“If you ask me politically what the implications of saving rich techs are in California — and that’s how it’s played — the answer is that Donald Trump’s odds of being re-elected just went up three to four points,” said Mick Mulvaney, who came to Congress as the Tea Party champion and later served as Mr Trump’s acting White House Chief of Staff.
Mr. Biden reiterated that taxpayers would not bear the cost of bailing out depositors at the failing banks, noting that the cost is funded by fees other banks pay to the Federal Deposit Insurance Corporation, or FDIC. What he failed to mention was that a separate lending program that the Federal Reserve opened to keep money flowing through the banking system is backed with taxpayer money. In a statement on Sunday, the Fed said it “does not expect it will be necessary to draw on these backstop funds.”
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The nuances didn’t matter to Mr. Biden’s critics. “Joe Biden is acting like this isn’t a bailout. It is,” said Nikki Haley, the former ambassador to the United Nations who is now running for the Republican presidential nomination, in a statement. “Now savers at healthy banks are being forced to subsidize the mismanagement of the Silicon Valley bank. If the deposit protection fund runs empty, all bank customers are on the hook. This is a public bailout.”
Other conservatives have argued that whatever the wording of a government bailout, it distorts private markets and removes disincentives for financial institutions to take reckless risks with the confidence that they too will eventually be bailed out, a concept that has been described as a “moral risk”.
“Organizations that can’t manage risk should be allowed to fail, and taxpayers shouldn’t be forced to bail out the well-connected and wealthy because a bank is prioritizing good causes over smart investments,” said David M. McIntosh, a former Republican congressman Indiana and president of the Club for Growth, a conservative advocacy group, wrote on Twitter.
But the White House firmly dismissed the comparison to past bailouts, noting that the government was protecting depositors, not investors, while firing bank managers responsible for the problems. “This is very different from what we saw in 2008,” Karine Jean-Pierre, the White House press secretary, told reporters.
Michael Kikukawa, another White House spokesman, later said in a statement, “The President’s direction from the beginning has been to respond in a way that protects hard-working Americans and small businesses, keeps our banking system strong and resilient, and ensures that those responsible will be arrested responsible. That is exactly what his government’s actions have done.”
