I want to make one additional point. If the Biden Administration really, truly wants to underwrite the uninsured deposits of Silicon Valley Bank, there should be a special tax levy (call it a fee) placed on banks for doing so. Anything else is horrifically regressive. Allow me to explain.
If any governmental entity or the Federal Reserve, a public-private hybrid, underwrites SVB’s depositors by issuing credit (“printing money”), it will increase inflation. That will fall most heavily on the poorest people. We’ll be taxing the poor to pay the rich. Robin Hood in reverse.
And that doesn’t even get into the insanity of underwriting the uninsured deposits of foreign companies. I honestly have no idea why we’re doing that.
I believe the FDIC said they will do that (assess a levy on bank deposits for the guarantee of the non-insured deposits at SVB and Signature Bank).
That said, its the other action that has inflationary implications. The Fed’s “BTFP” program and changes to the discount window let Banks pledge collateral — including those long duration treasuries that have lost 30% in value) at par value (not fair market value) in return for cash. Its the equivalent of banks issuing you a loan using your car as the collateral, with the loan amount at the original sales price of the car, not its current depreciated value! That BFTP program required a backstop of $25 billion from treasury (aka taxpayers).
As for the choice between the banking system or accepting higher inflation — its a no brainer the government and the central bank will pick accepting higher inflation.
Repeat: that’s regressive. Also, you can’t complain about income inequality and defend these actions coherently. You can say that both are the cost of our system. You can condemn income inequality and these actions. You can’t condemn income inequality and defend these actions.
I of course agree with you. I recently pointed out the baldfaced lie Biden, and his monkey, Janet Yellen, were peddling about no citizen footing the bill. Bull.
This is shameful.
But it seems to be routine these days. Like student loan forgiveness.