And then, once the management of Silicon Valley Bank and Signature screwed up badly enough, the federal government decided, “Never mind. We’re going to protect every amount for every bank customer.” The Biden administration may not like people calling that a bailout, but that is indeed a bailout.As our Phil Klein writes, “In practice, it has created a huge moral hazard by signaling that the $250,000 FDIC limit on deposit insurance does not exist in practice. The clear signal it sends is that when financial institutions make poor decisions, the government will swoop in to clean up the mess.”As the editors of the Wall Street Journal conclude, “This is a de facto bailout of the banking system, even as regulators and Biden officials have been telling us that the economy is great and there was nothing to worry about.”
It's unsurprising that the same crew who tried to push through student loan forgiveness has no idea what "moral hazard" means. As for that Deposit Insurance Fund:
MIT economist Simon Johnson: “Disingenuous: that’s the right word to describe anyone (Treasury official or not) who claims the DIF is not ultimately backed by the taxpayer.“
— Jeff Stein (@JStein_WaPo) March 13, 2023
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May 2018, President Donald Trump:
“We’ve kept yet another promise as I sign the Economic Growth Regulatory Relief and Consumer Protection Act into law. It’s a big deal. Big deal for our country. This is truly a great day for America, and a great day for American workers and small businesses all throughout the nation. The legislation I’m signing today rolls back the crippling Dodd-Frank regulations that are crushing community banks and credit unions nationwide. They were in such trouble. One size fits all, those rules just don’t work. …They were being put out of business, one by one.”
If you worry about what happens to the economy when a midsized regional bank doesn't repay its depositors, just wait until House Republicans force the government of the United States to default on its massive worldwide multi-trillion dollar obligations.
Straight from the liberal playbook: blame deregulation. Of course the solution is to propose more government control and regulation, ignoring the fact that very often it was the government that caused the problem in the first place. The "capitalism has failed" crowd is just about the same - as if bailing out a bank that made speculative investments was capitalism.
As opposed to the conservative playbook? Kill regulations that were working, then yell "woke woke woke"? Who can remember all the way back to 2008, anyway?
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