(C) Common Dreams
This story was originally published by Common Dreams and is unaltered.
. . . . . . . . . .
Opinion | Three and a Half Myths About the Bank Bailouts [1]
['Paul Krugman']
Date: 2023-03-16
Let’s start with the silly stuff. On the right side of the political spectrum, many have quickly rallied around the claim that S.V.B. failed because it was excessively woke — which is only marginally less ludicrous than claiming that wokeness somehow causes train derailments.
For what it’s worth, no, S.V.B. didn’t stand out from other banks in its concern for diversity, the environment and so on. And banks have been going bust for centuries, since long before H.R. departments began including boilerplate language about social responsibility in their mission statements. So the talk about wokeness tells us nothing about bank failures — but a lot about the intellectual and moral bankruptcy of the modern American right.
On to more serious criticism. There is a reasonable argument, one that I largely agree with, to the effect that the failure of S.V.B. didn’t pose a systemic threat in the way that the failures of financial institutions beginning with Lehman Brothers did in 2008. So why rescue the depositors?
Well, one answer is that, like it or not, Silicon Valley Bank had come to play a key role in what you might call the financial ecosystem of the technology sector. Notably, if depositors had lost access to their money, even temporarily, this would apparently have left many technology companies unable to meet their payrolls and pay their bills — which might have done lasting damage. True, killing the crypto industry would be a public service, but there’s also a lot of good stuff that might get hurt.
In this sense the bailout of S.V.B. was something like the bailout of General Motors and Chrysler in 2009, which was also justified on the grounds that it would preserve a crucial piece of the economic ecosystem. And although the auto bailout was harshly criticized at the time, in retrospect it looks like the right call, even though it ended up costing taxpayers billions.
[END]
---
[1] Url:
https://www.nytimes.com/2023/03/16/opinion/bank-bailout.html
Published and (C) by Common Dreams
Content appears here under this condition or license: Creative Commons CC BY-NC-ND 3.0..
via Magical.Fish Gopher News Feeds:
gopher://magical.fish/1/feeds/news/commondreams/
