The Political Impact of the SVB and Signature Bank Collapses 2023

Republicans and Democrats have lost little time politicising the failure of Silicon Valley Bank and Signature Bank.

President Joseph Biden urged Lawmakers to enhance bank rules and pledged to hold bank executives responsible. He assisted in coordinating the response to guarantee all deposits at SVB and Signature Bank, as well as establishing a loan programme to ensure that the banks had sufficient funds to satisfy their obligations.

On Monday, Biden again emphasised that the cost of his administration’s fines on the two collapsed banks would not be borne by taxpayers, but rather by an insurance fund financed by bank fees. Biden highlighted that while customers and small companies that deposited funds with the penalised institutions would be protected, investors would not.

Biden stated, “They consciously accepted a chance, and when the gamble did not pay off, the investors lost money.” This is how capitalism operates.

The president stated that he would not save the banks and that no government funds would be utilised for this endeavour.

Nonetheless, other GOP presidential hopefuls criticised the president’s reaction to the financial crisis.

“Joe Biden is acting as like this is not a bailout. That is,” tweeted presidential contender Nikki Haley. Now, healthy bank depositors must support Silicon Valley Bank’s incompetence. When the Deposit Insurance Fund is depleted, all bank customers will be liable. That’s a government bailout

Sen. Tim Scott (R-S.C.), the ranking Republican on the Senate Banking Committee who is also considering a run for president, criticised what he termed a “culture of government intervention,” arguing that it incentivizes banks to continue engaging in risky behaviour if they know federal agencies will ultimately bail them out.

But, Democrats drew attention to a 2018 measure that relaxed rules on midsize banks.

SVB actually advocated for this bill, but senators like Sen. Elizabeth Warren (D-Massachusetts) believed it undermined bank regulations and led to the recent failures.

Warren and other Democrats continued to demand that these rules be reinstated.

Notwithstanding the political disagreement, reassurance remained the top priority on Tuesday as regulators probed why the second- and third-largest bank failures in U.S. history occurred within days of one another.

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