SVB collapse: Bank crisis becomes another Biden vs. Trump war ahead of 2024
Haisten Willis
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The partisan war of words over Silicon Valley Bank‘s collapse has already started, with President Joe Biden launching one of the first volleys himself.
Biden spoke Monday morning about the collapse of Silicon Valley Bank and Signature Bank, reassuring that “the banking system is safe.” But he also strongly implied the collapses were the fault of Donald Trump.
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“During the Obama/Biden administration, we put in place tough requirements on banks like Silicon Valley Bank and Signature Bank, including the Dodd-Frank law to make sure the crisis we saw in 2008 would not happen again,” Biden said. “Unfortunately, the last administration rolled back some of these requirements. I’m going to ask Congress and the banking regulators to strengthen the rules for banks to make it less likely this kind of bank failure will happen again, and to protect American jobs and small businesses.”
That set off a partisan fight even as details of the fledgling crisis are still unfolding.
Progressives echoed Biden’s words, saying that the 45th president was to blame for signing a 2018 law that raised the asset threshold for banks to fall under Dodd-Frank from $50 billion to $250 billion.
“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,” Sen. Bernie Sanders (I-VT) said in a statement.
Republicans were ready for battle, rejecting new regulations and going after Biden’s financial management.
“The Biden bank bailout is a result of Biden’s failed economic policies,” said Club for Growth President David McIntosh. “The additional regulations being proposed by Biden would only make the situation worse and further consolidate power among the big banks and hurt regional banks that small businesses rely on.”
Sen. Tim Scott (R-SC), ranking member of the upper chamber’s banking committee, also rejected the idea that regulation was the answer.
“SVB’s failure is the result of mismanagement and failed supervision,” a Scott spokesperson said. “Regulators failed to do their job with regard to SVB, and if regulators can’t do their job with what the law gives them now, why is giving them more regulations the better route?”
House Financial Services Committee Chairman Patrick McHenry (R-NC) said he also has confidence in “the protections already in place” while calling Silicon Valley Bank “the first Twitter-fueled bank run.”
Going on the attack, Republicans pointed at high inflation, which the Fed has been combating with aggressive interest rate hikes that played a role in Silicon Valley Bank’s collapse. Republicans blamed Biden, and specifically the $1.9 trillion American Rescue Plan Act he signed soon after taking office, for pushing inflation from 1.4% the month he took office to a peak of 9.1% last summer.
“Even liberal economists blame his $1.9 trillion stimulus for fueling inflation,” said Republican National Committee Spokesman Tommy Pigott. “Ironically, Biden spent this weekend bragging about the so-called ‘American Rescue Plan’ as banks were failing.”
In reality, there’s a little bit of truth to both, argues University of Massachusetts economics professor Gerald Friedman.
“My first thought would be that the regulations that were relaxed in 2018 raised the bar for Dodd-Frank regulations so that Signature Bank and Silicon Valley Bank were no longer subject to its tight regulation,” he said. “Doing that probably was a mistake.”
At the same time, Friedman said “this is the steepest run-up in interest rates we’ve had in 15 years. Any time you do that, you risk having trouble,” and added that he’s not sure if Silicon Valley Bank would have behaved differently even if it fell under the Dodd-Frank law.
Biden will hope to avoid a full-blown recession and keep the economic heat on Republicans as the situation unfolds. His economic approval rating is just 37.5%, based on polls taken before the banks collapsed.
The failures of Silicon Valley Bank and Signature Bank are already being spun into campaign fodder for down-ballot candidates.
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Rep. Katie Porter (D-CA), who is running for Senate in 2024, has said she’s drafting legislation to reverse the 2018 law. Rep. Ruben Gallego (D-AZ), who hopes to defeat Sen. Kyrsten Sinema (I-AZ) next year, issued a statement Monday attacking her for supporting the Dodd-Frank rollback.
If the Silicon Valley Bank failure significantly affects the wider economy, those attacks are likely to play out in the 2024 presidential election as well.