Biden stresses taxpayer funds won’t be used in Silicon Valley Bank collapse – as it happened

The New York Times reports that after the GOP took control of the House, its oversight committee dropped an inquiry into whether Donald Trump profited improperly from his time as president.

The investigation had ensnared Mazars USA, an accounting firm used by the former president until they cut ties with him a year ago, and the oversight committee’s top Democrat has alleged that its Republican leader colluded with Trump in ending it.

“It has come to my attention that you may have acted in league with attorneys for former President Donald Trump to block the committee from receiving documents subpoenaed in its investigation of unauthorized, unreported and unlawful payments by foreign governments and others to then-President Trump,” Democratic lawmaker Jamie Raskin wrote to James Comer, the committee chair.

In an interview with the Times, Comer confirmed that the committee had dropped the inquiry, essentially saying they were now focused on scrutinizing current White House occupant Joe Biden.

“I honestly didn’t even know who or what Mazars was,” Comer said.

“They’ve been ‘investigating’ Trump for six years. I know exactly what I’m investigating: money the Bidens received from China.”

The consequences of the January 6 insurrection continue to reverberate across Washington, including among Republicans. Here’s The Guardian’s Sam Levine on the growing divide within the GOP over the attack:

Some Republicans have rebuked efforts by Donald Trump and Fox News host Tucker Carlson to whitewash the January 6 attack on the US Capitol, underscoring a significant split in the party over attempts to downplay the events of the day.

Kevin McCarthy, the speaker of the House, turned over more than 40,000 hours of security footage from the Capitol to Carlson earlier this year. This week, Carlson aired selectively edited portions of that footage, falsely claiming the rioters were “sightseers” and “not insurrectionists”. At least 1,000 people have been arrested for their role in the January 6 attack. Five people died as a result of it.

More than 999 people have been arrested so far, according to the justice department. Around 518 people have pleaded guilty to federal crimes to date and 53 have been found guilty at trial.

For more on how Silicon Valley Bank’s depositors will be made whole, and whether or not what the government is doing constitutes a bailout, here’s the Guardian Edward Helmore:

When is a bailout not a bailout? It’s a question many people are asking after the dramatic collapse of Silicon Valley Bank and the US’s decision to rescue depositors on Sunday.

Joe Biden, elected and appointed officials all insist the emergency interventions to protect deposits in Silicon Valley Bank, Signature Bank, a second bank that failed on the weekend, or, indeed, any further bank failures, won’t come at taxpayers’ expense.

On Monday, Biden was at pains to say that “no losses” would be borne by taxpayers, and the money would come from the fees that banks pay into the Deposit Insurance Fund.

Republican senator Josh Hawley has spent the day accusing Silicon Valley Bank of promoting “woke” ideology, and now he wants to undermine the Biden administration’s efforts to make its depositors whole.

Based in Santa Clara, California, Silicon Valley Bank did a lot of business with the venture capital community, including startups focused on fighting climate change, according to the New York Times. To Hawley, that’s enough to earn it the amorphous “woke” moniker:

Now Hawley, who is perhaps best known outside his home state of Missouri for promoting Donald Trump’s baseless conspiracy theories about the 2020 election and later running from the mob that attacked the Capitol, says he will stop the Federal Deposit Insurance Corporation from making a special assessment on American banks so that Silicon Valley Bank depositors don’t lose money:

The Guardian’s Edward Helmore reports on the changing fortunes of Fox News commentator Tucker Carlson, who is at the center of an increasingly intense controversy over his peddling of 2020 election conspiracy theories:

Tucker Carlson was once seen as untouchable. Now the most popular TV host on American cable news is at the center of a firestorm threatening to engulf Fox News and also anger Donald Trump, whose conspiracy theory-laden political cause he has long championed and who his audience loves.

Court filings attached to the $1.6bn Dominion Voting Systems defamation suit accuse Fox News of allowing its stars to broadcast false accusations about rigged voting machines in the 2020 presidential election.

The documents contained numerous emails detailing the private views and concerns of senior Fox management and its stars, which often seemed at odds with what they were publicly broadcasting to their audience.

The hit HBO show Succession is loosely based on his life as the patriarch of an unruly billionaire family, but that doesn’t mean Rupert Murdoch watches it.

Though the head of the rightwing media empire is under growing pressure amid a $1.6bn defamation lawsuit against his Fox News network, Murdoch recently took time to reveal that he has never watched the comedy-drama series that is set to launch its fourth season on 24 March, the Guardian’s Martin Pengelly reports.

