by Jason Cohen
Treasury Secretary Janet Yellen stated during her testimony at a Senate Finance Committee hearing on March 16 that she, the Federal Deposit Insurance Corporation board, the Fed board, and President Joe Biden would only safeguard uninsured deposits at banks whose failures they determine would pose “systemic risks” to the economy, which will destroy small regional banks, according to experts who spoke to the Daily Caller News Foundation.
On the other hand, it will enable big banks to be more reckless because their depositors will be made whole if they fail. In the case of Silicon Valley Bank (SVB), this will include many Chinese companies that will be getting reimbursed by community banks, according to Reuters.
“[A] funny thing about this is just the completely arbitrary nature of this designation,” Dr. Thomas Hogan, senior research faculty at the American Institute for Economic Research and former chief economist for the Senate Committee on Banking, Housing and Urban Affairs, told the DCNF. “Clearly, these banks aren’t actually systemically important. This is only being done as a bailout for the uninsured depositors.”
“It’s absolutely atrocious that we are yet again, using taxpayer money to bail out the CCP,” said E.J. Antoni, research fellow for Regional Economics at The Heritage Foundation’s Center for Data Analysis. “And so now whenever the government has these knee-jerk reactions, we end up sending dollars where the American people would not like them to go.”
During COVID-19, when the government authorized sending Payment Protection Program loans and unemployment payments, it also distributed taxpayer dollars to individuals in China, Antoni told DCNF. “Anytime the government spends money, they’re by definition spending taxpayer dollars … So taxpayers are ultimately on the hook for all of this.”
“The people who were bailed out were all of the depositors that had tens of millions or hundreds of millions or even billions of dollars in Silicon Valley Bank,” said Republican Sen. Ted Cruz of Texas on his podcast Verdict with Ted Cruz. “By the way, among many of those depositors, billions of dollars worth, were Chinese companies.”
Additionally, in the wake of the Silicon Valley Bank collapse, lawmakers may seize on the chance to create a restrictive regulatory environment that “small community banks are just not going to be able to withstand,” according to Alfredo Ortiz, president and CEO of the Job Creators Network.
“There’s almost a disproportionate or heightened scrutiny on the smaller institutions,” said Anne Balcer, ICBA senior executive vice president, chief of government relations and public policy. “Regulators keep a much tighter leash on the community banks, which is ironic” because they are less risky than banks like SVB.
– – –
Jason Cohen is a reporter at Daily Caller News Foundation.
Photo “Janet Yellen” by U.S. Department of the Treasury. Background Photo “U.S. Department of the Treasury” by AgnosticPreachersKid. CC BY-SA 3.0.