(C) Daily Kos
This story was originally published by Daily Kos and is unaltered.
 . . . . . . . . . .



The Republic of Big Business [1]

['This Content Is Not Subject To Review Daily Kos Staff Prior To Publication.', 'Backgroundurl Avatar_Large', 'Nickname', 'Joined', 'Created_At', 'Story Count', 'N_Stories', 'Comment Count', 'N_Comments', 'Popular Tags']

Date: 2023-04-07  

The government’s swift action in guaranteeing depositor funds in Silicon Valley Bank, and assisting other banks, has led to questions about why the government is so bad at helping ordinary Americans. The question is not whether those businesses should have been helped -they should-, but why the government cannot bring itself to be as swift and decisive in helping ordinary Americans. Rather than a republic for the people, America seems to have a republic of big business, designed to provide precise and swift aid for businesses, and to clumsily and inefficiently help ordinary people.

Saving Banks

The collapse of the Silicon Valley Bank has not yet led to a collapse of the American financial system. The bank, which had been technically insolvent for several months, had, essentially, collapsed because management bet that interest rates would not rise, and so, invested a large portion of its depositor funds into long-term securities. When interest rates rose, the influx of deposits declined, the value of the bank’s long-term securities fell, and the bank found itself in a position where, despite having more assets than liabilities, it could only cover its liabilities by taking a major hit? Unfortunately for the bank, it had to hold those long-term securities to maturity, and that triggered its collapse. The government, through the Federal Deposit Insurance Corporation (FDIC) was swift to attack and guaranteed all depositor funds in the bank.

Since then, a number of other banks have gotten into trouble and needed a cash injection. According to CNBC , the government has been swift to attack, with the Bank Term Funding Program (BTFP) releasing $11.9 billion in short-term loans to banks since last Sunday. The typical bank has taken a more traditional route, and collectively, these banks have borrowed nearly $153 billion through the Fed’s discount window. That window provides loans for up to 90 days, whereas the BTFP provides loans for a year. The Fed has also provided $142.8 billion in bridge loans for shuttered banks so they could meet their obligations to their depositors. These interventions have cost the FEd some $297 billion.

The Savior Who Never Comes

Critics have rightly pointed out that the government is always swift to bailout banks and big business, but slow to help ordinary people. The government is the savior who never comes, but of whom we hear a lot. We hear about how some companies are “too big to fail”, or “systemically important”, and yet when millions of individual Americans are affected by disaster, this government that is so swift and able, cannot seem to fulfill its obligations to its citizens. For example, flood victims in Detroit and Kentucky are still waiting for aid months after having suffered from flooding. Two years since the Treasury Dept released $46.55 billion for rental assistance, 92.6% of the first tranche of $25 billion has been released, and 70.2% of the second $21.55 billion tranche has been released. Many renters are still waiting for aid.

Source: National Low Income Housing Coalition

Many Americans will be familiar with how the government was so decisive in aiding banks and big business in the wake of the 2008 Financial Crisis, and how ordinary people were left to their own devices. When it came to ordinary people, the government argued that there was a moral hazard in bailing out people from the consequences of their decisions, but the banks who lied to those people were helped because they were “too big to fail”.

Indeed, what we often see is that even when the government does decide to intervene and help, they prove incredibly inept, with funds taking months to be released, procedures that are too complex for anyone to understand, and wholesale capture of those processes by politicians and lobby groups. Instead of benefitting ordinary people, systems of aid seem designed through their chaotic organization to help elites first. What we have today is not government for the people, but for big business.

[END]
---
[1] Url: https://www.dailykos.com/stories/2023/4/7/2162720/-The-Republic-of-Big-Business

Published and (C) by Daily Kos
Content appears here under this condition or license: Site content may be used for any purpose without permission unless otherwise specified.

via Magical.Fish Gopher News Feeds:
gopher://magical.fish/1/feeds/news/dailykos/