Trump slams Biden's 'anti-America policies' for collapse of SVB

view original post

Former President Donald Trump is blaming the failure of the Silicon Valley Bank on his successor’s ‘anti-American policies.’

Load Error

A spokesperson for the former president, who is once again running for the highest office, told FOX News Digital on Sunday that he sees the regional bank’s collapse as representative of President Joe Biden‘s stumbling economy. 

The bank, the 16th largest in the US, fell on Friday after a 60 percent drop in shares, which sparked a run on the bank as panicked customers rushed to withdraw cash.

It was the worst US financial institution failure since 2008, with SVB controlling $209 billion in total assets at the end of 2022. Those are now in the control of the Federal Deposit Insurance Corporation (FDIC).

But despite this, Treasury Secretary Janet Yellen has said the federal government will not bail out the bank.

Instead, federal regulators are looking for a prospective buyer of the institution. And if that fails, they are considering covering even the uninsured deposits at the bank.

© Provided by Daily Mail
The bank, the 16th largest in the US, fell on Friday after a 60 percent drop in shares, which sparked a run on the bank as panicked customers withdrew their cash

As federal regulators scramble to prevent a potential collapse of other regional banks before they open Monday morning, Trump’s campaign used the opportunity to slam his successor.

Many liberals had blamed the collapse of SVB on his administration’s rollbacks of some regulations set up in the aftermath of the 2008 financial crisis. 

But Trump campaign spokesman Steven Cheung shifted the blame to ‘out-of-control Democrats and the Biden administration,’ which he said have ‘pathetically continued to blame President Trump for their failures with desperate lies, such as the CCP balloons, the train derailment in East Palestine and now the collapse of SVB.

‘This is nothing more than a sad attempt to gaslight the public to evade responsibility,’ Cheung said. ‘The fact is that Biden has presided over a catastrophic economy that has devastated everyday Americans and has caused misery across the country due to his anti-America policies.’

The two other Republican presidential hopefuls, Nikki Haley and Vivek Ramaswamy, meanwhile, campaigned against the idea of bailing out the regional bank on Saturday — hours before Yellen announced that a bail out is not on the table.

In a tweet Saturday, Haley wrote: ‘Taxpayers should absolutely not bail out Silicon Valley Bank. Private investors can purchase the bank and its assets.

‘It is not the responsibility of the American taxpayer to step in,’ she continued. ‘The era of big government and corporate bailouts must end.’

Ramaswamy, who founded Roivant Sciences and Strive Asset Managment, also said SVB should be allowed to ‘fully fail’ and argued that the FDIC should increase its guarantee level to prevent other frenzied Americans from withdrawing their funds.

‘If you want to prevent a run on other banks, increase the FDIC guarantee,’ he tweeted Saturday. 

Under current law, the FDIC only insures deposits of up to $250,000. 

‘But SVB screwed up by utterly failing to take interest rate risk into account in two ways — both in terms of client concentration risk amongst startups and investing in interest rate-sensitive securities,’ Ramaswamy noted. ‘So did the many startups wo blithely did business with them.

‘It’s not the US taxpayer’s job to now coddle them.’

On Sunday, Yellen told Face the Nation that a bailout like the one in 2008 is not on the table this time around.

‘Let me be clear that during the financial crisis, there were investors and owners of systemic large banks that were bailed out… and the reforms that have been put in place means we are not going to do that again,’ she said.

‘But we are concerned about depositors, and we’re focused on trying to meet their needs,’ Yellen noted.

She said she has been working ‘all weekend with our banking regulators to design appropriate policies to address the situation.

‘I can’t really provide further details at this time, but I really want to emphasize that the American banking system is really safe and well capitalized. It’s resilient.’

The FDIC has already announced that insured funds up to a maximum of $250,000 at the bank will be available to depositors Monday morning.

For the uninsured deposits, the FDIC said it will pay depositors an ‘advanced dividend within the next week – but many fear they could lose substantial sums or face a long wait to get their cash back.

‘Uninsured depositors will receive a receivership certificate for the remaining amount of their uninsured funds,’ the agency said in a statement.

‘As the FDIC sells the assets of Silicon Valley Bank, future dividend payments may be made to uninsured depositors.’ 

© Provided by Daily Mail
Treasury Secretary Janet Yellen announced on Sunday that the government will not bail out Silicon Valley Bank after it shuttered on Friday

Meanwhile, both the FDIC and Federal Reserve are working with firms on a potential merger with the failed institution.

It is holding an auction for the bank, with final bids due Sunday.

