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      Trump deregulated railways and banks. He blames Biden for the fallout

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      When a fiery train derailment took place on the Ohio-Pennsylvania border last month, Donald Trump saw an opportunity. The former US president visited East Palestine, accused Joe Biden of ignoring the community – “Get over here!” – and distributed self-branded water before dropping in at a local McDonald’s.Then, when the Silicon Valley Bank last week became the second biggest bank to fail in US history, Trump again lost no time in making political capital. He predicted that Biden would go down as “the Herbert Hoover of the modrrn [sic] age” and predicted a worse economic crash than the Great Depression.Yet it was Trump himself who, as US president, rolled back regulations intended to make railways safer and banks more secure. Critics said his attacks on the Biden administration offered a preview of a disingenuous presidential election campaign to come and, not for the first time in Trump’s career, displayed a shameless double standard.“Hypocrisy, thy name is Donald Trump and he sets new standards in a whole bunch of regrettable ways,” said Larry Sabato, director of the Center for Politics at the University of Virginia. “For his true believers, they’re going to take Trump’s word for it and, even if they don’t, it doesn’t affect their support of him.”The collapse of Silicon Valley Bank on 10 March and of New York’s Signature Bank two days later sent shockwaves through the global banking industry and revived bitter memories of the financial crisis that plunged the US into recession about 15 years ago.Fearing contagion in the banking sector, the government moved to protect all the banks’ deposits, even those that exceeded the Federal Deposit Insurance Corporation $250,000 limit for each individual account. The cost ran into hundreds of billions of dollars.The drama reverberated in Washington, where Trump’s criticism was followed by that of Republicans and conservative media, seeking to blame Biden-driven inflation or, improbably, to Silicon Valley Bank’s socially aware “woke” agenda. Opponents saw this as a crude attempt to deflect from the bank’s risky investments in the bond market and more systemic problems in the sector.The 2008 financial crisis, triggered by reckless lending in the housing market, led to tough bank regulations during Barack Obama’s presidency. The 2010 Dodd-Frank Act aimed to ensure that Americans’ money was safe, in part by setting up annual “stress tests” that examine how banks would perform under future economic downturns.But when Trump won election in 2016, the writing was on the wall. Biden, then outgoing vice-president, warned against efforts to undo banking regulations, telling an audience at Georgetown University: “We can’t go back to the days when financial companies take massive risks with the knowledge that a taxpayer bailout is around the corner when they fail.”But in 2018, with Trump in the White House, Congress slashed some of those protections. Republicans – and some Democrats – voted to raise the minimum threshold for banks subject to the stress tests: those with less than $250bn in assets were no longer required to take part. Many big lenders, including Silicon Valley Bank, were freed from the tightest regulatory scrutiny.Sabato commented: “The worst example is the bank situation because that is directly tied to Trump and his administration and changes made in bank regulations in 2018. Yes, some Democrats voted for it, but it was overwhelmingly supported by Republicans and by Trump who heralded it as the real solution to future bank woes.”The minority of Democrats who supported the 2018 law have denied that it can be directly tied to this month’s bank failures, although Bernie Sanders, an independent senator from Vermont, was adamant: “Let’s be clear. 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.”Sherrod Brown, a Democratic senator for Ohio who introduced bipartisan legislation to improve rail safety protocols, drew a parallel between the banks’ collapse to rail industry deregulation lobbying that contributed to the East Palestine train disaster. “We see aggressive lobbying like this from banks as well,” he said.Trump repealed several Barack Obama-era US Department of Transportation rules meant to improve rail safety, including one that required high-hazard cargo trains to use electronically controlled pneumatic brake technology by 2023. This rule would not have applied to the Norfolk Southern train in East Palestine – where roughly 5,000 residents had to evacuate for days – as it was not classified as a high-hazard cargo train.But the debate around the railway accident and bank failures points to a perennial divide between Democrats, who insist that some regulation is vital to a functioning capitalism, and Republicans, who have long claimed to believe in small government. Steve Bannon, an influential far-right podcaster and former White House chief strategist, framed the Trump agenda as “the deconstruction of the administrative state”.Antjuan Seawright, a Democratic strategist, said: “The Republican party has gotten by for many years on this idea that less is better. However, we’re now learning in this country that, as America continues to mature, in some cases more is better, and more has to be how we get to better. Otherwise the mistakes can spin out of control and cause generations of people long-term damage.”Biden called on Congress to allow regulators to impose tougher penalties on the executives of failed banks while Warren and other Democrats introduced legislation to undo the 2018 law and restore the Dodd-Frank regulations. It is likely to meet stiff opposition from the Republican-controlled House of Representatives and even some moderate Democrats.Biden has also insisted that no taxpayer money will be used to resolve the current crisis, keen to avoid any perception that average Americans are “bailing out” the two banks in a way similar to the unpopular bailouts of the biggest financial firms in 2008.But Republicans running for the 2024 presidential nomination are already contending that customers will ultimately bear the costs of the government’s actions even if taxpayer funds were not directly used. Nikki Haley, the former governor of South Carolina, said: “Joe Biden is pretending this isn’t a bailout. It is.”Another potential 2024 contender, Senator Tim Scott, the top Republican on the Senate banking committee, also criticised what he called a “culture of government intervention”, arguing that it incentivises banks to continue risky behavior if they know federal agencies will ultimately rescue them.Larry Jacobs, director of the Center for the Study of Politics and Governance at the University of Minnesota, said: “This is familiar ideological territory. The battle lines between liberalism and a fake conservatism appear to be playing out here. But the tragedy of the situation is that the liberals are right.