What to make of Silicon Valley Bank’s chaotic, Twitter-fueled collapse? Washington spent much of Mon͏ ͏ ͏ ͏ ͏ ͏
with Steve Clemons
| Washington|| Davenport|| Kyiv|
What to make of Silicon Valley Bank’s chaotic, Twitter-fueled collapse? Washington spent much of Monday grappling with that question. As Joseph Zeballos-Roig and Jordan Weissmann write today, Democrats are debating how much financial deregulation under President Trump (with some of their votes) was to blame, and whether it might be time to insure all bank deposits. Meanwhile, in a call Monday night, House Republican leaders seemingly attempted to move their members beyond the idea that the bank collapsed because it was “too woke.”
Reporting from Iowa, our colleague Shelby Talcott chronicles Trump’s considerable efforts to win over local farmers while bashing his top (unannounced) rival. “Ron ‘DeSanctus’ strongly opposed ethanol, do you know that?” he told the crowd. And in international news, Morgan Chalfant writes that Ukrainian activists are complaining about how, no matter how hard they try, they can’t land a meeting with House Speaker Kevin McCarthy.
I’m still here in Doha at the Global Security Forum, where attendees have been asking hard questions about Afghanistan. A big one: If the U.S. and Europe refuse to engage with the Taliban, then could it return to past habits like hosting terrorist groups? Could we be on the verge of restarting a vicious cycle?
PLUS, we have one good text from Giffords Executive Director Peter Ambler about Biden’s new executive order on guns.
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☞ White House: Biden will visit Monterey Park, California, the site of a mass shooting that killed 11 people in January, where he will announce a new executive order on guns designed to increase background checks and boost public awareness of “red flag” laws.
☞ Chuck Schumer: Congress “will be looking closely at the causes behind the run on Silicon Valley Bank and other banks and how we can prevent a similar crisis in the future,” Schumer said in a joint statement with Minority Leader Hakeem Jeffries on Monday. He also praised the Biden administration’s “swift response.”
☞ Mitch McConnell: The Senate minority leader was discharged from the hospital yesterday and is beginning inpatient rehab after his fall last week, his office said, noting that in addition to a concussion McConnell also suffered a “minor rib fracture.”
☞ Kevin McCarthy: The speaker convened Republican House members for a call Monday evening to discuss the collapse of Silicon Valley Bank, after several days of conservatives arguing that Silicon Valley Bank collapsed because it was too “woke.” McCarthy and other GOP leaders reportedly emphasized the role inflation played in the bank’s problems as well as the failure of federal regulators to spot danger signs. According to Politico, Republican Study Commission head Kevin Hern also warned, “that members and staff don’t know what’s going on and should stop tweeting / going on tv if they don’t understand.”
☞ Hakeem Jeffries: The House minority leader and other members of Congress will attend a Service Employees International Union roundtable in Los Angeles to discuss Social Security, Medicare, and Medicaid.
Florida Gov. Ron DeSantis asserted that helping Ukraine defend against Russia’s invasion is not a “vital” American interest and that sending the country fighter jets and longer-range missiles should be “off the table.” DeSantis announced his policy position in a written response to Tucker Carlson, which the Fox News host read alongside other responses he received from prospective 2024 GOP presidential contenders on his show last night. Carlson has been a lead conservative critic of aid to Ukraine.
Michael Cohen said he expects to finish testifying on Wednesday before the grand jury hearing evidence on former President Trump’s role in payments made to porn star Stormy Daniels. Cohen, Trump’s lawyer-turned-critic who himself pleaded guilty to federal charges in connection with the payments in 2018, spent much of Monday afternoon before the grand jury in what his attorney described as a “productive” session. Trump, meanwhile, fired back at Cohen during a gaggle with reporters aboard his plane, calling him a liar and a “sick person.” Trump’s attorney also said the former president has “no plans” to participate in the investigation after being invited to testify.
Biden wants to speak with Chinese President Xi Jinping sometime in the near future “once they’re back and in stride coming off of the National People's Congress,” White House national security adviser Jake Sullivan told reporters, referring to the Chinese government’s annual legislative session. It would be their first conversation since the diplomatic row over China’s spy balloon in February.
The U.S, U.K., and Australia rolled out plans to build and deploy a new class of nuclear-powered submarine over the next two decades by pooling designs and technology, as part of the AUKUS partnership that is widely seen as an effort to counter China’s military moves in the Pacific.
The most-watched inflation statistic, the monthly Consumer Price Index, will be out later this morning. The Fed has its hands full dealing with the current banking situation, which has prompted speculation it might slow down plans to increase rates.
— Morgan Chalfant and Benjy Sarlin
Punchbowl News: House Financial Services Chairman Patrick McHenry, R-N.C. praised the Biden administration’s response to the banking crisis: “They acted swiftly and boldly, and I’ve told them more than once that bold action I will absolutely support if it is in the interest of the financial system and in the interest of the American people.” But he also sounded uninterested in new banking regulations.