In the event that no buyer emerges, financial regulators are now said to be discussing two different vehicles to manage the fallout and safeguard uninsured deposits at the bank, sources familiar with the matter told CNBC.

One way they could do that is by creating an emergency backstop program, which the Federal Reserve could use to funnel short-term ash to borrowers in need with the approval of the Treasury Secretary.

The problem with that option, the New York Times reports, is that these programs only provide loans.

And under the Federal Deposit Insurance Act, any emergency backstop programs must be broad-based, preventing their use for insolvent companies.

Another idea was the possibility that the FDIC invoke the ‘systemic risk exception’ loophole, which allows the federal government to pay back uninsured depositors if failing to do so would have serious adverse consequences for the economy or financial stability.

It would have to be approved by the Treasury Secretary, the President, the FDIC and the Federal Reserve Board.

But by doing that, federal government officials would essentially admit that they fear the collapse of SVB could have a serious effect on other regional banks, and perhaps even the economy as a whole — something they are trying to avoid in order to  prevent people from quickly withdrawing their funds.

Federal regulators may also forego those who have uninsured deposits altogether, and set up a ‘general banking facility’ from the Federal Reserve.

That would support other financial institutions that have done business with SVB so that they wouldn’t have to materially change their business practices or take steep losses.

© Provided by Daily Mail
Billionaire hedge fund manager Bill Ackman is predicting an economic meltdown following the collapse of Silicon Valley Bank on Friday

© Provided by Daily Mail
Ackman believes there could be a ripple effect across other smaller banks within the industry and is urging the government to take action by Monday to prevent such a bleak scenario

Financial institution executives, though, warn that the federal government only has until Monday morning to find a prospective buyer for the failed bank before other small, regional banks may feel the effects.

Billionaire hedge fund manager Bill Ackman said if the government fails to reach an agreement by Monday morning, there will be an ‘economic meltdown’ within hours.

Ackman, whose hedge fund Pershing Square Capital Management oversees roughly $16 billion in assets, explained that allowing SVB to fail without protecting all depositors shows that uninsured deposits are unsecured illiquid claims.  

He said that SVB’s collapse ‘could destroy an important long-term driver of the economy.’

The billionaire predicts that as a result, that people will withdraw large sums of uninsured deposits from non-systemically important banks and transfer them to US Treasury money market funds and short-term UST. 

© Provided by Daily Mail
Ackman believes that ‘the destruction of these important institutions’ will begin once depositors start draining money from regional and community banks – essentially leading to a run on smaller bank across the nation

‘By allowing @SVB_Financial to fail without protecting all depositors, the world has woken up to what an uninsured deposit is – an unsecured illiquid claim on a failed bank,’ he postulated.

‘These funds will be transferred to the SIBs, US Treasury (UST) money market funds and short-term UST. There is already pressure to transfer cash to short-term UST and UST money market accounts due to the substantially higher yields available on risk-free UST vs. bank deposits.’ 

Non-systemically important banks are financial institutions that are not considered to pose a significant threat to the stability of the overall financial system if they were to fail. 

These banks are generally smaller, with lower levels of assets and deposits compared to larger, well known names and systemically important banks. 

Ackman believes that ‘the destruction of these important institutions’ will begin once depositors start draining money from regional and community banks – essentially leading to a run on smaller bank across the nation.

He is not the only one to hold such views. 

‘The U.S. banking system is on the verge of a much bigger collapse than 2008,’ said economist Peter Schiff on Friday.

‘Banks own long-term paper at extremely low interest rates. They can’t compete with short-term Treasuries. Mass withdrawals from depositors seeking higher yields will result in a wave of bank failures,’ said Schiff, who is known for his known for his dire predictions.

Ackman predicts that it is now unlikely any buyer will emerge to acquire the failed bank, and that the government’s approach will concentrate more risk in systemically important banks at the expense of other banks, creating more systemic risk.

‘I think it is now unlikely any buyer will emerge to acquire the failed bank,’ he wrote. ‘The gov’t’s approach has guaranteed that more risk will be concentrated in the SIBs at the expense of other banks, which itself creates more systemic risk.’

‘The FDIC’s and OCC’s failure to do their jobs should not be allowed to cause the destruction of 1,000s of our nation’s highest potential and highest growth businesses (and the resulting losses of 10s of 1,000s of jobs for some of our most talented younger generation) while also permanently impairing our community and regional banks’ access to low-cost deposits,’ Ackman suggested.

Read more

Continue Reading