“You do need government to regulate finance and, when you don’t, you get mischief making and bank failures but that point cannot be made if you’ve got Donald Trump inventing reality. He’s demonstrated that facts and position taking don’t matter. It’s an extraordinary political strategy but it’s even more devastating to our whole political system and our media that this could be allowed.”This poses a huge messaging challenge for Democrats, who after the 2008 financial crisis came up against the Tea Party, a populist movement feeding off economic and racial resentments. Long and winding explanations about the negative impacts of Trump era deregulation are a hard sell compared to the former president’s sloganeering in East Palestine.Wendy Schiller, a political science professor at Brown University in Providence, Rhode Island, said: “Once again we see that Trump is taking advantage of the Achilles’ heel of the Democratic party by telling voters that the Democrats like big government because it bails out industries and it never provides a bailout for the little guy.”Democrats’ efforts to point out that Trump was responsible for deregulation are unlikely to cut through, Schiller added.“Any time it takes more than 10 seconds to explain something, you’re done in politics. This is why Trump has catchy phrases, sound bytes. He understands that all voters see is that rich people made a bad investment and then more rich people are making sure that their money’s available to them within three days, coming off the heels of all the closures during Covid, lost business, lost income, people struggling, inflation.“Democrats don’t want to call it a bailout but it is a bailout. The high visibility of this bailout smothers anything else the Democrats are doing for the average voter. It’s a perfect issue for the Republicans. It’s not new that the Republicans will deregulate an industry and then it collapses and the Democrats have to save it. Look at American political and economic history of the last 50 years: this is exactly what happens.” More

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      Why did the $212bn tech-lender Silicon Valley bank abruptly collapse?

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      The collapse of Silicon Valley Bank continues to reverberate, hitting bank stocks, revealing hidden stresses, knocking on to Credit Suisse, and setting off a political blame-game.Why the $212bn tech-lender abruptly collapsed, triggering the most significant financial crisis since 2008, has no single answer. Was it, as some argue, the result of Trump-era regulation rollbacks, risk mismanagement at the bank, sharp interest rate rises after a decade of ultra-low borrowing costs, or perhaps a combination of all three?Federal investigations have begun and lawsuits have been filed and no doubt new issues at the bank will emerge. But for now, here are the main reasons experts believed SVB failed.Trump rollbacksThe Vermont senator Bernie Sanders argues that the culprit was an “absurd” 2018 law, supported by Congress and signed by Donald Trump, that undid some of the credit requirements imposed under the Dodd-Frank banking legislation brought in after the 2008 banking crisis.Dodd-Frank required that banks with at least $50bn in assets – banks considered “systemically important” – undergo an annual Federal Reserve “stress test” and maintain certain levels of capital as well as plans for a living will if they failed.SVB’s chief executive, Greg Becker, argued before Congress in 2015 that the $50bn threshold (SVB held $40bn at the time) was unnecessary and his bank, like other “mid-sized” or regional banks, “does not present systemic risks”.Trump said the new bill went a “long way toward fixing” Dodd-Frank, which he called a “job-killer”. But the non-partisan Congressional Budget Office (CBO) warned before the bill passed that raising the threshold would “increase the likelihood that a large financial firm with assets of between $100bn and $250bn would fail.” Joe Biden says he wants Trump’s rollbacks reversed.SVB’s managementThe bank didn’t have a chief risk officer (CRO) for some of 2022, a situation that’s now being looked at by the Federal Reserve, according to reports. SVB’s previous CRO, Laura Izurieta, left the company in October but stopped performing the role in April. Another was appointed in December.Early SVB shareholder lawsuits are said to be looking at the key vacancy, especially as the board’s risk committee was meeting frequently before the bank collapsed.“It means perhaps management was hiding something or didn’t want to disclose something, or had disagreements over the risks it was taking,” said Reed Kathrein, a lawyer specializing in shareholder lawsuits, to Bloomberg.“This isn’t greed, necessarily, at the bank level,” said Danny Moses, an investor who predicted the 2008 financial crisis in the book and movie The Big Short. “It’s just bad risk management. It was complete and utter bad risk management on the part of SVB.”SVB and Signature, the second mid-size bank to fail last week, have also been accused of prioritizing social justice over financial management. The Republican House oversight committee chairman, James Comer, called SVB “one of the most woke banks”.The narrative fed into a larger conflict over ESG, or environmental, social and corporate governance-driven investing, that has become a target of conservatives.But the bank’s loans to community and environmental projects were not central to its collapse nor are its diversity, equity and inclusion (DEI) policies dissimilar to other banks. The argument also fails to take into account all the banks that existed in 2008, before DEI or “woke” became a part of corporate or political