A reporter for the media outlet Semafor got the scoop having contacted Murdoch after his email address was revealed in court filings pertaining to the lawsuit. Murdoch’s reply to the reporter’s email asking if he followed Succession reportedly was: “Never watched it.”

An unlikely figure has found himself drawn into the recent wave of bank collapses: Barney Frank.

The former House Democratic lawmaker’s name graces the 2010 Dodd-Frank Act, which tightened banking regulations following the global financial crisis. It turns out, he was serving on the board of Signature Bank, which regulators on Sunday closed, making it the third American bank to fail in five days.

In an interview with Bloomberg News, he said he disagreed with the decision to shut down the New York-based institution. “I think that if we’d been allowed to open tomorrow, that we could’ve continued – we have a solid loan book, we’re the biggest lender in New York City under the low-income housing tax credit.”

More interestingly, he disputed that the 2018 rollback of parts of the Dodd-Frank Act played any role in the failures of Signature and other similar sized institutions – like Silicon Valley Bank. That legislation, signed by Donald Trump, raised to $250bn the level at which banks are subjected to the most strict oversight. Both Signature and Silicon Valley were below that amount.

“I don’t think there was any laxity on the part of regulators in regulating the banks in that category, from $50 billion to $250 billion,” Frank said in the interview.

Louisiana’s two Republicans senators have been getting a lot of air time on Fox News lately, with John Kennedy appearing yesterday to complain about how Joe Biden recently put the GOP on the spot over social security. Here’s Maya Yang’s story:

The Republican senator John Kennedy accused Joe Biden of “demagoguing” the issue of how to fund social security and Medicare and protecting the two programs from Republican proposals to cut them, calling it a “very immature thing to do”.

Speaking to Fox News Sunday, Kennedy took aim at Biden for mentioning in his State of the Union address last month that some Republicans have proposed to “sunset” social security and Medicare as part of attempts to balance the federal budget.

“The problem is that President Biden in his State of the Union Address decided to demagogue the issue,” the Louisiana senator said. “We all saw it.

“He basically said, ‘If you talk about social security or Medicare, I’m going to call you a mean, bad person.’ And that just took the issue off the table when the president decided to demagogue it … You can only be young once, but you can always be immature, and I thought it was a very immature thing to do.”

Republican presidential contender Nikki Haley is describing the US government’s efforts to stop Silicon Valley Bank’s depositors from losing their money as a “bailout”.

It’s a politically loaded word, considering how deeply controversial Washington’s 2008 decision to help large banks during the global financial crisis remain.

Here’s her statement, on Twitter:

Meanwhile, Republican senator Bill Cassidy has compared social security – the government program credited with keeping many elderly Americans out of poverty – to Silicon Valley Bank.

He made the comment in an interview with Fox News as he discussed social security’s very real problem of long-term funding:

Florida governor Ron DeSantis is among the Republicans expected to soon jump into the 2024 presidential race, and in a Fox News interview yesterday, he blamed Silicon Valley Bank’s collapse on the liberal policies he’s built a reputation for railing against:

DEI stands for “diversity, equity, and inclusion”, the sorts of initiatives DeSantis’s administration in Florida has made a point of targeting. He also blames the “massive federal bureaucracy” for letting the collapse happen – which is interesting, because during his time as a House lawmaker in 2018, he voted for the legislation that rolled back some of the 2010 Dodd-Frank financial regulations, which is now being blamed for Silicon Valley Bank’s collapse.

Republicans reacted to Silicon Valley Bank’s collapse by avoiding the question of regulation and instead pointing their fingers elsewhere.

Tim Scott, the top GOP lawmaker on the Senate Banking Committee, implied in a statement that the intervention could make financial institutions believe the government will bail them out, no matter what:

The Republican chair of the House financial services committee Patrick McHenry blamed it all on Twitter:

And senator Josh Hawley invoked East Palestine, just as he did a few weeks ago when the president visited Ukraine:

Democratic senator Elizabeth Warren is one of Wall Street’s biggest antagonists in Congress, and she is not pleased by the collapse of Silicon Valley Bank.

“No one should be mistaken about what unfolded over the past few days in the US banking system: These recent bank failures are the direct result of leaders in Washington weakening the financial rules,” she wrote in a New York Times column published today.

