Following the recent collapse of Silicon Valley Bank and Signature Bank, U.S. Rep. Rashida Tlaib called for more regulation on the financial industry — and pointed out the hypocrisy when irresponsible banks can expect a helping hand from Uncle Sam, but everyday Americans can’t.
“I am troubled that when the rich and powerful manufacture a crisis they’re almost immediately saved by the federal government, but when we advocate for popular policy like student loan forgiveness and Medicare for All, we’re scolded about fiscal responsibility and told the cost is simply too high — including by some of the very venture capitalists and Silicon Valley executives now begging for a bailout,” Tlaib said in a Monday statement.
“The American people have been asking for help with affordable housing, livable wages, and the cost of higher education — where’s their bailout?” she added. “We need to flip this script, or people will continue to lose faith that the federal government will put their interests ahead of corporate profits.”
The Detroit Democrat also said that the collapse of the banks “should be a wake-up call to Congress and the White House that financial institutions simply cannot be trusted to regulate themselves and manage risk appropriately.”
She added, “There is a clear lesson to be learned about the destructive and reckless behavior of venture capital and Silicon Valley firms and how deregulating financial institutions only encourages unchecked greed to run rampant at the expense of our residents.”
The failures at Silicon Valley Bank and Signature Bank were the largest in U.S. history since the 2008 financial crisis. On Sunday, the federal government announced an extraordinary emergency intervention aimed to mitigate the fallout so it doesn’t spread throughout the financial system by making all depositors whole.
However, unlike the 2008 crisis, President Joe Biden made clear that taxpayers would not foot the bill. Instead, the money used to reimburse the banks comes from an insurance fund paid into by the banks.
“This is an important point: no losses will be borne by the taxpayers,” Biden said Monday. “Let me repeat that: No losses will be borne by the taxpayers.”
Tlaib urged Congress to pass new banking regulation legislation.
“If this bailout isn’t paired with serious reforms, what’s to prevent this all from happening again?” she said.
The point was echoed by a New York Times column by Sen. Elizabeth Warren published Monday.
“No one should be mistaken about what unfolded over the past few days in the U.S. banking system: These recent bank failures are the direct result of leaders in Washington weakening the financial rules,” the Massachusetts Democrat wrote.
In 2018, then-President Donald Trump signed legislation that rolled back regulations enacted in the wake of the 2008 crisis.
Warren also pointed out the double standard when the U.S. government helps banks but not working-class Americans saddled with unprecedented levels of student loan debt.
“Regulators have said that banks, rather than taxpayers, will bear the cost of the federal backstop required to protect deposits. We’ll see if that’s true,” she said. “But it’s no wonder the American people are skeptical of a system that holds millions of struggling student loan borrowers in limbo but steps in overnight to ensure that billion-dollar crypto firms won’t lose a dime in deposits.”
President Biden has called for a student loan forgiveness program to grant up to $10,000 of federal student loan debt relief for qualifying borrowers and another $10,000 for Pell grant recipients. But that plan is on hold as the courts consider two cases related to the program.
The Federal Reserve has been raising interest rates rapidly in an attempt to curb inflation, causing turbulence in the finance and technology sectors. However, critics like Warren say banks should have known to anticipate the possibility of interest rates rising.
“[Silicon Valley Bank] apparently failed to hedge against the obvious risk of rising interest rates,” she wrote. “This business model was great for S.V.B.’s short-term profits, which shot up by nearly 40 percent over the last three years — but now we know its cost.”
U.S. Sen. Bernie Sanders of Vermont also homed in on the hypocrisy from the federal government.
“We cannot continue down the road of more socialism for the rich and rugged individualism for everyone else,” Sanders said in a statement. “Let us have the courage to stand up to Wall Street, repeal the disastrous 2018 bank deregulation law, break up too big to fail banks and address the needs of working families, not the risky bets of vulture capitalists.”
Tlaib’s full statement is below:
“What happened this past week with Silicon Valley Bank and Signature Bank should be a wake-up call to Congress and the White House that financial institutions simply cannot be trusted to regulate themselves and manage risk appropriately. There is a clear lesson to be learned about the destructive and reckless behavior of venture capital and Silicon Valley firms and how deregulating financial institutions only encourages unchecked greed to run rampant at the expense of our residents.
“I will hold President Biden to his word that no taxpayer money will be used to protect uninsured deposits in these banks. This failure should be remedied by the irresponsible financial institutions, not the American people.
“These are the banks that lobbied for the deregulation. It enabled the risky mismanagement that created this situation in the first place. They even fought efforts to raise premiums on banks that would have filled the Deposit Insurance Fund to protect depositors in situations just like this.
“If this bailout isn’t paired with serious reforms, what’s to prevent this all from happening again? Congress should immediately repeal the 2018 bank deregulation law to reinstate safeguards that could have prevented this situation, and I support Senator Sanders’ consistent calls to break up any bank deemed too big to fail.
“I am troubled that when the rich and powerful manufacture a crisis they’re almost immediately saved by the federal government, but when we advocate for popular policy like student loan forgiveness and Medicare for All, we’re scolded about fiscal responsibility and told the cost is simply too high – including by some of the very venture capitalists and Silicon Valley executives now begging for a bailout. The American people have been asking for help with affordable housing, livable wages, and the cost of higher education – where’s their bailout? We need to flip this script, or people will continue to lose faith that the federal government will put their interests ahead of corporate profits.
“I look forward to working with my fellow members of the House Financial Services Committee to explore the details that led to the collapse of these banks, hold those responsible accountable, and strengthen regulations to prevent something like this from happening again.”
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