Roger Altman warned Tuesday that government intervention in Silicon Valley Bank and Signature Bank, two now-defunct financial institutions, “effectively nationalizes” the U.S. banking system.
The warning came after President Joe Biden said the U.S. government would guarantee the deposits at SVB despite the FDIC providing a maximum guarantee of $250,000.
What did Altman say?
Speaking on “CNN This Morning,” the former deputy secretary of the Treasury Department said what the Biden administration did was “absolutely profound.”
“They guaranteed the deposits, all of them, at Silicon Valley Bank. What that really means, and they won’t say it, is that they have guaranteed the entire deposit base of the U.S. financial system, the entire deposit base,” he said.
“Why? Because you can’t guarantee all the deposits in Silicon Valley Bank and then the next day say to the depositors, say, at First Republic, sorry, yours aren’t guaranteed — of course they are,” he explained.
According to Altman, who worked in the Clinton administration, the federal government is now on the verge of nationalizing the banking system.
“This is a breathtaking step which effectively nationalizes or federalizes the deposit base of the U.S. financial system. You can call it a bailout, you can call it something else, but it’s really absolutely profound,” he said. “Now, the authorities, including the White House, are not going to say that because what I just said of course implies that they have just nationalized the banking system. And technically speaking, they haven’t. But in a broad sense, they are verging on that.”
While the banking system has not been nationalized per se, Altman explained what the federal government did will forever change the relationship between the government, taxpayers, and banks.
“Usually the term ‘nationalization’ means that the government takes over the institution and runs it and the government owns it. That would be the type of nationalization we have seen in many other countries throughout the world,” he said. “Obviously, that did not happen here.”
But, he added, “When you guarantee the entire deposit base, you have put the federal government and the taxpayer in a much different place in terms of protection than we were in a week ago.”
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