WASHINGTON (NewsNation) — Republicans and Democrats have wasted no time turning the collapse of Silicon Valley Bank and Signature Bank into a political game.
President Joe Biden called on Congress to strengthen regulations against banks while also promising to hold bank managers accountable. He helped organize the response to guarantee all deposits at SVB and Signature Bank as well as set up a lending program to make sure the banks have the cash to meet their needs.
On Monday, Biden also stressed that taxpayers would not bear the cost of his administration’s penalties on the two failed banks, instead tapping into an insurance fund that is paid for by bank fees. And while customers and small businesses who stashed their money with the penalized banks would be protected, Biden emphasized that investors would not.
“They knowingly took a risk and when the risk didn’t pay off, investors lose their money,” Biden said. “That’s how capitalism works.”
The president added that he would not bail out the banks and reassured that no taxpayer dollars would be used in this effort.
However, some GOP presidential candidates reacted to the financial chaos, criticizing the president for this response.
“Joe Biden is pretending this isn’t a bailout. It is,” Presidential candidate Nikki Haley tweeted. “Now depositors at healthy banks are forced to subsidize Silicon Valley Bank’s mismanagement. When the Deposit Insurance Fund runs dry, all bank customers are on the hook. That’s a public bailout.”
Sen. Tim Scott (R-S.C.), the top Republican on the Senate Banking Committee who is also eyeing a presidential bid, also criticized what he called a “culture of government intervention,” arguing that it incentivizes banks to continue risky behavior if they know federal agencies will ultimately rescue them.
Democrats, however, called attention to a bill from 2018 that loosened regulations on mid-size banks.
SVB actually lobbied for that bill, but lawmakers like Sen. Elizabeth Warren (D-Mass.) said the bill weakened rules for banks and has contributed to the collapses over the past few days.
Warren and other Democrats continued to call to restore those regulations.
Despite the political dispute, the biggest focus for Tuesday remained reassurance while officials investigated why the U.S. saw the second-and third-largest bank collapses in U.S. history just days apart.
The Associated Press contributed to this report.
