“We cannot continue down the road of more socialism for the rich and rugged individualism for everyone else,” said the US Senator from Vermont.
BY JON QUEALLY MARCH 13, 2023 – https://therealnews.com/
This story originally appeared in Common Dreams on Mar. 13, 2023. It is shared here under a Creative Commons (CC BY-NC-ND 3.0) license.
Sen. Bernie Sanders on Sunday night called for a full repeal of the 2018 banking deregulations signed into law by former President Donald Trump and declared that “now is not the time for taxpayers to bail out Silicon Valley Bank”—the California bank that collapsed Friday.
On Sunday evening, the U.S. Treasury Department, Federal Reserve, and Federal Deposit Insurance Corporation (FDIC) issued a joint statement outlining a plan to make all deposits for Silicon Valley Bank as well as Signature Bank, which was shuttered by New York regulators earlier in the day, available to costumers Monday morning.
In his statement, Sanders said, “If there is a bailout of Silicon Valley Bank, it must be 100 percent financed by Wall Street and large financial institutions. We cannot continue down the road of more socialism for the rich and rugged individualism for everyone else. Let us have the courage to stand up to Wall Street, repeal the disastrous 2018 bank deregulation law, break up too big to fail banks and address the needs of working families, not the risky bets of vulture capitalists.”
The statement the Fed, Treasury, and FDIC noted that “no losses” associated with the rescue plan “will be borne by the taxpayer,” though the extraordinary intervention—the largest of its kind since the 2008 financial collapse—is still seen by many economists and financial experts, even if bank investors and debt holders are not protected, as a “bailout” for the financial industry only made possible by taxpayers.
“Let us have the courage to stand up to Wall Street, repeal the disastrous 2018 bank deregulation law, break up too big to fail banks and address the needs of working families, not the risky bets of vulture capitalists.”
Warren Gunnels, longtime staffer and top advisor to Sanders, made the connection between venture capitalists clamoring for a speedy government intervention to save the banking sector from a wider shock and the same kind of people who have adamantly opposed financial relief for the struggling middle- and working-class Americans:
As the Washington Post reports, “The decision by Treasury to backstop all deposits at SVB and Signature — not just those up to $250,000 that are insured under federal law — rested on a judgment that it was necessary to avoid a wider ‘systemic’ meltdown. The move will likely ignite a political firestorm over the decision to protect the assets of tech firms, venture capitalists, and other rich people in California.”
In 2018, as Sen. Mike Crapo’s (R-Idaho) Economic Growth, Regulatory Relief, and Consumer Protection Act was making its way through Congress, Sanders took to the floor of the U.S. Senate to oppose the bill, warning of exactly this kind of economic disaster if the deregulation was approved:
“Let’s be clear,” Sanders said Sunday night in his statement. “The failure of Silicon Valley Bank is a direct result of an absurd 2018 bank deregulation bill signed by Donald Trump that I strongly opposed. Five years ago, the Republican Director of the Congressional Budget Office released a report finding that this legislation would ‘increase the likelihood that a large financial firm with assets of between $100 billion and $250 billion would fail.’”
“Unfortunately,” he added, “that is precisely what happened.”
On Monday, Lindsey Owens, executive directive of the progressive economic watchdog Groundwork Collaborative, focused on the additional lending facility made available to the bank customers and said the latest actions expose a deep “rot” within the Federal Reserve—especially as the central bank squeezes workers with increasingly higher interest rates, hikes that played at least a part in the banks’ failures.
“This weekend, the Federal Reserve moved mountains to protect wealthy venture capitalists from the fallout of its aggressive interest rate hikes,” said Owens. ” Today, the Fed will return to its core work of pushing hardworking Americans out on the street to meet its inflation goals.”
Such a set of policies, said Owens, shows the Fed “is irreparably broken and can no longer be trusted to go it alone on monetary policy. As Congress works to re-regulate mid-size banks after the misguided 2018 rollbacks that set this weekend’s crisis in motion, they should also address the rot at the Fed.”
In a statement on Sunday ahead of the government’s rescue plan announcement, Matt Stoller, research director for the American Economic Liberties Project, made the case against any taxpayer bailout for SVB.
“Silicon Valley Bank was a badly managed and corrupt institution that entangled itself with powerful actors in the technology industry,” Stoller argued. “The operative question government regulators are now facing is whether to use taxpayer funds to bail out the depositors from the failures of SVB’s management.”
But a full bailout, Stoller warned, “will only encourage other large regional banks to take similar risks in the future, just as Silicon Valley Bank did.”
While bank investors and executives will not be included in the emergency actions announced on Sunday, Rep. Ro Khanna, the California Democrat who represents Silicon Valley, applauded the actions taken by Treasury to keep depositors whole.
Among his constituents impacted by the bank’s collapse, he said, were “non-profit leaders, small business owners, start-up founders, and impacted employees of small businesses.”
While expressly arguing that government intervention “should not and need not … cost taxpayers a dime” during a news interview Sunday morning, Khanna later applauded the government plan while echoing Sanders’ call for a reversal of the deregulation that led to the current crisis.
“I am glad that the Department of Treasury listened and moved to protect workers, the innovation pipeline, and the economy at large,” Khanna said. “But the work doesn’t end here. We’ve known since 2008 that stronger regulations are needed to prevent exactly this type of crisis. Congress must come together to reverse the deregulation policies that were put in place under Trump to avert future instability.”