Latest Development: GOP Sen. Tim Scott Claims That The Biden Admin’s Reaction To Collapse Of Silicon Valley Bank Is The “Greatest Form Of Corporate Cronyism”
Disclaimer: This article may contain the personal views and opinions of the author.
On Friday, March 10th, we saw the largest U.S. bank failure since the collapse of Washington Mutual in 2008.
The “go-to bank for U.S. tech startups,” Silicon Valley Bank, provided financing for nearly 50% of all U.S. venture-backed tech and healthcare companies.
The bank collapsed on Friday and was taken over by federal regulators following a sudden bank run and capital crisis leaving their depositors and investors in limbo.
The speculation on whether or not the federal government would bail out the bank took over Twitter this weekend prompting President Biden to make a statement.
On Sunday night, the president tweeted, “At my direction, [Treasury Secretary Janet] Yellen and my National Economic Council Director worked with banking regulators to address problems at Silicon Valley Bank and Signature Bank. I’m pleased they reached a solution that protects workers, small businesses, taxpayers, and our financial system.”
Earlier in the day, Secretary of the Treasury Janet L. Yellen, Federal Reserve Board Chair Jerome H. Powell, and FDIC Chairman Martin J. Gruenberg issued a statement regarding the situation and their action to guarantee all deposits, including those that did not fall under the insured funds’ policy.
“Today we are taking decisive actions to protect the U.S. economy by strengthening public confidence in our banking system,” the joint statement read. “This step will ensure that the U.S. banking system continues to perform its vital roles of protecting deposits and providing access to credit to households and businesses in a manner that promotes strong and sustainable economic growth.”
Senator Tim Scott, R-S.C., discussed the situation and the role of regulators with Trey Gowdy on his Fox News program, “Sunday Night in America.”
Scott feels the Biden administration’s decision to insure all deposits sends the wrong message.
“We just heard recently that they’re going to really have the greatest form of corporate cronyism that we’ve seen in a very long time. They’re going to insure all the deposits, even the ones over the $250,000 limit, which means that the most sophisticated investors are now going to have the insulation of the federal government. That is problematic,” Scott said.
“It sends a very negative statement to the marketplace, and it is something that we’re going to have to wrestle with over the next couple of days as we delve into what actually happened.”
Scott voiced his opinion saying, “The high inflation led to high interest rates, high interest rates meant that more depositors departed out of that bank quicker than they thought, leading to the collapse. We have failure at the Fed, failure at the regulators and failure with the management of that bank. We have a lot to uncover.”
“The American taxpayer should not be on the hook for this failure. We’re going to do everything in our power to make sure that doesn’t happen,” he added.
Speaker of the House, Kevin McCarthy, thinks the best outcome would come from a larger bank acquiring Silicon Valley Bank.
He said SVB has a lot of assets that would be attractive to another institution and that scenario would help cool the market.