5 MIN READ - An update from the Cautious Optimism Correspondent for Economic Affairs on the Biden administration’s latest “blame Trump for SVB’s failure” evasion.
In the Biden administration’s latest attempt to deflect blame for the failure of Silicon Valley Bank—which happened two years and two months into their watch—Treasury Secretary Janet Yellen this week blamed yucky Orange Man Bad for reducing staff at the Treasury Department’s Financial Stability Oversight Council (FSOC) from 36 employees to 18 and pleaded that she has worked tirelessly to increase its staffing since she took office.
Yellen on Thursday: “When the President and I took office in January 2021, we inherited a financial stability apparatus at Treasury that had been decimated."
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The message of course is “Don’t blame us. We saw the tremendous risk caused by Trump’s deregulation and budget cuts, but we were powerless to do anything about it in time. Otherwise we would have prevented SVB’s failure.”
Aside from the media and nearly half of America lapping up this latest excuse just before inhaling and regurgitating it back onto their smartphone screens, here are just a few of the problems with Yellen’s poorly-authored alibi:
1) Federal Reserve Vice Chair for Supervision Michael Barr testified last week that his office already audited SVB many times going back to 2021 and found multiple “deficiencies” and management problems before ordering the bank to take corrective measures. Clearly a smaller staff in one tiny Treasury Department office didn’t prevent the discovery of problems at SVB.
Barr also stated that despite finding deficiencies at SVB there was a failure of supervision within his office’s procedures, so money for eighteen bodies at Treasury wasn’t going to resolve what was clearly an execution problem at the Fed.
May 9, 2023 addendum: A newly filed report from California's bank regulator, the California Department of Financial Protection and Innovation, blames itself for SVB's failure and claims it (according to AP) "did not act forcefully enough to get the bank to fix its problems."
2) Despite framing herself as clairvoyant enough to see in early 2021 the tremendous risk evil Orange Man created by reducing the FSOC’s staff, the Economics Correspondent can’t find a single instance of Yellen warning of systemic financial risk in the last two-plus years.
Surely if she “saw it all along” and identified an existential threat to the financial system that threatened to usher in another Great Depression she would have spoken up publicly?
But she didn’t.
Strange for someone who was acutely aware of so chilling a threat to remain silent… unless she didn’t really see it and is now just playing CYA after the fact.
3) Not only did Yellen never warn about the great dangers ahead, but during the last two-plus years she found time to speak publicly and in Congressional testimony about the following issues that were more important than a novel threat of systemic financial crisis:
-Electric vehicle credits
-Community college subsidies
-George Floyd’s murder
-Biden’s Covid deficit spending packages
-Harriet Tubman’s face on the $20 billZ
-Appointing Treasury’s first Counselor for Racial Equity
-Flying the gay pride flag outside the Treasury building
(this is only a partial list).
These policy priorities were all important enough to bring public attention to but the looming threat of financial crisis due to 18 empty cubicles in a corner of the Treasury building was not.
4) Given that Yellen publicly stated in 2017 the USA would not see another financial crisis in our lifetimes, one would think if she was alarmed at how yucky Orange Man was inviting another crisis with his budget cuts she would have acted to protect her reputation by immediately and pre-emptively screaming at the top of her lungs:
“Earlier I said we wouldn’t see another financial crisis in our lifetimes but right now in January of 2021 I rescind that statement because look at the danger Trump has created!”
Forget even covering for her 2017 statement. Wouldn't any career bureaucrat, seeing the threat of crisis blowing up in their faces, want to get out in front of the problem for political insurance and announce (before the crisis explodes and takes them down) "We've found this problem left to us by Trump and we're working to fix it right now before it's too late?"
Instead she was dead silent. Now she’s eating her own words about “no financial crisis in our lifetimes” even though, according to her, she saw the problem for over two years? Yeah, like that’s believable.
5) Multiple times in her tenure at Treasury Yellen actually *praised* the stability of the banking system during the stresses of the 2020 Covid pandemic--and credited the current regulatory regime.
Yet we’re now expected to believe that all the time she was holding up the bureaucratic structure as steadfast/resolute she secretly knew it was wide open to a new financial crisis and never said a word?
Obviously the evidence points to a far more plausible explanation: Yellen and the entire Biden administration were blissfully confident that the regulatory system they oversaw was bulletproof on autopilot and then taken by surprise by SVB’s collapse.
Now that they are being criticized for dropping the ball after two-plus years in power, they’re scrambling to blame someone, anyone other than themselves.
And who are their supporters more likely to believe is responsible than Trump? They could accuse Trump of causing the Chicago fire of 1871 and most Democrats would not only believe it, they'd share it with all their friends and call anyone racist for pointing out Trump wasn't born until 75 years later.
And their alibis are as poorly thought through and crumble in the face of five seconds of scrutiny. But that doesn’t matter to the TDS-afflicted who willingly believe anything so long as the message is Orange Lucifer evil.
There’s one more about the budget cuts.
6) Although Yellen only became Treasury Secretary in early 2021, the Democratic Congressional leadership had every chance to restaff the FSOC when they controlled the House of Representatives starting in January of 2019.
Democrats controlled all the oversight committees and knew all the details of the budget for Treasury. Surely with Maxine Waters heading the Financial Services Committee they could have plugged the tiny hole that threated America with a financial tsunami.
What, they didn't control the Senate yet?
That didn't stop the Pelosi House from successfully holding both of Trump’s Covid CARES packages hostage in 2020 and early 2021 to get hundreds of billions of dollars of pork added to the bills while Americans waited in their locked homes for help.
We’re told that adding a few million dollars’ pittance for FSOC to the combined $3.4 trillion in two CARES packages would have snuffed out the menace of another Great Financial Crisis for good, yet instead Pelosi and the Democrats secured hundreds of billions of dollars for more important priorities like gender diversity programs in Pakistan, race riot studies, Kennedy Center remodeling funds, a Women’s History Museum and Latino Museum, foreign aid to Burma, Cambodia, Sudan, Nepal, and Ukraine, diversity on U.S. airline corporate boards, funds for “freshwater mussel hatcheries,” LGBT-friendly senior housing in Dallas, and....
Well that’s just part of what was in the 5,539 pages of the first CARES Act alone.