discourse.Nevertheless the Florida governor, Ron DeSantis, continued on that theme, telling Fox News, that SVB was “so concerned with DEI and politics and all kinds of stuff. I think that really diverted from them focusing on their core mission.”Inflation and interest ratesSVB had benefited from from more than a decade of “zero money” interest rates as billions poured into the bank via tech venture capital. Looking for some kind of a return, it put the money into long-term US treasury bonds. But when interest rates started sharply rising last year, and depositors demanded higher returns, the bank was forced to sell some of those bonds at a loss. When news of that hit social media, tech investors panicked, triggering a classic bank run. From there, it took 36 hours for the second-biggest bank failure in US history to materialize.Before the collapses, investors had been expecting the Federal Reserve to raise interest rates by a quarter or half a percentage point when the governors meet next week. Now central bankers are in a bind: continue raising rates to tame inflation still running at 6% and risk another break in the financial system, or continue tightening money supply.The treasury secretary, Janet Yellen, gave a hint on Thursday when she told the Senate finance committee that “more work needs to be done” on inflation.What happens next?Financial jitters eased on Thursday after Wall Street rode to the rescue and propped up First Republic, another mid-sized bank whose customers were fleeing. But the respite may be brief.Goldman Sachs has raised its prediction for a recession in the next year to 35%, partly as a result of lending drops by regional banks.In the meantime it seems clear that investigators are likely to uncover more problems at the banks as their inquiries continue. Those revelations may trigger more concerns from depositors and investors.On Thursday, the Republican house financial services chairman, Patrick McHenry, said people should hold off on assigning blame for the collapse of SVB and Signature while Congress and watchdogs investigate.“When people jump to these conclusions at this stage of the game – a week in on this really stressed moment for our banking system – it’s unhelpful and quite politically hackish,” McHenry told Bloomberg. More

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      Silicon Valley Bank said it was too small to need regulation. Now it’s ‘too big to fail’ | Rebecca Burns and Julia Rock

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      Silicon Valley Bank was supposedly the type of institution that would never need a government bailout – right until its backers spent three days on social media demanding one, and then promptly receiving it, after the bank’s spectacular collapse last week.Eight years ago, when the bank’s CEO, Greg Becker, personally pressed Congress to exempt SVB from post-2008 financial reform rules, he cited its “low risk profile” and role supporting “job-creating companies in the innovation economy”. Those companies include crypto outfits and venture capital firms typically opposed to the kind of government intervention they benefited from on Sunday, when regulators moved to guarantee SVB customers immediate access to their largely uninsured deposits.Fifteen years after the global financial crisis, the logic of “too big to fail” still prevails. The financial hardship of student debtors and underwater homeowners is a private problem – but losses sustained by titans of tech and finance are a matter of urgent public interest. Moral hazard for thee, but not for me.What’s more, SVB’s meteoric rise and fall serves as a reminder that many of the guardrails erected after the last crisis have since been dismantled – at the behest of banks like SVB, and with the help of lawmakers from both parties beholden to entrenched finance and tech lobbies.Before becoming the second-largest bank to fail in US history, SVB had transformed itself into a formidable influence machine – both in northern California, where it became the go-to lender for startups, and on Capitol Hill, where it spent close to a million dollars in a five-year period lobbying for the deregulatory policies that ultimately created the conditions for its downfall.“There are many ways to describe us,” SVB boasts on its website. “‘Bank’ is just one.”Indeed, SVB’s management appears to have neglected the basics of actual banking – the bank had no chief risk officer for most of last year, and failed to hedge its bets on interest rates, which ultimately played a key role in the bank’s downfall. In the meantime, the bank’s deposits ballooned from less than $50bn in 2019 to nearly $200bn in 2021.From the moment that Congress passed banking reforms through the 2010 Dodd-Frank law, SVB lobbied to defang the same rules that would probably have allowed regulators to spot trouble sooner. On many occasions, lawmakers and regulators from both parties bowed to the bank’s demands.One of SVB’s first targets was a key Dodd-Frank reform aimed at preventing federally insured banks from using deposits for risky investments. In 2012, SVB petitioned the Obama administration to exempt venture capital from the so-called Volcker Rule, which prevented banks from investing in or sponsoring private equity or hedge funds.​​“Venture investments are not the type of high-risk, ‘casino-like’ activities Congress designed the Volcker Rule to eliminate,” the bank argued to regulators. “Venture capital investments fund the high-growth startup companies that will drive innovation, create jobs, promote our economic growth, and help the United States compete in the global marketplace.”After the Obama administration finalized the Volcker Rule in 2014 without a venture capital carveout, SVB sought its own exemption that would allow it to maintain direct investments in venture capital funds, in addition to providing traditional banking services for roughly half of all venture-backed companies.One such firm was Ribbit Capital, a key investor in the collapsed cryptocurrency exchange FTX, which lauded SVB’s tech-friendly ethos in a 2015 New York Times profile. “You can go to a big bank, but you have to teach them how you are doing your investment,” Ribbit’s founder told the Times. At SBV, “these guys breathe, eat and drink this Kool-Aid every day.”In the transition between the Obama and Trump administrations, SVB got what it