SVB: Bank failure heats up political debate in the US – 03/14/2023 – Market

The bankruptcy of the Silicon Valley Bank (SVB) and the Signature Bank in the United States not only shook the markets, but also intensified the already troubled political climate in the country, at a time when the chess pieces are moving towards the next presidential election next year.

Democrats and Republicans traded accusations about liability and responses to the crisis, and some credited the bank failures to a culture of “political correctness.”

In a speech this Monday morning (13), Biden blamed the bankruptcies on a loosening of policies by the Donald Trump administration. “We need to reduce the risks of this happening again,” he said, praising Dodd-Frank, the name of the 2010 law passed by the Barack Obama administration in response to the 2008 crisis, which increased regulation in the sector.

The law placed banks under the oversight of a Financial Stability Oversight Board (FSOC) whose role is to identify risks that could affect the market, and created a Consumer Financial Protection Agency (CFPB) to oversee the personal lending sector. facilities, among other measures to increase transparency.

“Unfortunately, the last government [Trump] reversed some of these requirements. I will ask Congress and banking regulators to strengthen banking rules to make this type of bank failure less likely to happen again and protect jobs and small businesses,” Biden said on Monday.

In 2018, Trump signed a law that released small and medium-sized banks from the stricter rules established in 2010. With the easing, only banks with more than US$ 250 billion in assets were subject to federal supervision —which at the time restricted the universe of institutions less than ten. Before, the rule was lower, US$ 50 billion.

In an article for The New York Times, Democratic Senator Elizabeth Warren also blamed the Trump administration for loosening regulation. “Had Congress and the Fed not reversed tighter oversight, the SVB and Signature would have been subject to stronger liquidity and capital requirements to withstand financial shocks,” she wrote.

“They would have been required to conduct regular stress tests to expose their vulnerabilities and strengthen their business. But as those requirements were revoked, when an old-fashioned bank run took place on SVB, the bank could not withstand the pressure — and collapse of the Signature was close.”

Trump, for his part, used the opportunity to criticize the Biden administration, which he claims is leading the country into an economic recession. On Saturday (11), he wrote in capital letters on a social network: “WE WILL HAVE A GREAT DEPRESSION MUCH BIGGER AND MORE POWERFUL THAN THE ONE OF 1929. THE PROOF IS THAT THE BANKS ARE ALREADY BEGINNING TO COLLAPSE.”

On the Republican side, the barbs even reached the culture wars. Ron DeSantis, governor of Florida and one of the strongest potential candidates for the White House next year, said the bank failed because of its inclusive policies. “They were so worried about DEI [sigla para diversidade, igualdade e inclusão] that it really distracted them from focusing on their core mission,” he told Fox News.

He also blamed the Biden administration. “We have a huge federal bureaucracy and yet they never seem to be there when we need them to be there to stop something like this.”

Also in an interview with Fox, Republican Representative Jim Comer, head of the House Oversight and Reform Committee, said SVB is “one of the most ‘woke’ banks [politicamente corretos] in the search for ESG-type policies and investments [governança ambiental, social e corporativa]”. “This could be a trend as a result of bad policies by the Democrats,” he said.

Presidency candidate Nikki Haley has criticized the bailout of deposits announced by the Biden administration, which ensured that all SVB and Signature customers would have access to cash after the banks failed, even deposits in excess of the $250 guaranteed limit. thousand.

“Taxpayers should by no means bail out Silicon Valley Bank. Private investors can acquire the bank and its assets. It is not the responsibility of the US taxpayer to intervene. The era of big government and corporate bailouts must end.”

Biden said on Monday that “no loss will be paid by taxpayers,” and that bailout costs will be borne by fees paid by banks to the FDIC (Federal Deposit Insurance Corporation). The administration is trying to avoid giving the impression that it is bailing out the bank, and Biden has said that, unlike customers, investors will not be covered. “They took a conscious risk, and when they don’t succeed, investors lose money. That’s how capitalism works.”

Haley later said, “Biden is pretending this isn’t a bailout. But it is,” he wrote on Twitter. Another candidate, Vivek Ramaswamy, also said that the government should not bail out deposits made at the SVB.

Deputy George Santos, son of Brazilians and investigated for spreading a series of lies during the campaign, joked about the situation on Twitter. “Never thought I would live to see Democrats advocating bailing out millionaire bank depositors!” he wrote.