“They have guaranteed the entire deposit base of the U.S. financial system,” Roger Altman, who served as deputy treasury secretary in the Carter and Clinton administrations, told CNN on Tuesday morning.
“I didn’t say it has been nationalized. I said they are verging on that because they have guaranteed the entire deposit base,” he clarified.
ROGER ALTMAN: Well, the term “bailout” is, obviously, a loaded one. And it’s in the eye of the beholder. It’s like one person sees something and thinks it is a catastrophe, and another person sees the same thing and thinks it’s a small accident.
But the main point here is that the rescues of 2008 and 2009 which we all remember so vividly became ferociously unpopular, one of the most unpopular things that the federal government has done in 50 or 100 years. Many people think they led to the growth of the Tea Party and the growth of the MAGA movement, and so forth. And therefore, the administration today doesn’t want to get within 100 miles of that term “bailout.”
Now, what the authorities did over the weekend was absolutely profound. They guaranteed the deposits, all of them, at Silicon Valley Bank. And what that really means, and they won’t say it, and I’ll come back to that, what that really means is that they have guaranteed the entire deposit base of the U.S. financial system, the entire deposit base. 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.
And so 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.
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.
By the way, the shareholders in Silicon Valley Bank, obviously, lost all their money. And therefore, if you are a shareholder at First Republic or some of the other banks that you showed on your screen a few minutes ago, you are concerned because you saw that at Silicon Valley Bank the shareholders were wiped out. But the depositors at those institutions have nothing to worry about because they have just been guaranteed.
COLLINS: It is a remarkable statement to hear you say that you believe the U.S. banking system has been nationalized because of this.
ALTMAN: Well, no. I didn’t say it has been nationalized. I said they are verging on that because they have guaranteed the entire deposit base. 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 around the world. Obviously, that did not happen here. 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.