(RightWing.org) – Understanding how the United States banking system works is not an easy undertaking; the number of laws and regulations can take up an entire wing of a law library by themselves. As long as things are running smoothly, the general public typically ignores what’s going on, but when something goes wrong, everybody up to and including the President of the United States sits up and takes notice.
On Friday, March 10, Silicon Valley Bank (SVB), with headquarters in Santa Clara, California, went from stability to being shut down by federal regulators in just a matter of hours, sending shockwaves throughout financial markets around the world. On Sunday, the same action was taken for Signature Bank in New York by state regulators.
Deposits and Donations
SVB and its leadership were donors to the Silicon Valley Bank PAC, which would then help spread cash to politicians in California and well beyond. The list of recipients seems somewhat balanced between Republicans and Democrats… until one looks a little closer and notices that those with (R) after their names all voted in favor of impeaching then-President Donald Trump in 2021.
The Federal Deposit Insurance Corporation (FDIC) was set up to protect small depositors (up to $250,000) so that if they put money into the bank, their funds would be protected in the event of a catastrophic financial collapse such as was seen with the Great Depression in 1929, and the Great Recession in 2008. However, more than 90% of SVD depositors had amounts exceeding that limit and would be uninsured — at least, that should be the case.
In what is being framed as a supposed attempt to quell fears of a larger run on banks, President Joe Biden has decided on a somewhat controversial move in concert with:
- Secretary of the Treasury Janet Yellen
- Chairman of the Federal Reserve Board Jerome Powell
- FDIC Chairman Martin Gruenberg
On Sunday, the administration announced that the bank failure warranted a “systemic risk exception” that would allow the federal government to guarantee access to all funds for depositors even if they would typically be uninsured by the FDIC.
Early GOP 2024 presidential candidate Vivek Ramaswamy wrote an opinion piece for the Wall Street Journal, where he noted that SVB “lobbied for looser risk limits by arguing that its failure wouldn’t create systemic risk.”
Ramaswamy also pointed out that SVB’s method of risk management may have been to curry favor with Biden and other Democrats by throwing large sums of money at liberalizing their corporate environment. He closed by taking Silicon Valley entrepreneurs to task for breaking the “public trust as a long-shot maneuver for a special bailout.”
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