wanted: a string of deregulation, based on the idea that the bank posed no threat to the financial system.In 2015, Becker, the CEO, submitted testimony to Congress arguing that SVB, “like our mid-size peers, does not present systemic risks” – and therefore should not be subject to the more stringent regulations, stress tests and capital requirements required at the time for banks with $50bn or more in assets.Two years later, SVB was one of just a handful of banks to receive a five-year exemption from the Volcker Rule, allowing it to maintain its investments in high-risk venture capital funds.The deregulatory drumbeat grew louder in Congress, and in 2018 lawmakers passed legislation increasing to $250bn the threshold at which banks receive enhanced supervision – again, based on the argument that smaller banks would never prove “too big to fail”.The Federal Reserve chairman, Jerome Powell, supported the deregulatory push. Under Powell, a former private equity executive, the Fed in 2019 implemented a so-called “tailoring rule”, further exempting mid-size banks from liquidity requirements and stress tests.Even then, the banks’ lobbying groups continued to push a blanket exemption to the Volcker Rule for venture capital funds, which Powell advocated for and banking regulators granted in 2020.Then, in 2021, SVB won the Federal Reserve’s signoff on its $900m acquisition of Boston Private Bank and Trust, on the grounds that the post-merger bank would not “pose significant risk to the financial system in the event of financial distress”.“SVB Group’s management has the experience and resources to ensure that the combined organization would operate in a safe and sound manner,” Federal Reserve officials wrote.Since the financial crisis, SVB has reported spending more than $2m on federal lobbying efforts, while the bank’s political action committee and executives have made nearly $650,000 in campaign contributions, the bulk to Democrats.Among the highlights of this influence campaign was a 2016 fundraiser for the Democratic senator Mark Warner of Virginia, hosted by Greg Becker in his Menlo Park home. A few months later, Warner and three other Democratic senators wrote to regulators arguing for weaker capital rules on regional banks.Warner went on to become one of 50 congressional Democrats who joined with Republicans to pass the 2018 Dodd-Frank rollback. When asked this week about his vote, Warner said: “I think it put in place an appropriate level of regulation on mid-sized banks … these mid-sized banks needed some regulatory relief.”In the wake of SVB’s collapse, Republicans have not renounced their votes for deregulation – nor have most of the Democrats who joined them, even as Biden is promising a crackdown.Warner took to ABC’s This Week on Sunday to defend his vote; Senator Jeanne Shaheen, the Democrat from New Hampshire, told NBC on Tuesday that “all the regulation in the world isn’t going to fix bad management practices”. Senator Jon Tester, the Democrat from Montana and a co-sponsor of the 2018 deregulatory law, even held a fundraiser in Silicon Valley the day after the SVB bailout was announced.Unless they reverse course, the Silicon Valley Bank bailout could prove politically disastrous for Democrats, who just oversaw the rescue of coastal elites in a moment of ongoing economic pain for everyone else.The good news is that there are straightforward steps that Democrats can take to start fixing things.For example: Senator Elizabeth Warren’s legislation to repeal Trump-era financial deregulation.Democrats can also revisit the areas where Dodd-Frank fell short, including stronger minimum capital requirements, and consider longstanding proposals to disincentivize risky behavior by banks by reforming bankers’ pay. And they should demand that Powell recuse himself from the Federal Reserve investigation of recent bank failures and take a hard look at whether his disastrous record merits outright dismissal under the Federal Reserve Act, which allows the president to fire a central bank chair “for cause”.And yet even now – amid the wreckage of deregulation – these and other measures to better regulate the banks may still be nonstarters among both the Republicans and corporate Democrats who voted for the regulatory rollbacks and have so far shown little sign of repentance.The words of the Illinois Democratic senator Dick Durbin still ring true, 14 years after the financial crisis.“The banks – hard to believe in a time when we’re facing a banking crisis that many of the banks created – are still the most powerful lobby on Capitol Hill,” he said back in 2009. “And they frankly own the place.”If that remains true today, the possibility of change looks grim.
      Rebecca Burns and Julia Rock are reporters for the Lever, an independent investigative news outlet, where a version of this article also appeared More

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      Low-income Americans face a ‘hunger cliff’ as Snap benefits are cut

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      Gina Melton is facing a dilemma. Like millions of other Americans, Melton and her family relied on food assistance benefits boosted by Congress to help them through the pandemic. Now that extra cash is gone.The reduction has hit them hard. Three of her family members are disabled and one of her daughters works to take care of them through an agency. They had already relied on credit cards to pay for medical equipment that wasn’t covered by the federal health insurance schemes Medicare or Medicaid but have had to stop paying a couple of them in order to afford food.“When you have to choose between feeding your family and paying a credit card bill, you have to choose food,” said Melton, 62.Around 42 million Americans are currently enrolled in Supplemental Nutrition Assistance Program (Snap) benefits. Congress increased Snap benefits in response to the Covid-19 pandemic in March 2020. The last extra payments went out at the end of February in the remaining 32 states that were still issuing them, in addition to the District of Columbia, Guam and the US Virgin Islands.The emergency allotments were authorized in tandem with the Covid-19 emergency declaration in March 2022, but in December 2022, Congress passed a law to end the allotments.The lapse in the additional benefits will reduce Snap allotments for the average recipient by $90 a month, with some households losing $250 a month or more. Older adults at the minimum benefit level will see their monthly Snap benefits drop from $281 a month to $23.Though Melton’s husband, a diabetic, is still recovering from a recent surgery, he has been considering going back to work part time at the age of 65 as the family struggles to afford basic necessities, including healthy food. They’ve cut back on food purchases and buy what’s on sale or in reduced-price bins.