Democrat Congressman Slams Biden Admin Over Response To 2nd-Largest Bank Collapse In U.S. History

Ro Khanna, a Democratic-CA Representative, suggested that the Biden administration wasn’t recognizing the severity of the situation regarding the collapsed Silicon Valley Bank.

Silicon Valley Bank Announced A $1.75 Billion share Sale The financial institution suffered large losses in liquidating a $21billion bond portfolio. It raised concerns about the safety and security of venture capital firms and startups who have connections to the company. SVB, America’s 16th largest bank and Silicon Valley’s largest, lends almost half of all venture-backed tech and healthcare companies.

Federal Deposit Insurance Corporation (FDIC), announced Friday that SVB had been closed by the California Department of Financial Protection and Innovation. According to a press release, insured depositors will have access funds Monday morning. Release Uninsured depositors will receive an advance dividend within the week, while the government-backed firm will provide it.

Khanna, whose District includes Silicon Valley Bank Headquarters, made the comments during a Sunday interview on CBS News. “Face The Nation.”

Khanna was asked about the slow response by the Biden administration in the face of the crisis. “I think it’s just that right now things move at the speed of Twitter, and the government doesn’t move at that speed.”

“And I think they don’t realize what the problem could be and how fast money is moving and the challenge this could be,” He added.

WATCH:

Ro Khanna, Democrat Representative, blasted the Biden Administration’s inaction following the second-largest U.S. bank collapse in American history:

“They don’t realize what the problem could be and how fast money is moving and the challenge this could be.” pic.twitter.com/lTDfsb3v5X

— RNC Research (@RNCResearch) March 12, 2023

TRANSCRIPT:

MARGARET BRENNAN : Congressman Ro Khanna is joining us now. He is a Democrat and represents the California District, where Silicon Valley Bank once was headquartered. It’s a pleasure to have you with us. I am curious what you think about the Treasury Secretary’s comments. I understand that you’ve been in touch with Treasury, and the FDIC, with the White House.

REP. RO KHANNA (Rep.): While I have great respect and admiration for Secretary Yellen I believe we need more clarity and strength in what Treasury says. First, it is essential that depositors have full access Monday morning to their accounts. The–

MARGARET BRENAN: All depositors, that is accounts greater than $250,000. This is the cut-off for insurance.

REP. KHANNA : Yes, all of them. This has been done before. When Powell was at Treasury in 1991 the Bank of New England crashed and Powell stated that Treasury coordinated with FDIC, with the Fed and insured all depositors. Why did they do this? They did not want to see a bank run in the region. My constituents are telling me that they are receiving note to get out of regional banks. This will all be consolidated at the four largest banks. As a nation, we don’t want this, especially if you are progressive. People should also be aware that there are 400,000 payroll companies involved. If they don’t have the deposit funds, they won’t be able meet payroll. And then, go ahead–

MARGARET BRENNAN

REP. KHANNA : Yes, just like with the Bank of New England. It won’t cost taxpayers any money. Because SVB has the assets. They have the assets but they don’t have liquidity. The Fed raised interest rates extremely quickly, which was a result of these long-term Treasury bonds. These assets are still valuable because they were able to hold them. We need liquidity. We need liquidity.

MARGARET BRENNAN This indicates that perhaps there is a private option. Perhaps another bank, or other banks could buy these assets and then take them on. Do you feel comfortable doing that?

REP. KHANNA (Yes, that would be ideal). Our delegation, which spoke to the FDIC last evening, made this clear. But to have that happen–

MARGARET BRENNAN – Is this what FDIC is doing?

REP. KHANNA – That’s what we encouraged them to work on. They claimed they are working on this. FDIC and Treasury must be involved to make that happen. These assets cannot be liquidized and could pay off in 10 or more years. The Treasury Department and FDIC must be actively involved in helping to facilitate liquidity for these Treasury Bonds. I don’t believe you can get a private seller.

MARGARET BRENNAN : But you know that it’s not going to happen?

