Capitalism?

 If America claims to be rich enough to afford to not have the rich pay their fair share, rich enough to create a financial crisis purely for political reasons–then it stands to reason that it ought to be able to deal with the closing of one small bank.  But the situation is again being mishandled with negative consequences for the American taxpayer.  I am incredulous that over the long term no taxpayer money will be spent in an attempt to deal with this crisis.  Eventually, in some way, the American people end up paying, even if it is indirectly.  The only real way to shield taxpayers from this kind of fallout is to not let things like this happen in the first place.  Once they do, there is little that can be done to avert a catastrophe without government money, which inevitably has to come from somewhere.

One can blame the Trump administration, but one should be careful to remember that the deregulation that was at least part of how we got ourselves into this mess had bipartisan support.  The easy money and the bowing to Wall Street have spanned multiple administrations.  Now is a moment to stop and ask people who were involved, and ourselves, what we were thinking.   

No one doubts that the Fed is well intentioned.  Jerome Powell, in his mind, was attempting to put people back to work after the most serious economic crisis that the nation, and the world, has ever faced.  But good intentions are not enough.  It has been clear for a decade that the Fed is unable to maintain its independence from the markets.  Instead of stepping up and encouraging better regulation of these banks, it has simply gotten into the habit of bailing them out.  America has got to find a better way,  because the current path of bailouts every time a bank takes unnecessary and unwise risks cannot continue. There were warning signs after warning signs that something was going wrong at SVB, and that the failure of this bank would lead to contagion.  The Fed cannot afford to continue to drop the ball.  Eventually, a financial melt-down will occur that no amount of bailouts and “quantitative easing” (i.e. giving Wall Street everything it wants) will be able to resolve.

America needs fiscal policy truly directed at common and low-income people who are trying to make ends meet and put food on the table, not fiscal policy that cow-tows to Wall Street every time it throws a temper tantrum.  We need a policy that acknowledges that Wall Street isn’t the end all and be all of the American economy and finds a way to decouple the rest of the economy and Main Street from the banking sector so that banks that make financially unsound, and excessively risky investments are allowed to fail.  For years progressives have heard that we shouldn’t invest in the most vulnerable because it is contrary to principles of capitalism.  Allowing bad banks to fail–isn’t that capitalism?