Treasury Secretary Janet Yellen stated during her testimony at a Senate Finance Committee hearing on March 16 that she, the FDIC 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,” said Dr. Thomas Hogan, senior research faculty at AIER and Chief Economist for the Senate Banking, Housing and Urban Affairs. “Clearly, these banks aren’t actually systemically important. This is only being done as a bailout for the uninsured depositors.”
WASHINGTON, DC – MARCH 16: U.S. Treasury Secretary Janet Yellen testifies about the Biden Administration’s FY2024 federal budget proposal before the Senate Finance Committee in the Dirksen Senate Office Building on Capitol Hill on March 16, 2023 in Washington, DC. Yellen said the nation’s baking system is sound after the Treasury Department, the Federal Reserve and the Federal Deposit Insurance Corporation announced Sunday that depositors in Silicon Valley Bank in California and Signature Bank in New York will be repaid in full after both banks collapsed last week. (Photo by Chip Somodevilla/Getty Images)
“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 in 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.” (RELATED: Silicon Valley Bank Parent Company Files For Bankruptcy)
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.
All content created by the Daily Caller News Foundation, an independent and nonpartisan newswire service, is available without charge to any legitimate news publisher that can provide a large audience. All republished articles must include our logo, our reporter’s byline and their DCNF affiliation. For any questions about our guidelines or partnering with us, please contact licensing@dailycallernewsfoundation.org.