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Team Biden slings bank BS — but you possibly can’t spin this debacle


It’s a funny but sad spectacle that Joe Biden & Co. are attempting to show the mess at Silicon Valley Bank — and the crisis engulfing the banking system — right into a political win.

Funny since the BS is working about in addition to their spinning of the transitory nature of inflation, or how well they handled the alarmingly chaotic pullout from Afghanistan.

Sad since it underscores the downright stupidity of our political class as they face very serious issues in regards to the banking system and the economy that may’t be spun away.

In fact, the ultimate word has yet to be written on the collapse of SVB, Signature Bank, the near-collapse of First Republic Bank, and whatever else implodes by the point this column is within the ­paper.

But one thing I do know of course is that banking crises demand leadership from Washington — stuff that’s so obviously lacking at a time when it’s so desperately needed.

Back in 2008 we had Treasury Secretary Hank Paulson working day and night putting out multiple fires and leveling with Congress and the American people in regards to the severity of the situation. Today now we have Sleepy Joe Biden, his equally asleep Treasury Secretary Janet Yellen announcing that bank bailouts aren’t really bailouts because taxpayers aren’t involved.


Treasury Secretary Janet Yellen reportedly said that bank bailouts aren’t really bailouts because taxpayers aren’t involved.AFP via Getty Images

The federal government just handed SVB a blank check to cover all its depositors, mainly lefty Bay Area enterprise capitalists. Which means all accounts are covered with FDIC insurance, even those above the limit of $250,000.

He says with a straight face the cash is coming from the massive banks who contribute to the FDIC insurance pool. OK, but when the banks are financing the fund, they may pass on those costs to depositors. Which means everyone with a checking account, which suggests nearly every American taxpayer, shall be making whole those wealthy VC dudes.


Not very ‘stress’ful

Biden and Yellen then say the watering down of the banking law referred to as Dodd-Frank meant that midsized banks like SVB were spared the so-called stress tests that will have uncovered its weaknesses. They seem to disregard (or most probably haven’t any clue) the dirty little secret that such exams are known derisively in banking circles as “feather tests” because even big risk-management-challenged basket cases like Citigroup appear to pass them.

One other whopper: Biden and Yellen want us to consider that the San Francisco Fed had no idea what was happening in its backyard with a bank that grew exponentially in three years before it sank.

 Again, don’t consider it. SVB’s CEO was on the board of his local Fed bank. Everyone who should have known what SVB was as much as did. And by many accounts they were too busy ensuring the banks they regulated lived as much as ESG standards and embraced so-called social-justice remedies to care about SVB’s obvious risk taking. One among my sources worked at SVB until a few 12 months ago, and here’s how he described the bank’s business model: “Loans to VC-backed firms that made no money, asset-based credit lines to PE funds and little else. It should never have been given FDIC insurance. This wasn’t a place that made loans to construction firms and took deposits out of your aunt.”

Joe BidenBiden said the watering down of Dodd-Frank meant that SVB were spared the so-called stress tests that will have uncovered its weaknesses. Bloomberg via Getty Images

Yes, FDIC insurance was speculated to protect smallish depositors like your aunt, not dice-rolling tech millionaires who banked at SVB and knew it was a dangerous business. Those tech millionaires (just like the SF Fed) either knew or must have known that a hiccup within the economy like rising rates could doom this bank and perhaps others.

As I first reported last week, the massive banks at the moment are freaking out about one other midsized bank also in San Francisco about to succumb to market forces named First Republic. (See a pattern here?) They chipped in with $30 billion to stabilize the bank at least for the time ­being.

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That’s because I also hear the bank may very well be sold in the approaching days to one among the bailout participants. The explanation they’re doing this isn’t necessarily because they think First Republic is an excellent business — slightly they’re seriously anxious about economic contagion that policy makers haven’t any clue learn how to handle.

Remember 2008?

The bill is coming due for the unserious economic policies of the past two-plus years: The wildly unprecedented spending by the Biden administration to show the US right into a quasi-socialist European welfare state and money printing by the Fed to make that occur.

Every top bank executive I speak to says the present troubles within the economic system could lead on to something on the dimensions of what went down in 2008. They’re also seriously anxious the banking tumult is yet one more example of Sleepy Joe & Co. not being up for the job.

Or as one remarked to me: “Where’s Hank Paulson while you need him?”

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