They say you should never let a crisis go to waste, and almost nobody does these days. We live in an era where everything from pandemics to police shootings inevitably and almost immediately spawn competing (and often contradictory) culture war narratives. The recent bank crisis is no exception.
In case you missed it, regulators shut down Silicon Valley Bank (SVB) on Friday after its collapse. On Sunday, regulators closed Signature Bank in New York and promised to fully reimburse depositors (President Joe Biden claimed on Monday that “no losses” will be paid for by taxpayers).
Even if these steps prevent the spread of mid-level banks going under, what might otherwise be a wonky econ story is now a political story that is sure to reboot populist assholery.
ADVERTISEMENT
That’s because avoiding a contagion inevitably requires bailing out rich people who have made some pretty big and risky bets. This has some of the same populist ingredients that sparked both the Tea Party and Occupy Wall Street movements. And that’s only the most obvious reason that the lines are already being drawn.
Let’s start with the right, where multiple narratives are already forming.
Everyone from Wall Street Journal columnists to House Oversight Committee Chair James Comer is alleging SVB collapsed because they were pushing “woke” programs. As Rep. Marjorie Taylor Greene opined on Twitter, “the fools running the bank were woke and almost became broke…”
There are also related themes being pushed by Republican Sen. Josh Hawley and others about Biden caring more about Silicon Valley elites than he does about working-class Americans in Ohio. “We all know that if a small community bank failed in a place like East Palestine, they would never get a bailout!” tweeted Donald Trump Jr.
Now, this doesn’t mean that all the GOP carping is completely without merit. For example, Rep. Thomas Massie said he attended a Zoom meeting along with members of the “Fed, Treasury, FDIC, House, and Senate,” during which a Democratic senator (later identified as Sen. Mark Kelly of Arizona) allegedly asked “whether there was a program in place to censor information on social media that could lead to a run on the banks.” (After this article was published, Kelly's office told The Daily Beast that the senator’s words had been misrepresented, and that he had “asked about *foreign adversaries* potentially trying to take advantage of this situation by spreading misinformation.”)
Rep. Lauren Boebert reported the same thing from the meeting, adding: “[T]his administration AGAIN just committed the federal government to interfere with free speech. Unacceptable!”
Government censorship should never be taken lightly, even for a “good” cause like avoiding bank run panics.
Massie and Boebert aren’t always the most reliable sources on the inner workings of government, and it’s unclear exactly what was said on this Zoom call. But might there be a kernel of truth to their reports?
Ask yourself this: Would it be crazy for the government to at least consider the potential repercussions if someone like Steve Bannon or Alex Jones got on Twitter or Facebook and blared, “GET YOUR MONEY OUT OF THE BANKS TODAY!!!”—and then ten million people actually did it?
A run on the banks is a cascading phenomenon. Yes, the only thing we have to fear is fear itself; but we have never lived in a world where fear could spread so quickly—or (possibly) purposefully—before the advent of social media.
Regardless, coming on the heels of the Hunter Biden laptop/”Twitter Files” censorship story and the COVID-19 lab leak “conspiracy theory,” it is legitimate for elected officials to raise some red flags about the government using social media to censor controversial free speech—ostensibly for our own good.
Republicans are more than happy to take advantage of this opening and weaponize it against the Biden administration (all the while, ignoring the plank in their own eye).
Of course, the right isn’t the only side trying to use this banking crisis to score political points. Politicians on the left are also playing the populist card, albeit in more conventional ways.
In The New York Times, for example, Democratic Sen. Elizabeth Warren showed a preference for a different big government bailout, saying, “[I]t’s no wonder the American people are skeptical of a system that holds millions of struggling student loan borrowers in limbo but steps in overnight to ensure that billion-dollar crypto firms won’t lose a dime in deposits.”
Warren also (surprise!) blamed Trump-era deregulation for the bank crisis.
It should be noted that just because both sides are grasping at convenient causes for the bank crisis doesn’t mean that every allegation is meritless. Maybe SVB was too focused on progressive virtue signaling. Or maybe the weakening of financial rules is to blame. I’m not an expert on banking, but you don’t have to be to read the political tea leaves.
If history is a predictor, the rich will be made whole, the middle class will pick up the tab, and—most assuredly—both sides will demagogue this story to death. That’s the only safe bet. And you can take that to the bank.
