Rep congressman blames SVB, other banks failure on 'Bidenflation'

By Al Mayadeen English
Source: Agencies
17 Mar 2023 11:02

The bank's collapse is linked to the increased interest rates set by the Federal Reserve System, causing impairment of assets in the balance sheets of financial authorities.

The SVB logo and a decreasing stock graph are seen in this illustration taken on March 10, 2023. (Reuters)

Biden's economic policies are to blame for SVB's collapse, according to Republican Congressman Paul Gosar.

Gosar told Sputnik on Thursday that congressionally-approved bailouts are to be considered in the future to rescue the failing US banks following the collapse of Silicon Valley Bank as a result of President Biden's economic policies.

California regulators shut down SVB last Friday, becoming the largest US bank to collapse since the 2008 financial crisis. The bank's collapse is linked to the increased interest rates set by the Federal Reserve System, causing impairment of assets in the balance sheets of financial authorities.

Two days later, the New York-based Signature Bank was also shut down by authorities, recording the third-largest bank failure in US history.

"Biden’s economic policies created the conditions that lead to SVB’s large losses and eventually the bank run," Gosar said in a statement.

"SVB invested a large portion of its deposits in mortgage-backed securities and Treasury bonds. When interest rates were low, thanks in large part to President Trump, it seemed like a sound investment. However, when Bidenflation started to run out of control it forced the Fed to raise interest rates," he added.

The Congressman moves on to mention that as interest rates rose, SVB's mortgage value-backed securities and Treasury bond holdings fell drastically.

Treasury Secretary Janet Yellen shared the same thoughts regarding interest rates, which could have led to Silicon Valley Bank's failure.

As a result, Gosar indicated that a decline in the tech industry resulted from many start-up investments that were deposited in SVB, which ended up evaporating.

The Treasury Department took emergency actions to shore up the US banking industry, Gosar pointed out. He then pressed his concerns toward any future congressionally-approved bailouts, which could rescue millionaire bank CEOs who profited widely through mismanaging their banks.

In this context, US President Joe Biden promised that the government would take action against reckless activities performed by financial firms. The Federal Deposit Insurance Corporation protection for depositors at AVB and Signature banks will not be extended to investors and the management at the collapsed banks, assured the President.