REP. KHANNA – Do they have a relationship? They need to be engaged, I believe. They claim they are engaged. They must resolve the matter by Monday morning. The best way to solve it is to state that depositors will be able to access the accounts. From FDR, the deal in our country has been that shareholders win and investors lose. I do not sympathize or understand the actions of executives. However, depositors are protected. Let’s find out who these depositors really are. They aren’t just payroll companies. These are climate startups. These are companies that help cure cancer. These are companies that work in the wine industry. These companies deal with AI and defense to keep China ahead. There are 50,000 of them and they employ Americans all across the country. All they did was take no risks. They simply had their money in the bank. We believe those should be guaranteed.

MARGARET BRENNAN : The President spoke last night with Governor of California. Is it possible that the President has an understanding of the gravity and implications of what you have laid out? Do you think the Treasury is not speaking to this? Or that the Fed-is addressing it?

REP. KHANNA – I believe they are aware of the gravity, but they need to act decisively.

MARGARET BRENNAN : Because the clock is ticking. And market’s about to open–

REP. KHANNA (Rep. Khana): The clock is ticking. By Monday morning– and I would just urge them and Chair Powell to look at what he said in his own speech in 2013. Chair Powell, I’d like to ask if the Bank of New England found it acceptable and understood what would happen with a regional run. The US banking system is safe, according to me. I don’t believe this is a systemic danger. Here’s the outcome. Everyone in these tech companies will be emailed. Take your money from the regional banks and put it in the Big Four.

MARGARET BRENNAN – What is the problem? Is it political will or concern about the potential blowback to the administration? Why wouldn’t there be immediate action? Is that what you mean by indicating that it is Chair Powell you know to be opposed?

REP. KHANNA (NOT): I don’t believe so. Right now, things are moving at the speed Twitter does. The government is slower than that. And I think they don’t realize what the problem could be and how fast money is moving and the challenge this could be it there is no systemic risk, but there is a risk on consolidation and by the way progressives should be the most concerned about this and you don’t want banking sector to be JP Morgan, Citibank Bank, of America and Wells Fargo–

MARGARET BRENNAN: Well it may have to be–

REP. KHANNA: Yeah.

MARGARET BRENNAN: –right, is what you’re saying? If the government’s not going to–

REP. KHANNA – This will happen if the government does not step up. The assets are already there so taxpayers won’t have to pay.

MARGARET BRENNAN: The assets are there, so, which is why you’re saying a government bailout is not what you’re talking about–

REP. KHANNA: No.

MARGARET BRENNNAN: –just to be- just to be clear here. Yesterday, you tweeted that the government should also investigate short sales made by corporate executives who bet on a fall in stock prices. Bloomberg reported that Gregory Becker (CEO of SVB Bank) sold stock worth $3.6 million the day before the collapse of the bank. Is this what you believe happened?

REP. KHANNA : We need all the facts. I do think that money should be clawed back and used for places like Silicon Valley Community Center in my district that has money that–

MARGARET BreNNAN: Clawed back to the CEO, who do you know?

REP. KHANNA – Clawed back from my CEO. But whether there was something nefarious or not like, you know, 10 B fives where they have to make the sale years before or months, before–

MARGARET BRENAN: I understand what you are saying.

REP. KHANNA : People shouldn’t jump to conclusions. But I think that all that money should reclaimed and given back to the depositors

MARGARET BRENAN: To the-to the insured depositors or not?

REP. KHANNA – Insured or not.

MARGARET BRENNAN : What do you think the overall impact of American innovation is? The tech sector is crucial to American competitiveness.

REP. KHANNA (Rep.): This means that all companies, whether they are searching for cancer cures, or doing climate work, as well as those that keep us ahead of China in AI and defense technology are at risk. Some will go under, others will lay people off. It’s going be hard for people to pay their rent. It is – this is the point. The legislation that Congress passed, including the IRA to address climate change, the chip sector bring back semiconductors, relies on innovation pipelines, which is why this issue is so important. It is currently being- it is actually hurting it because of the rapid rise in interest rates and now this systemic threat. This is going to harm the innovation pipeline and it will also hurt ordinary people.

MARGARET BreNNAN: Yes, we will closely monitor what’s going on in your district. We appreciate your insights, Congressman. We wish you success. We are grateful.

This report was contributed by Ben Zeisloft

Related: Yellen says there is no bailout for the Silicon Valley Bank that has collapsed

“From Democrat Congressman Slams Biden Admin Over Response To 2nd-Largest Bank Collapse In U.S. History“

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