President Joe Biden praised himself on Monday for saving the banking industry while blaming former President Donald Trump for the collapse of Silicon Valley Bank and several others in a speech that his press secretary claimed was uncharacteristic of him because it happened at 9 a.m.
“Today, thanks to the quick action of my administration over the past few days, Americans can have confidence that the banking system is safe. Your deposits will be there when you need them,” Biden said.
Biden went on to say that depositors in the banks that failed would not lose any of their money, even if they exceeded the 250,000 insured under FDIC rules and that taxpayers would not be paying for any losses.
Investors, however, would lose their money because “that’s how capitalism works.”
After these reassurances, Biden went on to blame Trump for all of the problems because of a rule change made in 2018.
“During the Obama-Biden administration, we put in place tough requirements on banks like Silicon Valley Bank and Signature Bank, including the Dodd-Frank Law, to make sure the crisis we saw in 2008 would not happen again,” Biden said. “Unfortunately, the last administration rolled back some of these requirements.”
While Trump did loosen some of the restrictions placed on banks after the Great Recession in 2008, he did so to give small businesses more flexibility, which was needed at the time.
Politifact said clearly that the bank’s heavy reliance on low-interest bonds and the ignoring of triggers for regulation by the San Francisco Federal Reserve were equally if not more to blame for the collapse than Trump’s deregulation.
Could other banks fail?
While the failure of one bank doesn’t necessarily lead to another, it can happen that way in some cases as a sort of ripple effect. Silicon Valley Bank held funds for many startup companies in the region, which employed many thousands of workers.
If business owners lose all their operating capital, they will need to lay off workers. These workers may not be able to pay their obligations, such as mortgages, auto loans, and credit cards.
If workers do not pay their obligations, other banks will be short operating capital and they, too may fail. This is how the ripples spread, but it doesn’t always happen that way.
It’s clear that banking has become far too lazy in recent years about keeping enough deposits on hand, and this should change if banks want to have protection against runs like this that could put them out of business.
U.S. is vulnerable
Outside forces that hold a large amount of U.S. cash or investments could also use their leverage to make banks fail, if they have nefarious purposes.
It puts the U.S. in a vulnerable position just when we have several enemies, Russia and China chief among them, who would love to see us go down.