Pence blames Biden for bank busts and blasts bailouts
Quin Hillyer
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Former Vice President Mike Pence used Monday’s collapse of First Republic Bank as occasion to blast the Biden administration for policy mistakes he said created the conditions for the bank’s demise.
“The [Federal Deposit Insurance Corporation] has agreed to cover some $13 billion in losses when the bank was sold to J.P. Morgan: It’s just one more Biden bailout,” he said in a phone interview, noting that this second-largest bank failure in U.S. history followed the failures in March of two other banks, which now are the third- and fourth-largest failures ever. (Columns tomorrow will explore other topics covered in today’s exclusive interview.)
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“As someone who fought against the Wall Street bailout in 2008,” Pence continued, “I said then — and I believe still — we cannot borrow and spend and bail our way back to a growing economy. What we’re witnessing, I believe, in these three bank failures is the failure of Biden’s economic policies.”
Specifically, Pence strenuously criticized the “completely unnecessary … party-line” passage of the misnamed American Rescue Plan that threw $1.9 trillion into an already recovering economy. Doing so, he said, “lit the pilot light on the worst inflation in 40 years. That’s what created tremendous pressure on financial institutions across the country.”
“The answer is not bailouts,” he said. “The answer is to let the marketplace work. And the real answer is to get away from the runaway spending and war on energy” President Joe Biden has implemented.
Indeed, Pence has a point. Almost every news story about First Republic’s failure explained that the bank experienced huge losses on long-term Treasury bonds, which lost massive value due to rising interest rates. Those rates rose, of course, as a result of, and as a tactic to counteract, the two years of Bidenflation.
The inflation was eminently predictable and avoidable. Even longtime liberal economist Larry Summers, who was treasury secretary under President Bill Clinton and director of President Barack Obama’s National Economic Council, warned specifically that the $1.9 trillion law Pence today cited would cause major inflation and repeatedly has blamed it for doing so.
“So long as this administration continues to bury the American people under an avalanche of big government spending, debt on this and future generations, a war on energy, and an avalanche of regulations and even higher taxes,” Pence said, “we are going to continue to see these kinds of economic outcomes.”
Indeed, Pence warned that the inflationary pressures on American families and on financial institutions alike “may well be sending us headlong into a recession before the end of the year.”
Pence said the “antidote” is to end big spending and “let’s make the Trump-Pence tax cuts permanent, for starters.”
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Probably the most controversial part of Pence’s comments involved his firm opposition to bailouts, even if they temporarily seem to calm the financial markets.
“If you are going to say some banks are too big to fail, then you are also saying that there are some banks that are too small to care about,” he said. Instead, he said, “you have to allow the marketplace to breathe. And that’s how a free enterprise system sorts things out and creates discipline. Bailouts undermine that.”