In 2016, Vice President Joe Biden warned against efforts to unravel banking regulations that Democrats had fought to implement following the nation’s financial crisis, just as the emerging Trump administration was determined to loosen those strict banking rules.
Biden argued that without the far-reaching 2010 banking overhaul known as Dodd-Frank, financial institutions would continue to gamble with consumers’ cash and ultimately hurt the middle class.
“We can’t go back to the days when financial companies take massive risks with the knowledge that a taxpayer bailout is around the corner when they fail,” Biden said in a speech at Georgetown University in the waning days of the Obama administration.
Now there’s a banking crisis on his watch as president, and Biden is moving aggressively to assure the public that it is contained, bank executives will be fired, deposits are safe and taxpayers aren’t on the hook — measures also designed to calm jittery financial markets.
As he contemplates an announcement for a second term, Biden’s ability to avert a contagion among financial institutions will test his contention that his administration represents competence and stability in contrast to the the chaos of the Donald Trump years.
His call for additional regulation, though, is likely to run into stiff resistance in the Republican-controlled House and even among some moderate Democratic lawmakers who joined Republicans to loosen some rules in a 2018 law — not to mention criticism from the still-forming 2024 Republican field that has already labeled his actions a bailout by just another name.
Privately, Biden has been adamant that the government’s intervention would not be like that of 2008, when Congress authorized billions in taxpayer cash to rescue financial institutions that were deemed too big to fail. That’s according to a senior White House official, who was not authorized to describe private discussion by name.
But administration officials believe that this time they had to act substantively despite bad decision-making by bank executives, given the economic risks and the potential impact on customers who did nothing wrong.
Unlike in 2008, Biden was insistent that bank executives had to pay a price, said the official, granted anonymity to discuss internal White House deliberations.
“The management of these banks will be fired,” Biden declared Monday. If an institution is taken over by the Federal Deposit Insurance Corp., “the people running the bank should not work there anymore.”
On Monday, Biden also stressed that taxpayers will not bear the cost of his administration’s penalties on the two failed banks, instead tapping into an insurance fund that is paid for by bank fees. And while customers and small businesses who stashed their money with the penalized banks would be protected, Biden emphasized that investors would not.
“They knowingly took a risk and when the risk didn’t pay off, investors lose their money,” Biden said. “That’s how capitalism works.”
California Rep. Maxine Waters, the top Democrat on the House Financial Services Committee, said that Biden, like others, cannot ignore the lessons of the 2008 financial collapse and that having endured …read more
Source:: News Headlines