US economy
Subterms
More stories
- in US Politics
To prevent more bank runs, the Fed should pause rate hikes | Robert Reich
The global financial system is facing a crisis of confidence. Which makes this week’s meeting of America’s central bankers critically important.None of the 12 members of the Federal Reserve Board’s Open Market Committee were elected to their posts. The vast majority of Americans don’t even know their names, except perhaps for the chairman, Jerome Powell.But as they try to decide whether to raise interest rates and, if so, by how much, America’s central bankers are deciding on the fate of the American – and much of the world’s – economy.And they’re sitting on the horns of a dilemma.On one horn is their fear that inflation will become entrenched in the economy, requiring more interest-rate hikes.On the other horn is their fear that if they continue to raise interest rates, smaller banks won’t have enough capital to meet their depositors’ needs.Higher rates could imperil more banks, especially those that used depositors’ money to purchase long-term bonds when interest rates were lower, as did Silicon Valley Bank.That means that raising interest rates could cause more runs on more banks. The financial system is already shaky.The two objectives – fighting inflation by raising rates, and avoiding a bank run – are in direct conflict. As the old song goes: “Something’s got to give.” What will it be?The sensible thing would be for the Fed to pause rate hikes long enough to let the financial system calm down. Besides, inflation is receding, albeit slowly. So there’s no reason to risk more financial tumult.But will the Fed see it that way?The Fed’s goal last week was to stabilize the banks enough so the Fed could raise interest rates this week without prompting more bank runs.The Fed bailed out uninsured depositors at two banks and signaled it would bail out others – in effect, expanding federal deposit insurance to cover every depositor at every bank.On top of this, 11 of America’s biggest banks agreed to contribute a total of $30bn to prop up First Republic, another smaller bank caught in the turmoil.This “show of support” (as it was billed, without irony) elicited a cheer from Jerome Powell and the treasury secretary, Janet Yellen, who called it “most welcome”. (Of course it was welcome. They probably organized it.)But investors and depositors are still worried.Other regional banks across the US have done just what Silicon Valley Bank did – buying long-dated bonds whose values have dropped as interest rates have risen. According to one study, as many as 190 more lenders could fail.On Monday, First Republic remained imperiled notwithstanding last week’s $30bn cash infusion. Trading in its shares on the New York Stock Exchange was automatically halted several times to prevent a freefall.Multiple recent downgrades of banks by ratings agencies like Moody’s haven’t helped.Reportedly, the Biden administration is even in talks with Warren Buffett, the chairman of Berkshire Hathaway, who invested billions to bolster Goldman Sachs during the 2008 financial crisis.Meanwhile, on the other side of the Atlantic, the European Central Bank last week raised interest rates by half a percentage point, asserting its commitment to fighting inflation.Yet the higher interest rates, combined with the failure of the two smaller American banks, have shaken banks in Europe.Just hours before the European Central Bank’s announcement, the banking giant Credit Suisse got a $54bn lifeline from Switzerland’s central bank.Yet not even this was enough to restore confidence. After a several days of negotiations involving regulators in Switzerland, the US and the UK, Switzerland’s biggest bank, UBS, agreed over the weekend to buy Credit Suisse in an emergency rescue deal.Finance ultimately depends on confidence – confidence that banks are sound and confidence that prices are under control.But ever since the near meltdown of Wall Street in 2008, followed by the milquetoast Dodd-Frank regulation of 2010 and the awful 2018 law exempting smaller banks, confidence in America’s banks has been shaky.November’s revelation that the crypto giant FTX was merely a house of cards has contributed to the fears. Where were the regulators?The revelation that Silicon Valley Bank didn’t have enough capital to pay its depositors added to the anxieties. Where were the regulators?Credit Suisse had been battered by years of mistakes and controversies. It is now on its third CEO in three years.Swiss banking regulations are notoriously lax, but American bankers have also pushed Europeans to relax their financial regulations, setting off a race to the bottom where the only winners are the bankers. As Lloyd Blankfein, then CEO of Goldman Sachs, warned Europeans: “Operations can be moved globally and capital can be accessed globally.”One advantage of being a bank (whether headquartered in the US or Switzerland) is that you get bailed out when you make dumb bets. Another is you can choose where around the world to make dumb bets.Which is why central banks and bank regulators around the world must not only pause interest rate hikes. They must also join together to set stricter bank regulations, to ensure that instead of a race to the bottom, it’s a race to protect the public.Banking is a confidence game. If the public loses confidence in banks, the financial system can’t function.In the panic of 1907, when major New York banks were heading toward bankruptcy, the secretary of the treasury, George B Cortelyou, deposited $35m of federal money in the banks. It was one of the earliest bank bailouts, designed to restore confidence.But it wasn’t enough. JP Morgan (the man who founded the bank) organized the nation’s leading financiers to devise a private bailout of the banks, analogous to last week’s $30bn deal.Confidence was restored, but the underlying weaknesses of the financial system remained. Those weaknesses finally became painfully and irrevocably apparent in the great crash of 1929.
