After all, SVB’s customers benefitted from the bank’s risky practices in the form of cheap debt. Allowing SVB to fail does not fully address all the concerns about moral hazard or the idea of privatized gains and socialized losses. On the other, it’s clear that some of the same considerations weigh heavily today even with that difference. On the one hand, it’s possible to understand the nature of yesterday’s intervention as an effort to avoid the mistakes of 2008: saving depositors, not stockholders. And even given the differences between past bailouts and this emergency measure, the echoes of bailout politics will ring loudly in Biden’s ear. An administration eager to tout its blue-collar credentials knows this isn’t a good look. For now, the White House will be acutely aware of the perception that the government is intervening to help venture capitalists and tech start-ups. But how much will they matter politically? Much depends on whether the administration is forced into further action in the coming days. Those are, to be sure, very important differences. Instead it has created an insurance fund for depositors that will be capitalized by the banks. Supporters of the move argue that the government intervention is not a bailout because, unlike in 2008, the government has not used taxpayers’ money to save stockholders and bondholders. The administration maintains that taxpayers will not have to pick up the bill and the White House will be hoping that this federal intervention will be enough to contain the problem. Viewed as a stand-alone case, Biden’s response to a run on America’s sixteenth largest bank after mismanagement left it fatally exposed to higher interest rates is understandable. Talking the day after regulators announced emergency measures that guaranteed all depositors at Silicon Valley Bank, Biden said that “thanks to the quick action of my administration over the past five days, Americans can have confidence that the banking system is safe.” There was a back-to-the-noughties feel to events in Washington this morning as Joe Biden sought to calm markets and assuage fears of contagion in the banking system after the collapse of Silicon Valley Bank in the last few days.
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