“The extra food allotment was helping us a lot,” said Melton. “We’ve started shopping at lower-priced stores that don’t bag your groceries, but for a disabled person like myself, that requires me to go with a helper. We’ve also cut back on some more expensive necessities and are relying on the local food pantry more.”The end of the expanded benefits comes at a time when US consumer debt has been on the rise, with 20.5 million Americans currently behind on their utility payments and nearly 25 million behind on credit card, auto loan or personal loan payments, the highest number since 2009. Low-wage workers in the US, who make less than $20 an hour, have experienced drops in wage growth compared with other workers in recent months.Food prices have and are expected to continue to significantly rise in 2023 as well. The US Department of Agriculture estimated that all food prices will increase by 7.9% in 2023 – and they were already 9.5% higher in February 2023 compared with February 2022.With so many Americans receiving Snap benefits because of low wages, unemployment and underemployment, the sudden end of the emergency allotment has been characterized as a “hunger cliff”.Ellen Vollinger, Snap director for the nonprofit Food Research and Action Center, said: “The cliff is aptly named because this a very abrupt change in what people are going to have in their food budget and it’s affecting tens of millions of people.“When the federal government doesn’t provide as much support for food, it doesn’t mean that hungry people all of a sudden are better off, or no longer need assistance, or they go away. The hunger is still there, people are still there, the need is there, but the federal government is too abrupt in shifting the burden and costs of dealing with that downstream, to states [and] localities, and puts a greater burden on charities.”Vollinger noted that the end of emergency allotments leaves low-income families facing difficult choices around food, from forgoing meals and purchasing less to buying cheaper food.“There’s a lot of stress, that’s why we call it a hunger cliff. It’s very precipitous,” she added.Food banks have been bracing for a surge in demand as the expanded Snap benefits expire, with state agencies directing recipients to food pantries to help cope with the reduction in benefits.Studies have shown that the extra payments worked. The Urban Institute found that the increased Snap benefits during the Covid-19 pandemic kept 4.2 million Americans out of poverty in the fourth quarter of 2021, reducing poverty by 9.6% and child poverty by 14% in states with emergency allotments. They also have a wider economic benefit. Every $1 invested in Snap benefits yields between $1.50 and $1.80 in economic activity during economic downturns.A 2022 survey conducted by Propel found that among Snap recipients, there was a significant level of higher food insecurity in states where emergency allotments were cut off. In a January 2023 survey, there was an increase in the number of Snap recipients who reported skipping meals, eating less, visiting food pantries or relying on family or friends for meals compared with December 2022.The end of the emergency Snap allotments also coincides with a push from Republicans in Congress to cut regular Snap benefits this year, despite the majority of Americans having favorable views of the benefits. A January 2023 survey conducted by Purdue University found that seven out of 10 respondents supported permanent expansions of the Snap program.But an expansion looks very unlikely in the current Congress. In the meantime, recipients are facing tough choices.“I just received the last one last week,” said Patricia Ameral, 67, of Massachusetts, referring to the Covid emergency benefits. “I am certain it will mean the difference between consuming less fresh produce and less meat, fresh or frozen.” More

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      US banks launch $30bn rescue of First Republic to stem spiraling crisis

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      Wall Street’s giants moved to end the US’s spiraling banking crisis on Thursday by agreeing to prop up troubled First Republic, a mid-sized bank whose shares have been pummeled amid a wider banking turmoil.Bank of America, Goldman Sachs, JP Morgan and others will deposit $30bn in First Republic, which has seen customers yank their money following the collapse of Silicon Valley Bank (SVB) and fears that First Republic could be next.“The actions of America’s largest banks reflect their confidence in the country’s banking system. Together, we are deploying our financial strength and liquidity into the larger system, where it is needed the most,” the banks said in a joint statement on Thursday.The big banks have received billions in deposits from smaller, regional banks as the banking crisis has spooked their customers. US authorities swooped in to take control of SVB and New York’s Signature bank last weekend after frightened customers pulled their deposits.Banks and regulators are hoping that the action will act as a firewall by protecting First Republic and stopping the crisis spreading to other smaller banks.Shares in First Republic – a San Francisco-based bank that largely caters to wealthier clients including Facebook co-founder Mark Zuckerberg – had fallen about 70% since the news of SVB’s collapse. They fell another 22% on Thursday before the bailout but ended the day up nearly 10%.In a joint statement, US treasury secretary Janet Yellen, Federal Reserve chair Jay Powell and senior regulators said: “This show of support by a group of large banks is most welcome, and demonstrates the resilience of the banking system.”Ahead of the news Yellen assured Congress on Thursday that the US banking system was “sound”.