Robert Reich, a former US secretary of labor, is professor of public policy at the University of California, Berkeley, and the author of Saving Capitalism: For the Many, Not the Few and The Common Good. His new book, The System: Who Rigged It, How We Fix It, is out now. He is a Guardian US columnist. His newsletter is at robertreich.substack.com More - in US Politics
Elizabeth Warren says Fed chair ‘failed’ and calls for inquiry into bank collapse
Political fall-out in the US from the collapse of Silicon Valley Bank continued on Sunday when leftwing Senator Elizabeth Warren hit the morning talk shows and repeatedly called for an independent investigation into US bank failures and strongly criticised Federal Reserve finance officials.The progressive Democrat from Massachusetts, who has positioned herself as a consumer protection advocate and trenchant critic of the US banking system, told CBS’s Face the Nation that she did not have faith in San Francisco Federal Reserve president Mary Daly or Fed chairman Jerome Powell.“We need accountability for our regulators who clearly fell down on the job,” Warren said, adding that it “starts with” Federal Reserve Chairman Jerome Powell, who she said “was a dangerous man to have in this position”.“Remember the Federal Reserve Bank and Jerome Powell are ultimately responsible for the oversight and supervision of these banks. And they have made clear that they think their job is to lighten regulations on these banks. We’ve now seen the consequences,” Warren added.Asked if she had “faith” in Daly, under whose jurisdiction SVB fell, Warren said flatly: “No, I do not.”In the wake of the collapse of Silicon Valley and Signature banks, the one-time presidential candidate has in recent days launched a broad offensive on politicians on both the left and the right who supported Trump-era deregulation of smaller US banks.Warren sent a letter to the inspectors general of the US treasury department, the Federal Deposit Insurance Corp (FDIC) and the Federal Reserve, urging regulators to examine the recent management and oversight of the banks which collapsed earlier this month.Last week, Warren unveiled legislation that would repeal that law and raise “stress-tests” on “too big to fail” banks from $50bn to $250bn. On Sunday, Warren also argued for raising federal guarantees on consumers deposits above the current $250,000.“Is it $2m? Is it $5m? Is it $10m? Small businesses need to be able to count on getting their money to make payroll, to pay the utility bills,” Warren said. “These are not folks who can investigate the safety and soundness of their individual banks. That’s the job the regulators are supposed to do.”Warren broadened out her criticism on NBC’s Meet the Press, calling for a stop to interest rates rises when central bankers meet next week and claiming that Powell was pushed by Congress to support deregulation in 2018.“Look, my views on Jay Powell are well-known at this point. He has had two jobs. One is to deal with monetary policy. One is to deal with regulation. He has failed at both,”, she said.US prosecutors are investigating the SVB collapse, a source familiar with the matter told Reuters last week, after the $212bn bank collapsed when depositors rushed to withdraw their money.A blame-game erupted, with some arguing that the bank’s apparent lack of adequate risk management, combined with deregulation and a sharp interest rate rises, had created an accident waiting to happen.US banks have since lost around half a trillion dollars in value. On Friday, President Joe Biden promised that bank customers deposits are safe and the crisis had calmed down.In Warren’s letter published Sunday, the senator also called for executives of the failed banks to be held to account.“The bank’s executives, who took unnecessary risks or failed to hedge against entirely foreseeable threats, must be held accountable for these failures,” Warren said. “But this mismanagement was allowed to occur because of a series of failures by lawmakers and regulators.” More
- in US Politics
Why did the $212bn tech-lender Silicon Valley bank abruptly collapse?
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
- in US Politics
Silicon Valley Bank said it was too small to need regulation. Now it’s ‘too big to fail’ | Rebecca Burns and Julia Rock
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 - in US Politics
US banking system 'remains sound' despite bank collapses, says treasury secretary Yellen – video
Janet Yellen, the Treasury secretary, informed Congress that the recent collapses of two US banks, Silicon Valley Bank and Signature Bank, does not reflect on the overall strength of the US banking system. Yellen told Congress the US banking system ‘remains sound,’ claiming that the government’s swift response to the failures helped to restore public confidence in the banking system. ‘I can reassure the members of the committee that our banking system remains sound, and that Americans can feel confident that their deposits will be there when they need them,’ she said More
- in Elections
US banking system 'remains sound' despite bank collapses, says Janet Yellen – video
Janet Yellen, the US treasury secretary, told Congress that the recent collapses of two US banks, Silicon Valley Bank and Signature Bank, does not reflect on the overall strength of the US banking system. She told Congress the US banking system ‘remains sound’, claiming that the government’s swift response to the failures helped to restore public confidence in the banking system. ‘I can reassure the members of the committee that our banking system remains sound, and that Americans can feel confident that their deposits will be there when they need them,’ she said More
- in US Politics
Biden stresses taxpayer funds won’t be used in Silicon Valley Bank collapse – as it happened
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