She directs most of her criticism towards the Trump administration and Republicans who in 2018 supported rolling back regulations that might have prevented the bank’s collapse, while also criticizing the now-closed institution’s leadership. “Greg Becker, the chief executive of Silicon Valley Bank, was one of the ‌many high-powered executives who lobbied Congress to weaken the law. In 2018, the big banks won. With support from both parties, President Donald Trump signed a law to roll back critical parts of Dodd-Frank. Regulators, including the Federal Reserve chair Jerome Powell, then made a bad situation worse, ‌‌letting financial institutions load up on risk.”

With Washington again picking up the pieces of a failed bank, here’s what Warren thinks needs to happen next:

First, Congress, the White House‌ and banking regulators should reverse the dangerous bank deregulation of the Trump era. Repealing the 2018 legislation that weakened the rules for banks like SVB must be an immediate priority for Congress. Similarly, ‌Mr Powell’s disastrous “tailoring” of these rules has put our economy at risk, and it needs to end – ‌now. ‌

Bank regulators must also take a careful look under the hood at our financial institutions to see where other dangers may be lurking. Elected officials, including the Senate Republicans who, just days before SVB’s collapse, pressed Mr Powell to stave off higher capital standards, must now demand stronger – not weaker – oversight.

Second, regulators should reform deposit insurance so that both during this crisis and in the future, businesses that are trying to make payroll and otherwise conduct ordinary financial transactions are fully covered – while ensuring the cost of protecting outsized depositors is borne by those financial institutions that pose the greatest risk. Never again should large companies with billions in unsecured deposits expect, or receive, free support from the government.

Finally, if we are to deter this kind of risky behavior from happening again, it’s critical that those responsible not be rewarded. SVB and Signature shareholders will be wiped out, but their executives must also be held accountable. Mr Becker of SVB took home $9.9 million in compensation last year, including a $1.5 million bonus for boosting bank profitability – and its riskiness. Joseph DePaolo of Signature got $8.6 million. We should claw all of that back, along with bonuses for other executives at these banks. Where needed, Congress should empower regulators to recover pay and bonuses. Prosecutors and regulators should investigate whether any executives engaged in insider trading ‌or broke other civil or criminal laws.

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How did we get here? How could one California bank’s problems end up potentially jeopardizing the entire US economy, to the extent that the government has to suddenly step in? For the answers, here’s the Guardian’s Jonathan Barrett:

Four decades ago, Silicon Valley Bank (SVB) was born in the heart of a region known for its technological prowess and savvy decision making.

The California-headquartered organisation grew to become the 16th largest bank in the US, catering for the financial needs of technology companies around the world, before a series of ill-fated investment decisions led to its collapse.

What happened to SVB?

As the preferred bank for the tech sector, SVB’s services were in hot demand throughout the pandemic years.

The initial market shock of Covid-19 in early 2020 quickly gave way to a golden period for startups and established tech companies, as consumers spent big on gadgets and digital services.

The next big indicator of whether the Silicon Valley Bank failure will spark a wider crisis may come from Wall Street.

Don’t worry, this isn’t going to become a stock market blog, but today, it’s important. Trading just started, and the three major indices, the Dow Jones Industrial Average, the S&P 500 and the Nasdaq Composite Index, are all lower – though only by about 1%, at most.

If markets really tank, as in, if they lose several percentage points in the course of the trading day, as happened when Covid-19 was breaking out across the United States three years ago, Washington could be pressured to more forcefully act to protect the banking sector.

With many Americans still bitter over Washington’s assistance to large banks during the 2008 global financial crisis, Biden made a point in his speech of saying no bailout was happening under his watch.

“No losses, and this is an important point, no losses will be borne by the taxpayers,” Biden said. “Let me repeat that: no losses will be borne by the taxpayers. Instead the money will come from the fees that banks pay into the Deposit Insurance Fund.”

He also noted that “management of these banks will be fired”, and “investors in the banks will not be protected. They knowingly took a risk. And when the risk didn’t pay off, investors lose their money. That’s how capitalism works.”

When Joe Biden speaks in a few minutes, he will have one goal: convince everyone to calm down.

His specific audience will be people who keep their money in small- and medium-sized institutions similar to Silicon Valley Bank, which are seen as most vulnerable to what economists call “contagion”. If customers at these banks believe they are going to collapse, as Silicon Valley Bank did on Friday, they will do what any sensible person would do and pull out their money – potentially causing the very crisis they fear, because such mass withdrawals would stress these banks’ financial underpinnings.

Biden speaks at 9am ET, and this blog will follow it as it happens.