The Biden Effect: Biden Has Presided Over Three of the Four Largest Bank Failures in US History
The Biden administration’s economic agenda has been under scrutiny since the start of his presidency, and the latest news is not good. According to recent reports by Fox News and The Washington Post, Joe Biden has presided over three of the four largest bank failures in US history. Unfortunately, this news is not surprising, given the trajectory of his economic policies.
First Republic Bank, Silicon Valley Bank, and Signature Bank are the three latest financial institutions to fail under the Biden administration. These banks had assets worth $212 billion, $209 billion, and $110 billion, respectively. Experts have attributed the failures to high interest rates and poor management decisions. The Federal Deposit Insurance Corporation (FDIC) has estimated that the cost to taxpayers to resolve these failures will be around $36 billion.
What makes this news even more concerning is that Biden has only been in office for a little over a year. The Washington Post reports that since 2001, more than 500 banks have failed, but the vast majority of them were in the wake of the Great Recession. Recent bank failures have paled in comparison to the ones that have happened under Joe Biden’s watch.
E.J. Antoni, an economist and research fellow at The Heritage Foundation, told Fox News Digital in an interview, “The Federal Reserve, the Treasury, this entire administration, frankly, has been very inconsistent with their operations in financial markets. So they will do one thing in one instance and then something completely different in the next. However, if this last episode is any indication, as the federal government gets increasingly desperate in this banking crisis, as the crisis continues to escalate, what we’re seeing is an increasing willingness to basically use taxpayer money to bail out these institutions.”
What Led to These Bank Failures?
It’s not just the poor management decisions made by the failed banks. Economic policies implemented under the Biden administration have also played a role in the lax banking regulations that have allowed these institutions to fail. Biden’s approach to the economy has been focused on spending and printing money in order to prop up the economy, despite the foreseeable consequences.
The Biden administration has been printing trillions of dollars, which has led to inflation hitting all-time highs. The Federal Reserve’s decision to keep interest rates low despite high inflation has also contributed to the crisis. According to Antoni, “Interest rates need to be at a certain level for people to be incentivized to save and create credit-worthy borrowers. When the Federal Reserve sets them too low, you get booms and busts. When they set them too high, you get recessions. Right now, we’re too low for too long.”
The Biden administration’s economic policies have also made it nearly impossible for small banks to compete with larger financial institutions. The Wall Street Journal reported last year that small banks are being left behind in the PPP (Paycheck Protection Program) loan distribution. Large banks have more resources to process large numbers of loans, leaving smaller, community banks struggling. This has led to a loss of business and revenue for small banks, making them more vulnerable to failure.
What Can Be Done to Prevent Further Bank Failures?
Experts agree that the Biden administration needs to take a more proactive approach to address existing banking issues and prevent further failures. Here are some proposed solutions:
1. Tighter Banking Regulations
Tighter regulations on banking practices can help prevent future failures. However, it’s important that these rules are not so strict as to impede the flow of credit and create more financial crises. It’s also crucial that they are implemented fairly and without bias in order to prevent large, politically-connected banks from having an advantage over smaller banks.
2. Diversifying the Market
One way to protect against banking failures is to diversify the types of banks in the market. This can be achieved by encouraging more small, community banks and credit unions to compete with larger institutions. This will improve competition and provide consumers with more options.
3. Supporting Small Businesses
Small businesses are the backbone of any economy. Supporting small businesses will help improve their ability to compete with larger companies. This can include creating programs and incentives for small businesses to access credit.
4. Implementing Sound Economic Policies
The most effective way to prevent bank failures is to create sound economic policies that prioritize sustaining the long-term health of the economy rather than just short-term gains. Policies that prioritize low inflation and sound fiscal policies can help prevent future banking crises.
Three of the four largest bank failures in US history have happened under Joe Biden’s watch. The Biden Effect has led to weakened banking regulations, neglect of small banks and businesses, and inflation hitting all-time highs. The cost to taxpayers of bailing out these failed banks will only continue to grow. To prevent future failures, policymakers need to be proactive in implementing policies that diversify the market and prioritize the long-term health of the economy.