Chris Lange, FISM News
Several GOP senators are challenging President Joe Biden’s claim that American taxpayers won’t foot the bill for the bailout of wealthy investors who deposited funds in Silicon Valley Bank, now controlled by federal regulators following its storied collapse on Friday.
Republicans argued that U.S. banks that pay into the Federal Deposit Insurance Corporation (FDIC), which will cover depositors’ losses, will pass higher bank fees down to consumers.
“Understand what’s happening at FDIC: They’re taking the insurance premiums that were paid in to protect depositors under $250,000 (little guys) and using it to cover deposits of the very rich,” Rep. Thomas Massie (R-Ky.) said in a tweet. “They argue it benefits everyone to go ‘all in’ on the first few banks,” he added.
The Fed’s new Bank Term Funding Program is backed by $25 billion the Treasury Department will make available from the Exchange Stabilization Fund (ESF). The Hill noted in its reporting that Congress used the ESF to prevent financial markets from freezing in the early days of the COVID-19 pandemic.
‘EVERY BANK IS GOING TO PASS THE COST ON TO EVERY TAXPAYER’
Following Monday’s telephone briefing of GOP senators by Treasury Department and FDIC officials, Sen. James Lankford (R-Okla.) said that, despite Biden’s claim that taxpayers won’t be impacted by the bailout, the administration is “doing a special assessment on every bank and every bank is going to pass the cost on to every taxpayer.”
William Luther, director of the American Institute for Economic Research’s Sound Money Project, explained that since the Bank Term Funding program gets its money from FDIC-insured banks, it stands to reason that regular customers will be forced to bear the burden of added costs.
“The Deposit Insurance Fund is not really an insurance fund,” Luther told The New York Post. “It is a rainy-day fund, which gets drawn down following a bank failure and replenished thereafter.”
Luther added: “Although the statutory incidence of these taxes falls on banks, they pass along some of the cost to their customers in the form of higher fees and lower-quality services,” such as fewer tellers in each branch.
‘THEY’RE SETTING UP PRECEDENT WITHOUT INPUT’
Republicans are scratching their heads over why federal regulators felt compelled to designate Signature Bank and Silicon Valley Bank as systemic risks when they had $110 billion and $209 billion in assets, respectively.
Lankford questioned why the administration “didn’t have the auction” to sell Silicon Valley Bank to a private sector competitor like PNC Financial before taking such an extreme measure.
“They’re not handling it the way they would typically handle it so we’re trying to figure out over the weekend how they’re making policy. They’re setting precedent up without input and they’re setting precedent that I think would be long-term damaging to banking,” Lankford said.
Sen. Mike Crapo (R-Idaho), a senior member of the Senate Banking Committee who participated in the briefing call, complained that the Treasury Department and FDIC have failed to provide a satisfactory explanation as to why an auction didn’t take place, The Hill reported.
“We haven’t got much information except that they haven’t been able to find a buyer. I know there’s a lot of information running around out there about why not and who might have been and what’s going on now but we haven’t been given any of that information,” he said.
Crapo said that future hearings “would be very helpful” and that officials from Treasury, the Federal Reserve, and the FDIC should testify before Congress.
LAWMAKERS QUESTION WHETHER US FUNDS WILL BE USED TO MAKE CHINESE INVESTORS WHOLE
Sens. Lankford and Crapo also raised concerns that billions of dollars of FDIC funds may be used to make whole Chinese depositors who invested heavily in SVB, which Carpo said would be “an issue to me.”
“SVB obviously has a lot of investment from China,” Lankford said, pondering whether Chinese “account holders [are] going to be made whole by Oklahomans who are in community banks that are going to have to pay a special assessment to cover Chinese deposits.”
COMER SAYS ‘WOKE’ SVB INVESTED IN PROGRESSIVE ESG INITIATIVES
Some Republicans have suggested that the Biden bailout may be linked to progressive environmental, social, and governance (ESG) investments. SVB attracted venture capitalists and tech start-up companies with ESG investments and diversity, equity, and inclusion (DEI) initiatives.
Rep. James Comer (R-Ky.), chair of the House Oversight and Accountability Committee, told Fox News’s “Sunday Morning Futures” that Silicon Valley Bank was one of the “most woke banks in their quest for the ESG-type policy and investing.”
SEN. HAWLEY INTRODUCES BILL TO PROTECT CONSUMERS FROM SHOULDERING BAILOUT BURDEN
Sen. Josh Hawley (R-Mo.) introduced legislation Monday aimed at protecting consumers and community banks from special assessment fees he said the Biden administration will impose on financial institutions to cover the losses of SVB depositors.
“What’s basically happened with these ‘special assessments’ to cover SVB is the Biden Administration has found a way to make taxpayers vote for a bailout without taking a vote on it,” Hawley tweeted.
NEWSOM WITHHELD INFO ON PERSONAL SVB ACCOUNTS WHILE LOBBYING FOR BAILOUT
The Business Insider reported California Democratic Gov. Gavin Newsom did not disclose his personal ties to SVB while lobbying for the federal bailout.
According to the report, Newsom’s links to the bank include personal accounts, three of his private wineries, and his wife’s charity.
The report noted that it is illegal under California law for government officials to in any way seek to influence decisions in which they have a “financial interest.”
SVB INTERIM CEO SAYS BANK IS OPEN FOR BUSINESS
Meanwhile, the new government-appointed head of Silicon Valley Bank (SVB) declared on Monday that the bank is open for business. Interim CEO Tim Mayopoulos said that there is “no safer place” to stash one’s cash in a phone call inviting depositors to keep their deposits in the bank or return recent withdrawals, per The Information.
“I’m not asking you to do this as an act of charity,” Mayopoulos reportedly added in the call.