The sweet bailout of depositors at Silicon Valley Bank (SVB) and Signature Bank by the federal government over the weekend received a derisive and frustrated response from taxpayers.
Many of the people The Hill spoke to for this article worry that the financial system could collapse around them again — and angry that rich venture capitalists can get a quick bailout from the government while expanded social services and loan forgiveness seem to continue into Forever is elusive.
“What amazes me that our economy is run by people who own banks? No, it’s not a surprise. But yeah, this is another example of total injustice and racism,” Elaine McTeague, a retired New York nurse, told The Hill in an interview.
“No surprises there, but it’s unfortunate and it’s wrong,” she said.
McTeague added that she believed the government had taken a “better safe than sorry” approach, which she understood.
But it still had concerns about the transparency of the failures and the government’s response, which has insured ultra-wealthy depositors above the record $250,000 limit offered by the Federal Deposit Insurance Corporation (FDIC).
The SVB and Signature failures are the largest since the 2008 financial crash and the second largest bank failures in US history, and the consequences continue to ripple throughout the global economy.
Latest: Signature Bank Had A Criminal Investigation Looming Before It Collapsed: Report
The Dow Jones Industrial Average fell more than 500 points in early trading Wednesday as CEO Larry Fink of financial giant BlackRock warned of “more bookings and closings to come” in an annual letter to investors.
Fink compared the situation to a “subsidy and loss crisis,” referring to the crash in the savings and loan sector in the 1980s that led to a Wall Street bailout funded by taxpayers. amounting to $160 billion.
Who might be next? The successive bank failures are fueling broader concerns
Who pays to bail out the bank?
In a history of the savings and loan crisis posted on its website, the FDIC refers to this incident as a “catastrophe,” a “catastrophe,” and a “major public policy failure.”
While taxpayers are not yet technically on the hook from the SVB and Signature implosion, because the depositors were paid out of an FDIC-managed fund that the banks are paying into, their money is still at risk.
The fund is secured “by the full faith and credit of the United States government,” according to the FDIC, so taxpayer money can be used directly if the fund runs out.
A push for less regulation: Silicon Valley’s elite banks have pushed hard to ease banking rules
An additional credit line set up by the Federal Reserve for distressed banks is also backed by $25 billion from the Treasury Department’s Exchange Stabilization Fund, which has a net worth of $38 billion.
People who pay student loans cry wrong
Students and recent college graduates in particular, who have been waiting for the dangling promise of loan forgiveness by President Joe Biden’s administration that could have been crushed by the Supreme Court, are feeling the acute pangs of injustice.
They are frustrated with the VIP service rendered to the financial sector by federal regulators while their financial aspirations are left hanging in the balance.
“It really shows students and anyone who looks to government for support that we’re not their first priority, that we generally live in a capitalist society, and so their first priority will always be where the money is,” Vivian Kormani, a pre-med student at the University of California, Berkeley, said. And who also works in student co-ops there, in an interview with The Hill.
said Kormani, who added that her father was paying off student loans until the age of 40 and that her mother had decided not to attend college because of the cost.
Lawmakers take aim: Warren blames Congress for ‘totally avoidable’ bank failures
Mercury Robertson, who works as a dormitory resident assistant at the University of Texas at Austin, told The Hill that she can see the frustration bank bailouts cause for the students she helps with support and advice.
“They are very frustrated because things like this keep happening,” she said. “My current financial expenditures are covered through federal funding, by the university. But when I see these bank bailouts, I think the money could go to improving the University of Texas or improving other Texas universities. Austin and Houston both have public universities that could use more funding “.
Victoria St. Louis said that her decision to go to school was largely determined by the cost and that avoiding as much student debt as possible was a major concern of hers.
“There seems to be a system where banks can get away with not making the right investments,” St. Louis, a marketing and business student at online Western Governors University in New York, told The Hill.
St. Louis had some financial advice for regulators and fiscal policymakers.
“One place to start is the debt relief program they were just trying to implement,” she added. “If they can get this done as quickly as they did rescues, it could potentially make a huge difference to a lot of people’s lives.”
Do companies get preferential treatment over taxpayers?
It appears that pleading by companies in California’s tech sector was part of what prompted the rapid response from the federal government over the weekend.
Just a day before the insurance cap for SVB was raised by Washington’s fiscal and monetary authorities, blue chip investment group Y Combinator, whose companies collectively own nearly $1 trillionHe wrote an open letter to Treasury Secretary Janet Yellen, asking for “comfort and attention.”
Will taxpayers fund the bailout? Here’s who pays to take back Silicon Valley deposits, Signature Bank
Workers and business owners in other sectors of the economy say they would love to see this kind of attention.
Albert Zyback, an independent pharmacist in New York, told The Hill that big business interests and lobbyists in the healthcare sector make it difficult for his company to compete with the larger chains.
He said the regulatory response he saw from the federal government on the SVB bailout would “definitely” make a difference to his business and others like it.
If the government has a quick response [to our regulatory concerns] Like what happened with the financial situation going on right now, it’s going to be a game changer,” he said.
Americans are still angry about the 2008 bank bailouts
Public frustration with what is perceived as preferential treatment given to the financial sector is nothing new.
Reuters/Ipsos vote of 2013 that, after five years of bank bailouts in the aftermath of the 2008 financial crisis, “The Americans [were] I’m still mad at Wall Street.”
Forty-four percent of the respondents believed that the government should not have bailed out the financial sector, and only 22 percent believed that the bailout was the right thing to do.
Reuters reported at the time that Larry Summers, then director of the National Economic Council in the White House, warned financial executives that they “didn’t understand how angry ordinary Americans were with them.”
New banking investigation: 5 things to know about the Silicon Valley bank investigation
The anger eventually turned into a protest movement known as Occupy Wall Street in 2011, which saw protesters camp out for nearly two months in Zuccotti Park near Wall Street in lower Manhattan.
Activist Yotam Marom, who helped organize the demonstrations during Occupy Wall Street, told The Hill that he saw the aid to failing banks as similar to what sparked the protests in 2011, though on a smaller scale.
Is this a similar situation? Yes, he said. “I don’t know if people are getting hurt now in the same way they were. But it’s certainly not new that banks or big companies basically fail and get bailed out, and they’re all the same in that way. That’s infuriating.”
Copyright 2023 Nexstar Media Inc. All Rights Reserved. all rights are save. This material may not be published, broadcast, rewritten, or redistributed.
“Reader. Infuriatingly humble coffee enthusiast. Future teen idol. Tv nerd. Explorer. Organizer. Twitter aficionado. Evil music fanatic.”