Playbook: House Republicans are getting ready to unveil a big energy bill today. House Majority Leader Steve Scalise told Politico that the measure, which would boost domestic fossil fuel production among other things, would be good for U.S. national security and the environment because “nobody makes energy cleaner and more efficiently than the United States.”
Axios: The House Democrats’ super PAC, House Majority PAC, is launching a new field office in New York to focus on clawing back seats lost to Republicans last cycle.
|Jordan Weissmann and Joseph Zeballos-Roig|
Two big policy debates to watch after the collapse of Silicon Valley Bank
As Washington grapples with the weekend collapse of Silicon Valley Bank, Democrats are at odds over how much of a role recent deregulation played in the debacle. At the same time, some are already looking ahead to reforms that might prevent similar runs in the future by massively expanding deposit insurance.
JORDAN AND JOSEPH’S VIEW
While it’s unclear whether the Silicon Valley Bank fiasco will lead to any new regulation in a split Congress, the debates occurring among Democrats are worth keeping an eye on if only because they could influence new rules by regulators. (Republicans, for their part, still seem to be settling on talking points about the collapse after trying to shoehorn it into a culture war script.) Here’s a rundown of the issues.
Is this all DC’s fault? Progressives wasted little time before blaming this weekend’s chaos on Congress’ rollback of banking regulations put in place after the 2008 Wall Street meltdown. In 2018, President Donald Trump signed a controversial bipartisan bill that loosened oversight on regional banks with hundreds of billions of dollars in assets — including ones like Silicon Valley Bank, whose CEO lobbied for the bill.
“These recent bank failures are the direct result of leaders in Washington weakening the financial rules,” Sen. Elizabeth Warren, D-Mass., wrote in the New York Times Monday. Rep. Katie Porter, D-Calif., told the American Prospect she planned to introduce legislation undoing the changes, while President Joe Biden called on lawmakers and regulators to “ strengthen the rules for banks.”
Supporters of the legislation have pushed back. Sen. Mark Warner, D-Va. told ABC he still thought the bill put in place an “appropriate level of regulation,” and suggested it wasn’t directly responsible for the kind of bad management that brought down Silicon Valley Bank.
The issue is tricky in part because Congress didn’t act alone. Instead, it increased the size banks could reach before they would be subjected to “enhanced” oversight, and gave Federal Reserve officials the option to cut back regulations further — which they did. In one major move, they eliminated liquidity rules requiring institutions the size of Silicon Valley Bank to have access to quick cash, which some believe might have helped prevent a run.
Even with the 2018 bill, however, the Fed should have been able to spot and prevent the danger at Silicon Valley Bank, Dennis Kelleher, head of the pro-financial regulation group Better Markets, told Semafor. Problems with the bank’s finances were reported in the press months ago, and ought to have been obvious to examiners charged with overseeing it, he said.
“The deregulatory law contributed to some degree to what happened here, but the failure of federal reserve supervisors was a much, much greater contributor to the failure of this bank,” Kelleher said.
But Mike Konczal, director of macroeconomic analysis at The Roosevelt Institute, argues that the 2018 bill acted as a “stand down order to regulators” when it came to mid-sized banks — discouraging them from taking a tough line on financial risk-taking, even if they still technically had the legal tools to do so. “That chilling culture matters quite a bit,” he said.
On Monday, the Fed announced it planned to review its oversight of Silicon Valley Bank, and where it went wrong.
Deposit insurance for all? Today, the federal government only insures up to $250,000 of each U.S. bank account. That rule went right out the window this weekend, however, when regulators announced they’d back all of the deposits at Silicon Valley Bank.
Now, Democrats are talking about expanding deposit insurance to avoid last-minute emergency decisions that risk being labeled a bailout. California Rep. Maxine Waters, D-Calif., even floated establishing a universal program on CNBC that covered every bank account in full. Warren and California Rep. Ro Khanna have talked up the need for reforms to ensure businesses can at least make payroll if their bank goes under — which became a major concern for Silicon Valley Bank’s many startup clients.
Jason Furman, a former economic advisor to Barack Obama, said the idea makes sense on paper, calling it “better than ex-post universal deposit insurance.” Some experts have suggested establishing a tiered insurance system that charges banks larger fees for larger deposits.
“What we might do is say if you've got an account between 250k and 500k, there's a minor fee that's also added on to your banking costs,” Robert Hockett, a finance professor at Cornell Law School who’s advising progressive legislative efforts, told Semafor. “If you have an account between 500k and a million, maybe a slightly larger fee… and so on.”
But there are possible downsides, practically and politically. Many banking experts worry that a universal deposit insurance program would encourage risky behavior by banks since they wouldn't have to worry about customers fleeing to competitors. Any attempt to reform deposit insurance is very likely to crash into resistance from the banking industry, since they’d face higher fees to pay for it.
