The dramatic meltdown of Silicon Valley Bank is proving one thing for sure – the biggest systemic risk to the United States lies not in its banking system but in its polarized politics.
So far, the Biden administration’s frantic effort to contain the California bank’s woes seems to have worked. There was no Monday morning run on the banks after the federal government agreed to guarantee deposits at SVB and another shuttered bank, although future failures can’t be ruled out.
But the hyper-politicized reaction to the drama in Washington and on the Republican 2024 campaign trail, as key figures twisted the situation to further predetermined political ends, suggested that if a real financial crisis does erupt, it may be beyond the government’s capacity to fix it.
Several prominent Republicans – led by Florida Gov. Ron DeSantis, a potential White House hopeful – quickly blamed the bank’s collapse not on its questionable financial strategy but on a supposed obsession with “woke” socially progressive investments. Other Republicans – like former South Carolina Gov. Nikki Haley, a declared 2024 contender – preferred to open a new front in the perennial debate between conservatives and liberals about the role of government in the economy.
“Joe Biden is pretending this isn’t a bailout. It is,” Haley said on Monday. The charge is not specifically accurate. But in presidential campaigns, perception has long been just as important as the truth – even before Donald Trump wove his alternative factual reality. On the left, two former Democratic presidential candidates – Sens. Elizabeth Warren of Massachusetts and Bernie Sanders of Vermont – re-upped their calls for more regulation of the banking industry. And some Democrats, including President Joe Biden, resorted to an increasingly familiar gambit when trouble hits – blaming it on Trump and his…
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