Biden's banking busts

The failure of three banks in the last two weeks, including Silicon Valley Bank on Friday and Signature Bank on Sunday, is a saga of utter government incompetence. Call these bank collapses Biden's Banking Busts. The Biden administration has been obsessing on woke causes while banks teeter toward insolvency.

Three days before Silicon Valley Bank collapsed, Treasury Secretary Janet Yellen cautioned that climate change puts the banking industry at risk. Yellen was in la-la land, speculating that future storms and tornadoes could diminish the value of banks' assets.

Weather is a risk, but she was oblivious to the much more immediate problem facing banks -- the plummeting value of the bonds they own. She was heedless to the impending downfall of SVB and possibly several other small banks that had purchased long-term bonds when interest rates were near zero.

In 2022, after doing nothing to tame inflation the previous year, the Federal Reserve hiked rates repeatedly to make up for their previous inaction. Those rapid rate hikes, the most drastic in decades, made the banks' bonds lose value.

A week before Yellen's climate change harangue, Moody's Investors Service already had delivered bad news to SVB that it was about to be downgraded several notches because its inventory of bonds was not worth enough to repay depositors. A day before Yellen's loony speech, Federal Deposit Insurance Corp. Chairman Martin Gruenberg also cautioned that the diminishing value of the bonds held by banks meant a $620 billion problem ahead.

The Office of the Comptroller of the Currency, a part of Yellen's Treasury, is responsible for examining the financial condition of banks. It failed to avert the SVB collapse.

Yellen has been an outspoken activist for climate change, women's rights and diversity, including appointing the Treasury's first ever racial equity officer. Apparently, the hordes of bureaucrats working under her are also too busy with diversity, equity and inclusion seminars to prevent banks from failing.

As the SVB crisis unfolded, Yellen was MIA. Now she says she's monitoring several banks "struggling with the whiplash in prices" of their bonds.

Financial experts warn smaller banks are in for a rough ride, though the big banks like JPMorgan Chase, Bank of America, Wells Fargo and others are not apt to be in trouble.

Admittedly, SVB's managers made mistakes. Banking's first rule is that assets should match deposits. If depositors can demand their money back anytime, then using their money to buy long-term bonds is risky. SVB had to sell $21 billion worth of bonds at a fire sale, taking a $1.8 billion loss.

Trading was suspended Friday in the stocks of several small banks whose share prices plunged on fears they were in the same situation. On Sunday, New York bank regulators shut Signature Bank.

President Joe Biden created the perfect storm for what may become a string of banking busts. In 2021, he lied about inflation, saying it was temporary and "no serious economist" considered it a threat. Yellen and Federal Reserve Chairman Jerome Powell, whose first term was about to expire, went along with Biden and did nothing to bring down prices. It was the single biggest monetary policy mistake in half a century.

Then in March 2022, newly reappointed Powell launched aggressive rate hiking to cure what the Wall Street Journal called "a mess largely of the Fed's own making." As rates rose fast, startup companies could no longer afford to borrow, and instead started withdrawing their bank deposits. Without regulatory intervention, the downfall of SVB was almost a foregone conclusion.

On March 7, Powell predicted that the Fed will likely "increase the pace of rate hikes" to continue bringing down inflation. A task made more difficult by our spendaholic president's budget proposal, which is an inflation accelerator.

As rates rise, more banks could be in trouble. Continued government incompetence is not an option.

Mr. President, get rid of your woke minions and appoint competent people. Our money and jobs are at stake.

On Sunday night, Biden said he's "firmly committed to holding those responsible for this mess fully accountable." Look in the mirror, Mr. President.

Instead, he's looking at the list of Democratic campaign donors and scurrying to bail them out. Ninety-eight percent of all political contributions from people who worked at internet companies went to Democrats in 2020. Silicon Valley residents coughed up nearly $200 million for Democrats. No surprise that the Treasury and the Fed are offering bailouts, whether they use that word or not.

Biden's reckless spending and incompetent monetary policy are causing this string of banking busts. And John Q. Public will end up paying one way or another.

Betsy McCaughey is a former lieutenant governor of New York and chairman of the Committee to Reduce Infection Deaths.