Joe Biden Learned the Lessons of 2008 Well – As President Joe Biden deals with the failure of multiple regional and small banks that was initiated by the collapse of the Silicon Valley Bank (SVB), cries of another 2008 bailout of irresponsible, risk-taking bank leaders emanated far and wide across the fruited American plain. Sensing the unpopularity of such a move, President Biden and his team denied that any such action was underway.
At the same time, however, SVB was a hub of Biden’s crony capitalist friends in Silicon Valley. Thus, unlike the poor working-class folks of East Palestine, Ohio—most of whom voted for the dreaded Donald J. Trump—SVB could not be abandoned.
Going into what will be a brutal 2024 presidential election, though, Biden needs the most significant cross-section of voters possible to overcome the strong support among Right-leaning people that both Donald Trump and Ron DeSantis enjoy. Biden’s team deftly avoided directly bailing out the SVB and the retinue of other regional banks that are now becoming insolvent.
Joe Biden: A Non-Bailout, Bailout!
Instead, the Biden Administration directed the Federal Deposit Insurance Corporation (FDIC) to use the money that the FDIC collects from all banks in America to bail the depositors of the failing banks out. Investors aren’t getting bailed out. But, the depositors—even those with more than $250,000 in the bank—are being bailed out. It’s just that the money of other banks is being used to do so…at the direction of the government, as opposed to direct taxpayer dollars.
It’s a nifty move by Joe Biden to save his friends in Silicon Valley without committing political suicide by engaging in an unpopular bailout, as both Presidents George W. Bush and Barack Obama did during the 2008 Great Recession. Like having your son do all your corrupt business deals with foreign governments while you feign ignorance—all while getting ten percent of the cut.
Now, Biden is demanding that Congress pass laws to punish bankers who make irresponsible and risky loans and put their banks on the path to insolvency. This sounds wonderful to many people.
Who doesn’t want to make them pay for their perceived greed?
Whose Responsibility is It Anyway?
Yet, at no point in this national conversation has anyone mentioned the absurdity and cynical move by Joe Biden to demand accountability for bankers while eschewing any accountability for himself. Even less is said about the confusing approach by Biden at holding bankers accountable while simultaneously using FDIC funds to excuse irresponsible bankers from their mishandling of their banks.
Biden’s indirect bailout of SVB has removed risk from the industry. Thus, it no longer matters if bankers are good or bad at their jobs. If bad decisions are made by bank managers that lead their banks down the path of collapse, they will ultimately be bailed out. The bank manager and his bank bears no real responsibility. They will likely repeat the irresponsible behavior that made their bank vulnerable to eradication. This is the textbook definition of “moral hazard.”
Biden might not even know what he’s saying. Biden certainly doesn’t care. All that matters to he and his handlers is that they avoid a catastrophe before the election in 2024 that could make them lose power.
What about Biden’s responsibility in this mess?
This is the aspect of the story that few outside of the Right-wing have noticed. SVB made the risky loans it did because it assumed that interest rates would remain at or around near-zero percent. If the US government had not spent the last three years feverishly printing more than $2 trillion to combat the economic consequences of the government-ordered COVID-19 lockdowns in the United States, then the Federal Reserve would not have needed to raise interest rates when it did.
The rapid increase of interest rates led to the destabilization of SVB, which had made risky loans based on the idea that interest rates wouldn’t go up—and if they did, they’d not go up the way they did over the last two years.
Who caused the interest rate spike, though?
The Federal Reserve under Jerome Powell was merely responding to events. Yes, former President Donald Trump initiated the massive spending spree as part of his stimulus to keep the economy going during the early phases of COVID-19. No one told Biden, however, to do the same in 2021. Seeking to earn cheap political points, Joe Biden did yet another stimulus in his first year in office which was the straw that broke the camel’s back.
We should absolutely hold imbecilic bank leaders accountable for making risky loans. At the same time, though, we must reserve some of our ire for the politicians who enacted policies that forced interest rates to spike the way they did. Further, Americans should be keenly aware that no banker will be held accountable as the Biden Administration has ensured that it will never let risk truly factor into the operations of banks across America ever again.
Just what were these risky loans?
Finally, SVB’s bank leaders made insanely stupid loans not because they were trying to cultivate tech talent who would create the next great innovation or technology startup in Silicon Valley. SVB was merely trying to satisfy its Liberal clients and Democratic Party benefactors in Washington, D.C., by having their bank fund the silliest Left-wing causes and business leaders. Again, Far Left ideology has led to this crisis.
Until Joe Biden, his party, and our elite recognize their failures, we will continue to suffer through banking crisis after banking crisis. Still, Biden’s success at manipulating the American voters into thinking he wasn’t bailing out the banks or that his stimulus wasn’t responsible for the mess we’re in, should study the last decade with far more attention than he has. Removing risk from any industry is a surefire way to create a failed industry—that’s the very last thing we need.
Brandon J. Weichert is a former Congressional staffer and geopolitical analyst who serves as a Senior Editor for 19FortyFive.com. Weichert is a contributor at The Washington Times, as well as a contributing editor at American Greatness and the Asia Times. He is the author of Winning Space: How America Remains a Superpower(Republic Book Publishers), The Shadow War: Iran’s Quest for Supremacy (March 28), and Biohacked: China’s Race to Control Life (May 16). Weichert can be followed via Twitter @WeTheBrandon.