Some Democrats aren’t necessarily sold on universal deposit insurance, either. Rep. Ritchie Torres, D-NY, told Semafor that it might create “perverse” incentives.
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Trump to Iowa: DeSantis will sell out farmers
DAVENPORT, IA – If Monday was any indication, former President Donald Trump’s plan to defeat Florida Gov. Ron DeSantis in Iowa involves promising to cater to the state’s farmers at every turn.
On Monday, thousands of Iowa voters — many adorned with MAGA gear — lined up and down the block in the hopes of seeing Trump speak. Hours later, the former president arrived to a packed theater (plus a crowd still waiting outside) and honed in on his support for agriculture.
“I was the most pro-farmer president that has ever been in the White House, by far,” Trump told the crowd. “How could a farmer vote against me?” he later added.
He boasted of his record-setting farm subsidies, which surged under his administration to counteract the effects of a trade war he launched, bragged how he “ended the NAFTA disaster” with a new trade deal, and declared that his team had “put farmers first.”
Perhaps most notably, the former president sought to separate his record with farmers from DeSantis, citing his votes in Congress against existing biofuel mandates that boost the market for corn ethanol.
“Ron ‘DeSanctus’ strongly opposed ethanol, do you know that? And we don’t even know if he’s running … he strongly opposed ethanol and fought against it at every turn, and he’s gonna do that again,” Trump said.
It was one of several recent instances in which Trump has attacked DeSantis for his hardline conservative record in Congress, which also included votes to raise the age for retirement benefits. Once again, Trump made clear he would not let conservative ideology get in the way of a good campaign promise.
Still, there’s reason to believe the state, which DeSantis visited on Friday, could be competitive despite Trump’s success turning it red after President Obama won it twice. Trump lost Iowa in 2016 to Sen. Ted Cruz, who notably won the state’s first-in-the-nation caucus despite opposing ethanol mandates on free market grounds. Cruz’s victory was powered by a strong showing with evangelicals; Trump’s support from religious leaders who backed his re-election is notably soft so far.
The former president also saved some of his fire for Democrats. He promised “cancel every Biden policy that’s brutalizing our farmers” to roaring cheers. He cited a Biden administration rule imposing new protections on wetlands and waterways (which his administration repealed in 2019) and the current administration’s failed push to expand estate taxes, which farm interests lobbied hard against. And he blamed Biden for high fertilizer prices, which shot up after Russia’s invasion of Ukraine created a global shortage.
Ukrainian activists in D.C. want to speak to the speaker
A group of Ukrainian notables is in Washington to ask Biden administration officials and congressional staffers for more weaponry and support for their country — but there’s one meeting they say has eluded them.
During a roundtable with reporters at the German Marshall Fund’s D.C. headquarters, Olena Halushka, who sits on the board of the Ukraine-based Anti-Corruption Action Center, said that the group had extended an invitation to meet with House Speaker Kevin McCarthy or his staff but hadn’t received a reply.
“That’s a shame because we wanted very much to thank him for all of the assistance which Ukraine is receiving from the United States and also explain what is the price of the Ukrainian victory in 2023 and why this would have the geopolitical implications on China, which definitely is the top priority for him given from his public interviews which we were hearing on Fox News just yesterday,” Halushka said on Monday.
A representative for McCarthy didn’t return a request for comment.
Halushka said the group has plans to meet with staff on House and Senate national security committees. The group — which includes activist and former member of parliament Hanna Hopko, as well as Alyona Getmanchuk and Leonid Litra of the New Europe Center in Kyiv — already sat down with members of the White House National Security Council, a Biden official confirmed.
The delegation is among a steady stream of Ukrainian officials and advocates who have come to the U.S. to lobby for continued help in their war with Russia, but comes at a moment when public support for aiding Ukraine in the U.S. shows signs of slipping, particularly among Republicans.
Halushka and her colleagues made clear that they want to answer questions from GOP lawmakers who have expressed concerns about oversight of U.S. aid dollars in Ukraine. (McCarthy has said the U.S. shouldn’t write “blank checks.”)
“We sent requests to many of the most skeptical voices, but unfortunately we didn’t receive any feedback or confirmation,” Getmanchuk said.
— Morgan Chalfant
Peter Ambler is the executive director of Giffords, a gun safety advocacy organization founded by former congresswoman Gabby Giffords after she survived a gunshot wound to her head in 2011.
Stories that are being largely ignored by either left-leaning or right-leaning outlets, according to data from our partners at Ground News.
WHAT THE LEFT ISN’T READING: Actor Rainn Wilson accused Hollywood of harboring bias toward Christians, citing a recent scene from HBO’s “The Last of Us.”
WHAT THE RIGHT ISN’T READING: Trump tried to blame former Vice President Mike Pence for the violence on Jan. 6, 2021, after Pence leveled criticism at Trump for the riot over the weekend.
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— Steve Clemons