“I can reassure the members of the committee that our banking system is sound, and that Americans can feel confident that their deposits will be there when they need them,” she told the Senate finance committee.SVB had a high percentage of “uninsured” deposits – deposits above the $250,000 government insured limit. SVB’s uninsured deposits accounted for 94% of its total. First Republic’s percentage of uninsured deposits was far lower – at 68% according to S&P Global – but was high enough to worry investors and depositors with more than $250,000 in accounts at the bank.The unprecedented rescue plan will see most of the US’s largest banks making uninsured deposits into First Republic. Bank of America, Citigroup, JP Morgan Chase and Wells Fargo are each making a $5bn deposit into First Republic. Goldman Sachs and Morgan Stanley are each making deposits of $2.5bn, and BNY Mellon, PNC Bank, State Street, Truist and US Bank are each making a deposit of $1bn, for a total deposit from the eleven banks of $30bn.The news came as the Swiss central bank issued a $53.7bn loan to Credit Suisse to stem its own crisis of confidence. The long-troubled bank’s share price had collapsed after its largest shareholder, Saudi National Bank, said it was unable to provide more financing to Credit Suisse. More

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      Biggest US banks weigh rescuing First Republic as its shares tumble – report

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      Some of the US’s biggest banks are weighing a rescue bid for First Republic, a mid-sized bank whose shares have been pummeled amid a wider banking turmoil.Citigroup, Goldman Sachs, JP Morgan and Wells Fargo are among the banks discussing a lifeline for the San Francisco-based lender, according to the Wall Street Journal.The Journal also reported that top executives at the bank had sold millions of dollars in shares in the bank in the two months leading up to its share price collapse. In total insiders have sold $11.8m worth of stock so far this year.First Republic’s shares fell 22% on Thursday morning but bounced back after the news of a possible deal broke. They are down close to 70% over the last five trading days and the bank’s market capitalization has fallen from $21bn on 8 March, when the Silicon Valley Bank ( SVB) crisis began, to less than $5bn.Any deal would need to be passed by regulators and the Journal said the situation was highly uncertain.First Republic, known for its affluent customer base, has been hit hard following the collapse of SVB, which was seized by federal regulators over the weekend.First Republic, like some other regional banks, has a large amounts of uninsured deposits above the $250,000 government insured limit. SVB’s uninsured deposits accounted for 94% of its total. Some 68% of First Republic deposits are uninsured, according to S&P Global, far lower than SVB but high enough to worry investors and depositors.Customers have pulled billions in deposits from the bank and S&P Global Rating downgraded the bank’s credit rating to junk on Tuesday.Over the weekend the bank announced it had secured another $70bn in financing from the Federal Reserve and JP Morgan.“First Republic’s capital and liquidity positions are very strong, and its capital remains well above the regulatory threshold for well-capitalized banks,” Jim Herbert, founder and executive chairman, and Mike Roffler, CEO and president of First Republic, said in a statement.But the announcement appears to have done little to assuage investor and customer fears.SVB’s collapse was the second largest since the collapse of Washington Mutual in 2008, at the height of the global financial crisis. It was accompanied by the failure of New York-based Signature, which also failed after fears about its finances led customers to yank their funds.Speaking to Congress on Thursday, the treasury secretary, Janet Yellen, said the US banking system remained “sound”.“I can reassure the members of the committee that our banking system is sound, and that Americans can feel confident that their deposits will be there when they need them,” she said.The Fed’s intervention has drawn parallels to the unpopular bailout of Wall Street banks after the 2008 financial crisis. Yellen said the latest rescue efforts were markedly different.“Shareholders and debt holders are not being protected by the government,” she said. “Importantly, no taxpayer money is being used or put at risk with this action.” More

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      Biden stresses taxpayer funds won’t be used in Silicon Valley Bank collapse – as it happened

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      Speaking at the White House, Joe Biden is attempting to reassure Americans that the banking system will hold up.“Thanks to the quick action in my administration over the past few days, Americans can have confidence that the banking system is safe,” the president said.“Your deposits will be there when you need them. Small businesses across the country that deposit accounts at these banks can breathe easier knowing they’ll be able to pay their workers and pay their bills. And their hardworking employees can breathe easier as well.”Washington is on tenterhooks, waiting to see if the collapse of Silicon Valley Bank, and the government’s efforts to ensure its depositors can get their money, cause wider chaos in the economy. Democratic senator and Wall Street foe Elizabeth Warren said the California-based institution’s debacle is a sign that rolling back financial regulations in 2018 was not a good idea, while Republicans are blaming everything from Twitter to the woke mob. And on the 2024 campaign trail, Nikki Haley described the government’s intervention with the most infamous b-word: bailout.Here’s what else happened today:
      Joe Biden approved a major oil and gas drilling project in Alaska while protecting the Arctic ocean and millions of acres elsewhere in the state from petroleum exploration. Environmental groups are furious.
      Social security is like Silicon Valley Bank: so says Republican senator Bill Cassidy.
      Barney Frank was a champion of financial regulation during his time in Congress, but then sat on the board of a now-closed bank and said he doesn’t think tighter rules would have stopped the recent insolvencies.
      Rupert Murdoch has not watched Succession, it turns out.
      Have you been affected by the collapse of Silicon Valley Bank? Tell us.
