When the Biden administration bailed out Silicon Valley Bank (SVB), it provided a lifeline for thousands of businesses, including prominent tech companies, liberal news outlets, and a Democratic politician’s vineyards. While Joe Biden insists this move was not a bailout intended to protect American workers and small businesses, the wealthiest clients will benefit the most, with 93% of the bank’s depositors holding more than $250,000 in their accounts.
🤢😠Here Are the Tech Companies, Liberal Media Outlets, and Prominent Democrats Saved by Biden's Bank Bailout https://t.co/ug3Z0igqhY
— MARY WICKER (@MARYWICKER20) March 18, 2023
The individuals and institutions directly benefiting from the bailout include California Gov. Gavin Newsom (D) and his wineries, BuzzFeed, Vox Media, and Black Lives Matter. The bailout, seen by many as benefiting the wealthy and politically connected, has led to accusations of inequity and protecting the rich at the expense of the poor, particularly as it covers uninsured deposits over the traditional FDIC coverage limit of $250,000.
Republicans are criticizing regulators for the bailout, arguing that the FDIC is using insurance premiums paid by smaller depositors to cover the deposits of the very rich. Rep. Thomas Massie (R-KY) expressed concern that the FDIC is using funds intended for the “little guys” to bail out wealthy clients. The Biden administration asserts that the FDIC’s insurance fund, which stands at about $125 billion, will cover all SVB depositors without additional taxpayer funding.
Understand what’s happening at FDIC:
They’re taking the insurance premiums that were paid in to protect depositors under $250,000 (little guys) and using it to cover deposits of the very rich.
They argue it benefits everyone to go “all in” on the first few banks.
— Thomas Massie (@RepThomasMassie) March 13, 2023
Dean Baker, a senior economist at the Center for Economic and Policy Research, argues that while there may be some additional costs if the FDIC raises premiums, these would be “very, very small” and over many years, with the losses likely to be “invisible” to ordinary account holders. He also disputes claims that SVB’s financial problems are tied to “woke” investing, attributing them instead to the bank holding US government bonds that lost value after the Fed hiked interest rates over the last year.
Nonetheless, the SVB bailout highlights the need for more stringent financial regulations. Leftist lawmakers, including Sens. Elizabeth Warren (D-MA) and Bernie Sanders (I-VT), have targeted a Trump-era rollback of provisions in the Dodd-Frank Act, which eased oversight over mid-size regional banks like SVB. As a result, SVB was no longer subject to stress tests, which could have gauged how the bank would perform under current financial conditions.
Warren argues that the passage of the 2018 rollback “made a bad situation worse,” allowing financial institutions like SVB to “load up on risk” without adequate oversight. President Biden has also referenced the 2018 law, calling for Congress and banking regulators to strengthen rules for banks and reduce the risk of such bank failures happening again.
If the Fed does not contain the regional bank collapse, there will be another great depression.
Small/medium banks account for 50% of US commercial and industrial lending, 60% of residential real estate lending, 80% of commercial real estate lending, and 45% of consumer lending pic.twitter.com/wzTMHxSnXI
— zerohedge (@zerohedge) March 18, 2023
The resulting risk of depositors moving assets away from smaller regional banks has led Zerohedge to warn: “If the Fed does not contain the regional bank collapse, there will be another great depression.”
