The federal government’s frenzied bailout of depositors at Silicon Valley Bank (SVB) and Signature Bank over the weekend is drawing a cynical and frustrated response from taxpayers.
Many of the people The Hill spoke to for this article are nervous that the financial system could collapse around them again — and angry that wealthy venture capitalists could get a quick government bailout while expanded social services and loan forgiveness for always seem to be. out of range.
“How surprised I am that our economy is run by people who own banks? No, it’s not a surprise. But yes, it’s another example of total inequality and racism,” Ellen McTigue, a retired nurse practitioner from New York, told The Hill in an interview.
“No surprises there, but it’s unfortunate and it’s wrong,” she said.
McTigue added that she thought the government had taken a “better safe than sorry” approach that she understood.
But she was still concerned about the transparency of the failures and the government’s response, which insured extremely wealthy depositors well above the Federal Deposit Insurance Corporation’s (FDIC) standard $250,000 limit.
The SVB and Signature bankruptcies are the largest since the 2008 financial collapse and the second largest bank failures in US history, and the effects are still visible in the global economy.
The latest: Signature Bank had a criminal investigation pending before it collapsed: report
The Dow Jones Industrial Average fell more than 500 points in early trading Wednesday as CEO Larry Fink of financial giant BlackRock warned of “more repossessions and closures to come” in an annual letter to investors.
Fink compared the situation to the “S&L crisis,” referring to the collapse of the savings and loan industry in the 1980s that resulted in a $160 billion taxpayer-funded bailout from Wall Street.
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Who pays for the bank bailout?
In a history of the savings and credit crisis published on its website, the FDIC refers to the episode as a “disaster,” a “debacle,” and a “massive public policy failure.”
While taxpayers are technically not yet on the hook for the SVB and the signature collapse, their money is still at risk as depositors were paid out of a fund managed by the FDIC and to which banks pay.
The fund is guaranteed “by the full faith and credit of the U.S. government,” according to the FDIC, so taxpayer money can be used immediately if the fund runs out.
A plea for less regulation: Silicon Valley, Signature banks lobbied hard to relax banking regulations
An additional line of credit set up by the Federal Reserve for distressed banks is also backed by $25 billion from the Treasury’s foreign exchange stabilization fund, which has a net balance of $38 billion.
People who pay student loans cry viciously
College students and recent graduates in particular, who have been waiting for a dangling promise of loan forgiveness from President Joe Biden’s administration that could yet be overturned by the Supreme Court, are feeling a sharp pang of injustice.
They are frustrated with the VIP service provided to the financial industry by federal regulators, while their own financial ambitions are at stake.
“It makes it very clear to students and anyone looking to the government for support that we are not their first priority, that we generally live in a capitalist society and therefore their first priority will always be where the money is,” Vivian Cormany, a pre-med student at the University of California, Berkeley, who also works at the student co-op there, said in an interview with The Hill.
“Helping people get a higher education and helping people live better lives because they can’t pay off their student loans until they’re 35 falls by the wayside when it comes to bailing out big banks,” said Cormany, who added that her father was paying off student loans until he was 40 and that her mother decided not to go to college because of the expense.
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Mercury Robertson, who works as a resident’s assistant at a dormitory at the University of Texas at Austin, told The Hill that she can see the frustration that bank bailouts inflict on the students she helps support and mentor.
“They get very frustrated that things like this keep happening,” she said. “My own current financial expenses are paid for by the federal government, by the university. But every time I see these bank bailouts, I think the money could go to improving UT or improving other universities in Texas. Austin and Houston both have public universities that could use more money.”
Victoria St. Louis said her decision to attend the school was largely dictated by cost and that avoiding as much student debt as possible was a major concern for her.
“There seems to be a system where banks get away with not making the right investments,” St. Louis, a marketing and business student at Western Governors Online University in New York, told The Hill.
St. Louis had some tax advice for regulators and financial policy makers.
“A place to start would be the debt relief program they were just trying to run,” she added. “If they could have done that as quickly as they did with the rescues, it would probably make a huge difference in a lot of people’s lives.”
Do companies get preferential treatment over taxpayers?
A plea from companies in the California technology sector appears to be part of the impetus for the federal government’s swift response over the weekend.
Just a day before the insurance cap on SVB was lifted by Washington fiscal and monetary authorities, blue-chip investment group Y Combinator, whose companies are worth nearly $1 trillion collectively, wrote an open letter to Treasury Secretary Janet Yellen stating the request for “relief”. and attention.”
Will the taxpayer fund the bailout? Here’s Who Pays to Restore Silicon Valley, Signature Bank Deposits
Workers and entrepreneurs in other sectors of the economy say they would like to see this much attention paid to them.
Albert Zibak, an independent pharmacist in New York, told The Hill that the interests of big companies and their healthcare lobbies make it difficult for his company to compete with the larger chains.
He said the regulatory response he saw from the federal government to the SVB bank bailout would “definitely” make a difference to his company and similar businesses.
“If the government reacted quickly [to our regulatory concerns] like what happened with the current financial situation, it would be a game changer,” he said.
Americans are still angry about the 2008 bank bailouts
Public frustration over what is perceived as preferential treatment for the financial industry is not new.
A 2013 Reuters/Ipsos poll found that five years after the bank bailouts following the 2008 financial crisis, “Americans [were] still mad at Wall Street.”
Forty-four percent of the poll’s respondents believed the government should not have bailed out the financial sector, and only 22 percent believed the bailout was the right thing to do.
Reuters reported at the time that then White House National Economic Council director Larry Summers had warned finance executives that “they didn’t understand how angry average Americans were at them.”
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The anger eventually turned into a protest movement known as Occupy Wall Street in 2011, during which protesters camped out in Zuccotti Park near Wall Street in Lower Manhattan for nearly two months.
Activist Yotam Marom, who helped organize demonstrations during Occupy Wall Street, told The Hill that he sees the aid to the bankrupt banks as similar to what sparked the 2011 protests, though on a smaller scale.
“Is this a similar situation? Yes,’ he said. “I don’t know if people are hurting the same way they used to. But it is certain that banks or big companies essentially go bankrupt and get bailed out is not new, and in that sense it is similar. And that is irritating.”
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