      The New York Times reports that after the GOP took control of the House, its oversight committee dropped an inquiry into whether Donald Trump profited improperly from his time as president.The investigation had ensnared Mazars USA, an accounting firm used by the former president until they cut ties with him a year ago, and the oversight committee’s top Democrat has alleged that its Republican leader colluded with Trump in ending it.“It has come to my attention that you may have acted in league with attorneys for former President Donald Trump to block the committee from receiving documents subpoenaed in its investigation of unauthorized, unreported and unlawful payments by foreign governments and others to then-President Trump,” Democratic lawmaker Jamie Raskin wrote to James Comer, the committee chair.In an interview with the Times, Comer confirmed that the committee had dropped the inquiry, essentially saying they were now focused on scrutinizing current White House occupant Joe Biden.“I honestly didn’t even know who or what Mazars was,” Comer said.“They’ve been ‘investigating’ Trump for six years. I know exactly what I’m investigating: money the Bidens received from China.”The consequences of the January 6 insurrection continue to reverberate across Washington, including among Republicans. Here’s The Guardian’s Sam Levine on the growing divide within the GOP over the attack:Some Republicans have rebuked efforts by Donald Trump and Fox News host Tucker Carlson to whitewash the January 6 attack on the US Capitol, underscoring a significant split in the party over attempts to downplay the events of the day.Kevin McCarthy, the speaker of the House, turned over more than 40,000 hours of security footage from the Capitol to Carlson earlier this year. This week, Carlson aired selectively edited portions of that footage, falsely claiming the rioters were “sightseers” and “not insurrectionists”. At least 1,000 people have been arrested for their role in the January 6 attack. Five people died as a result of it.More than 999 people have been arrested so far, according to the justice department. Around 518 people have pleaded guilty to federal crimes to date and 53 have been found guilty at trial.Republican response to the January 6 Capitol attack divides partyRead moreFor more on how Silicon Valley Bank’s depositors will be made whole, and whether or not what the government is doing constitutes a bailout, here’s the Guardian Edward Helmore:When is a bailout not a bailout? It’s a question many people are asking after the dramatic collapse of Silicon Valley Bank and the US’s decision to rescue depositors on Sunday.Joe Biden, elected and appointed officials all insist the emergency interventions to protect deposits in Silicon Valley Bank, Signature Bank, a second bank that failed on the weekend, or, indeed, any further bank failures, won’t come at taxpayers’ expense.On Monday, Biden was at pains to say that “no losses” would be borne by taxpayers, and the money would come from the fees that banks pay into the Deposit Insurance Fund.Avoiding the ‘B-word’: is the US response to SVB’s collapse a bailout?Read moreRepublican senator Josh Hawley has spent the day accusing Silicon Valley Bank of promoting “woke” ideology, and now he wants to undermine the Biden administration’s efforts to make its depositors whole.Based in Santa Clara, California, Silicon Valley Bank did a lot of business with the venture capital community, including startups focused on fighting climate change, according to the New York Times. To Hawley, that’s enough to earn it the amorphous “woke” moniker:So these SVB guys spend all their time funding woke garbage (“climate change solutions”) rather than actual banking and now want a handout from taxpayers to save them— Josh Hawley (@HawleyMO) March 13, 2023
      Now Hawley, who is perhaps best known outside his home state of Missouri for promoting Donald Trump’s baseless conspiracy theories about the 2020 election and later running from the mob that attacked the Capitol, says he will stop the Federal Deposit Insurance Corporation from making a special assessment on American banks so that Silicon Valley Bank depositors don’t lose money:Now we learn the Biden Admin will impose “special assessments” (= fees) on banks across the country to pay for the SVB bailout. No way MO customers are paying for a woke bailout. I will introduce legislation preventing any bank from passing these fees on to customers -— Josh Hawley (@HawleyMO) March 13, 2023
      And my legislation will exempt responsible community banks from the “special fees” to bail out the California billionaires— Josh Hawley (@HawleyMO) March 13, 2023
      The Guardian’s Edward Helmore reports on the changing fortunes of Fox News commentator Tucker Carlson, who is at the center of an increasingly intense controversy over his peddling of 2020 election conspiracy theories:Tucker Carlson was once seen as untouchable. Now the most popular TV host on American cable news is at the center of a firestorm threatening to engulf Fox News and also anger Donald Trump, whose conspiracy theory-laden political cause he has long championed and who his audience loves.Court filings attached to the $1.6bn Dominion Voting Systems defamation suit accuse Fox News of allowing its stars to broadcast false accusations about rigged voting machines in the 2020 presidential election.The documents contained numerous emails detailing the private views and concerns of senior Fox management and its stars, which often seemed at odds with what they were publicly broadcasting to their audience.Tucker Carlson firestorm over Trump texts threatens to engulf Fox News Read moreThe hit HBO show Succession is loosely based on his life as the patriarch of an unruly billionaire family, but that doesn’t mean Rupert Murdoch watches it.Though the head of the rightwing media empire is under growing pressure amid a $1.6bn defamation lawsuit against his Fox News network, Murdoch recently took time to reveal that he has never watched the comedy-drama series that is set to launch its fourth season on 24 March, the Guardian’s Martin Pengelly reports.A reporter for the media outlet Semafor got the scoop having contacted Murdoch after his email address was revealed in court filings pertaining to the lawsuit. Murdoch’s reply to the reporter’s email asking if he followed Succession reportedly was: “Never watched it.”‘Never watched it’: Rupert Murdoch answers cold email about SuccessionRead moreAn unlikely figure has found himself drawn into the recent wave of bank collapses: Barney Frank.The former House Democratic lawmaker’s name graces the 2010 Dodd-Frank Act, which tightened banking regulations following the global financial crisis. It turns out, he was serving on the board of Signature Bank, which regulators on Sunday closed, making it the third American bank to fail in five days.In an interview with Bloomberg News, he said he disagreed with the decision to shut down the New York-based institution. “I think that if we’d been allowed to open tomorrow, that we could’ve continued – we have a solid loan book, we’re the biggest lender in New York City under the low-income housing tax credit.”More interestingly, he disputed that the 2018 rollback of parts of the Dodd-Frank Act played any role in the failures of Signature and other similar sized institutions – like Silicon Valley Bank. That legislation, signed by Donald Trump, raised to $250bn the level at which banks are subjected to the most strict oversight. Both Signature and Silicon Valley were below that amount.“I don’t think there was any laxity on the part of regulators in regulating the banks in that category, from $50 billion to $250 billion,” Frank said in the interview.Washington is on tenterhooks, waiting to see if the collapse of Silicon Valley Bank, and the government’s efforts to ensure its depositors can get their money, cause wider chaos in the economy. Democratic senator and Wall Street foe Elizabeth Warren said the California-based bank’s debacle is a sign that rolling back financial regulation in 2018 was not a good idea, while Republicans are blaming everything from Twitter to the woke mob. And on the 2024 campaign trail, Nikki Haley described the government’s intervention with the most infamous b-word: bailout.Here’s what else has happened today:
      Joe Biden approved a major oil and gas drilling project in Alaska while protecting the Arctic ocean and millions of acres elsewhere in the state from petroleum exploration. Environmental groups are furious.
