“Politically, if you ask me what’s the impact of bailing out rich techies in California — which is exactly how this will be played — then the answer is Donald Trump’s likelihood of re-election just went up three to four points,” said Mick Mulvaney, who came to Congress as a Tea Party champion and later served as Mr. Trump’s acting White House chief of staff.
In repeating that taxpayers will not bear the cost of bailing out depositors at the failed banks, Mr. Biden noted that the cost will be financed by fees paid by other banks into the Federal Deposit Insurance Corporation, or F.D.I.C. What he did not mention was that a separate loan program that the Federal Reserve has opened to help keep money flowing through the banking system will be backed by taxpayer money. In a statement on Sunday, the Fed said it “does not anticipate that it will be necessary to draw on these backstop funds.”
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The nuances did not matter to Mr. Biden’s critics. “Joe Biden is pretending this isn’t a bailout. It is,” Nikki Haley, the former ambassador to the United Nations now running for the Republican presidential nomination, said in a statement. “Now depositors at healthy banks are forced to subsidize Silicon Valley Bank’s mismanagement. When the Deposit Insurance Fund runs dry, all bank customers are on the hook. That’s a public bailout.”
Other conservatives argued that a government rescue, however it is formulated, warps private markets and eliminates disincentives for financial institutions taking reckless risks because they can assume they too will eventually be saved, a concept called “moral hazard.”
“Organizations that can’t manage risk should be allowed to fail, and taxpayers should not be forced to bailout the well-connected and wealthy because a bank prioritized woke causes above smart investing,” David M. McIntosh, a former Republican congressman from Indiana and president of the Club for Growth, a conservative advocacy organization, wrote on Twitter.
But the White House adamantly rejected the comparison to the bailouts of the past, noting that the government is protecting depositors, not investors, while firing bank managers responsible for the trouble. “This is very different than what we saw in 2008,” Karine Jean-Pierre, the White House press secretary, told reporters.
Michael Kikukawa, another White House spokesman, later said in a statement: “The president’s direction from the outset has been to respond in a way that protects hardworking Americans and small businesses, keeps our banking system strong and resilient, and ensures those responsible are held accountable. That’s exactly what his administration’s actions have done.”
Peter Baker
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