Republicans and Democrats in the presidential mix didn’t anticipate the collapse of Silicon Valley Bank or Signature Bank, but they quickly knew which of their off-the-shelf ideas would save the financial system.
The View From Republicans
For Florida Gov. Ron DeSantis, and for many congressional Republicans, the culprit was wokeness, a bank too “concerned with DEI and politics” to focus on its “core mission.” That synced up perfectly with GOP efforts to ban ESG investing, echoing last month’s attacks on the Biden administration for being too distracted by “woke initiatives” to clean up after a train derailment.
For Mike Pence, the only would-be presidential candidate who voted against TARP in 2008, the problem was a bailout culture; it had replaced the American “freedom to fail,” and needed to be dismantled.
“Banks make foolish decisions enabled by imprudent government policies and the American people pay the price,” Pence wrote in a Daily Mail column on Tuesday, a day after ex-U.N. Ambassador Nikki Haley — who rose to fame in the post-TARP tea party days — denounced the “Biden bailout.”
“When the Deposit Insurance Fund runs dry, all bank customers are on the hook,” Haley said in a statement. “Depositors should be paid by selling off Silicon Valley Bank’s assets, not by the public.”
And for Donald Trump, the specifics of the crisis and response were less important than that something bad was happening under his successor’s watch. “JOE BIDEN WILL GO DOWN AS THE HERBERT HOOVER OF THE MODRRN AGE [sic],” he wrote on Truth Social. “WE WILL HAVE A GREAT DEPRESSION FAR BIGGER AND MORE POWERFUL THAN THAT OF 1929. AS PROOF, THE BANKS ARE ALREADY STARTING TO COLLAPSE!!!”
Vivek Ramaswamy, the wealthy and anti-”woke” asset manager seeking the GOP nomination, told Semafor that the “real problem” was a failure to apply the rules already on the books — thereby “teaching large depositors at smaller banks that they can simply throw money at risky banks without diversifying or conducting diligence.” The failed bankers were taking advantage of a system they’d already distorted.
“The deeper problem is that the Federal Reserve has been trying to play God for too long,” said Ramaswamy. “Stop playing this misguided game of trying to balance inflation and unemployment where the Fed has repeatedly failed.”
South Carolina Sen. Tim Scott, the ranking member of the Senate’s banking committee – and a potential presidential candidate – wasn’t interested in new regulation, either.
“If this is such an outlier in the system, why wasn’t action taken?” said a spokesman for Scott. “Regulators failed to do their job with regards to SVB, and if regulators can’t do their job with what the law gives them now, why is giving them more regulations the better route?”
The View From Democrats
Democrats saw an easier fix, channeling frustration at the tech and finance leaders wrapped up in the SVB fallout into a campaign for more regulation. On Monday, President Biden blamed “the last administration” for signing legislation, supported by nearly all Republicans and a handful of Democrats, that exempted large regional banks like SVB from extra scrutiny.
“I’m going to ask Congress and the banking regulators to strengthen the rules for banks to make it less likely that this kind of bank failure will happen again,” said Biden. The White House also pushed back hard at the suggestion it was staging a bailout, emphasizing that individual depositors and businesses, not bankers, were being protected. “This is very different than what we saw in 2008,” said White House Press Secretary Karine Jean-Pierre.
Two of California’s candidates for U.S. Senate raced in that same direction. Rep. Katie Porter told supporters she’d write “legislation to reverse that risky law,” teaming up with her mentor, Massachusetts Sen. Elizabeth Warren, while Rep. Adam Schiff planned his own bill to “claw back” SVB executive bonuses.
Arizona Rep. Ruben Gallego, who’s challenging independent Sen. Kyrsten Sinema for her seat, attacked her for supporting the 2018 Dodd-Frank rollback and said that Republicans would struggle to blame “wokeness” for the tumult. If 2022 GOP nominee Blake Masters ran again, said Gallego, he’d have to explain his mentor Peter Thiel’s role in the bank run; if any other Republican ran, Gallego would attack the “woke” distraction.
“Not everything in the world is a noun, a verb and ‘woke,’” the congressman told Semafor. “Thinking that way is how we end up with Republicans de-regulating these banks to the point where they become ticking time bombs for the economy.”
What makes this populist backlash different? The response from DeSantis and many GOP House members is maybe the most telling example yet of how railing against “wokeness” has replaced inveighing against big government as the go-to rhetorical move for modern Republicans — sometimes to awkward effect.
Republicans haven’t entirely given up their small government message on banks and bailouts — especially politicians like Pence and Haley who rose to prominence in the Obama era. During the 2010s, Tea Party conservatives also swirled their small-government ideology with resentment against “the food stamp president.” But the emphasis has shifted.
Democrats, forever frustrated about how TARP was handled, haven’t changed as much. They supported regulation then, they support it now, and over the last 48 hours they were clearly irritated by how Republicans pinned SVB’s failure on liberalism – as if plenty of banks with the same “woke” public values, and without as many panicky high-risk depositors, weren’t doing business as usual this week.
One big difference however: The Biden White House is far more concerned about the appearance of bailing out the banks than the team of technocrats who served under Barack Obama.
There will be hearings, and there will be campaign speeches, and the songbook for all of that is being written this week. Republican leaders pushed back on the “woke bank” talking point on Monday calls with their conference. But it may prove durable.
I’d expect Republicans to ask if regulators were distracted by their “commitment to equity” — especially because SVB’s CEO, Greg Becker, was on the board of the San Francisco Fed. That’s not all: “San Francisco Fed head Mary Daly is considered herself to be quite a wokester,” former Trump economic advisor Larry Kudlow told Fox Business viewers on Tuesday.