      Social security is like Silicon Valley Bank: so says Republican senator Bill Cassidy.
      Have you been affected by the collapse of Silicon Valley Bank? Tell us.
      Louisiana’s two Republicans senators have been getting a lot of air time on Fox News lately, with John Kennedy appearing yesterday to complain about how Joe Biden recently put the GOP on the spot over social security. Here’s Maya Yang’s story:The Republican senator John Kennedy accused Joe Biden of “demagoguing” the issue of how to fund social security and Medicare and protecting the two programs from Republican proposals to cut them, calling it a “very immature thing to do”.Speaking to Fox News Sunday, Kennedy took aim at Biden for mentioning in his State of the Union address last month that some Republicans have proposed to “sunset” social security and Medicare as part of attempts to balance the federal budget.“The problem is that President Biden in his State of the Union Address decided to demagogue the issue,” the Louisiana senator said. “We all saw it.“He basically said, ‘If you talk about social security or Medicare, I’m going to call you a mean, bad person.’ And that just took the issue off the table when the president decided to demagogue it … You can only be young once, but you can always be immature, and I thought it was a very immature thing to do.”Republican John Kennedy takes aim at Biden over social security fundingRead moreRepublican presidential contender Nikki Haley is describing the US government’s efforts to stop Silicon Valley Bank’s depositors from losing their money as a “bailout”.It’s a politically loaded word, considering how deeply controversial Washington’s 2008 decision to help large banks during the global financial crisis remain.Here’s her statement, on Twitter:Joe Biden is pretending this isn’t a bailout. It is.Now depositors at healthy banks are forced to subsidize Silicon Valley Bank’s mismanagement. When the Deposit Insurance Fund runs dry, all bank customers are on the hook. That’s a public bailout.Depositors should be paid by… https://t.co/LDmCR9NOCd— Nikki Haley (@NikkiHaley) March 13, 2023
      Meanwhile, Republican senator Bill Cassidy has compared social security – the government program credited with keeping many elderly Americans out of poverty – to Silicon Valley Bank.He made the comment in an interview with Fox News as he discussed social security’s very real problem of long-term funding:Sen. Bill Cassidy (R-LA): “Social Security is the Silicon Valley Bank of retirement systems.” pic.twitter.com/J5N8nhnXko— The Recount (@therecount) March 13, 2023
      Joe Biden today authorized a major oil drilling project in Alaska that has angered environmental groups, who see it as a setback in Washington’s fight against climate change. In an effort to temper those criticisms, the president also banned drilling in the Arctic ocean, and protected millions of acres of land in Alaska. Here’s the Guardian’s coverage of one of the Biden administration’s most significant environmental decisions, from Oliver Milman, Nina Lakhani and Maanvi Singh:The Biden administration has approved a controversial $8bn (£6bn) drilling project on Alaska’s north slope, which has drawn fierce opposition from environmentalists and some Alaska Native communities, who say it will speed up the climate breakdown and undermine food security.The ConocoPhillips Willow project will be on of the largest of its kind on US soil, involving drilling for oil and gas at three sites for multiple decades on the 23m-acre National Petroleum Reserve which is owned by the federal government and is the largest tract of undisturbed public land in the US.It will produce an estimated 576m barrels of oil over 30 years, with a peak of 180,000 barrels of crude a day. This extraction, which ConocoPhillips has said may, ironically, involve refreezing the rapidly thawing Arctic permafrost to stabilize drilling equipment, would create one of the largest “carbon bombs” on US soil, potentially producing more than twice as many emissions than all renewable energy projects on public lands by 2030 would cut combined.Biden approves controversial Willow oil drilling project in AlaskaRead moreFlorida governor Ron DeSantis is among the Republicans expected to soon jump into the 2024 presidential race, and in a Fox News interview yesterday, he blamed Silicon Valley Bank’s collapse on the liberal policies he’s built a reputation for railing against:DEI stands for “diversity, equity, and inclusion”, the sorts of initiatives DeSantis’s administration in Florida has made a point of targeting. He also blames the “massive federal bureaucracy” for letting the collapse happen – which is interesting, because during his time as a House lawmaker in 2018, he voted for the legislation that rolled back some of the 2010 Dodd-Frank financial regulations, which is now being blamed for Silicon Valley Bank’s collapse. More