Banking Turmoil: How Biden’s Presidency Could Be Under Threat from Political Risks

YEREVAN (CoinChapter.com) – US President Joe Biden has been steadily losing his favorable position with the Democratic Party during his term. Moreover, the latest Silicon Valley Bank fiasco resulted in a considerable backlash from the Republican party, which pointedly called the emergency loan established by the Fed a “bailout,” which would ultimately fall on the shoulders of American taxpayers.

For the unversed, this is a short recap of what happened.

San-Francisco based SVB threatened to collapse the US banking system.

According to a report late March 9, the Silicon Valley Bank (NASDAQ:SIVB) launched a $2.25 billion share sale. The Bank representatives asserted SVB needed the proceeds to make up for a $1.8 billion loss brought on by the sale of its $21 billion AFS bond portfolio consisting mostly of U.S. Treasuries.

SVB’s initial plan was to sell $1.25 billion of its common stock to investors, $500 million in convertible preferred shares, and $500 million of its common stock in a separate transaction to the private equity firm General Atlantic.

However, if the goal was to project stability and conservatism, the intention backfired. The SVB share sale announcement came hours after Silvergate Bank closed shop, which might have spooked investors. 

With around $212 billion in assets, SVB is less than a tenth the size of a banking giant, JPMorgan Chase & Co. However, the Silicon Valley Bank collapse threatens to start a wave of contagion among financial institutions.

Did the Biden administration miss the mark?

To save the depositors’ assets, the Federal Reserve established an emergency loan, which could allegedly inject over $2 trillion in liquidity into the banking system. “The Federal Reserve is prepared to address liquidity pressures that may arise,” stated the Fed, despite its ongoing battle to curb runaway inflation.The President himself praised his team for a timely response to the crisis.

Thanks to the quick action of my administration in the past few days, Americans can have confidence that the banking system is safe. Your deposits will be there when you need them.

noted the President during a press conference.

Moreover, Biden asserted that not a dime would come out of taxpayers’ pockets to “bail out SVB.” Instead, some of the country’s most powerful banks, including JPMorgan Chase, Wells Fargo, Citigroup, and Truist, combined to shore up teetering First Republic Bank in a $30 billion cash infusion days after the Fed emergency loan guaranteed deposits in Silicon Valley Bank.

Also read: Biden vs Trump in 2024- US voters between a rock and a hard place.

Thus, the narrative is the following: the banking industry saved itself. The government did not bail out rich bankers whose recklessness put the savings, prosperity, and peace of mind of Americans at risk.

Meanwhile, the Republican Party disagreed.

Republicans believe the “banking system saving itself” is a sham.

Republican Senator John Kennedy strongly disagreed with Biden’s stance. He slammed Biden for sugarcoating the “bailout” that will eventually fall on the shoulders of taxpayers and added that the fiasco would have been prevented if regulators had done their job.

He commented that Silicon Valley Bank filed regular reports to the authorities. Thus, if the regulators “had paid attention” to those reports, the situation could have been avoided. Also, he called Biden’s efforts to sugarcoat the situation “putting perfume on a pig,” saying that it would “still smell like a pig.”

Political backlash remains strong.

The majority of Democrats now agree one term is plenty for President Joe Biden. According to a new poll from The Associated Press-NORC Center for Public Affairs Research, just 37% of Democrats say they want him to seek a second term, down from 52% in the weeks before last year’s midterm elections. Notably, many respondents took issue with his age over the policies.

The Democrats and Republicans are currently divided on a whole constellation of domestic and foreign issues. One of which is Presiden Biden’s decision to provide several billions worth of ammunition to Ukraine, including several high-end weapons and equipment and Stryker combat vehicles, de facto dragging the US into a proxy war with Russia.

As the war rages on, threats of nuclear response casually fly about. Moreover, the New York City Police Department issued a video with quite questionable instructions on what to do if a nuclear attack does happen.

Also read: Fed emergency loan could provide $2T liquidity, says JPMorgan – Will Bitcoin react?

Meanwhile, the Republican Party (GOP) and many democrats as well blame Biden for not only allocating billions of dollars to a foreign war but also for putting America in danger of the said nuclear response from Russia.