The Bank Crisis Has Democrats Scrambling Behind The Scenes To Find A Scapegoat

Democratic representatives are scrambling in the wake of the potentially contagious Silicon Valley Bank implosion, looking for a way to divert attention away from them should the crisis expand.

One avenue for scapegoating the event that has been suggested among Dems and the media is to blame a 2018 law that eased Dodd-Frank capital requirements for midsize and small banks.  Republicans led the effort to pass the law, which President Donald Trump signed, but 33 House Democrats and 17 Senate Democrats also voted for it.

No mention, of course, of the cancerous exposure SVB had to numerous woke investments through venture capital, including money losing ESG related projects, climate change-based companies and World Economic Forum stakeholder capitalism projects.

The Dems have found their narrative, which is an old narrative:  “The conservatives did it.”

What Democrats do not seem to understand is that the easing of Dodd-Frank capital requirements was in direct response to the Federal Reserve’s announced plan to tighten liquidity and raise interest rates through 2018.  With more expensive credit and a shrinking Fed balance sheet, reducing requirements for bank buffers was one of the few ways to prevent the stimulus addicted lending sector from plummeting.  The extra capital also allowed banks to continue lending to companies that engage in stock buybacks, keeping stock markets afloat.

With a larger capital buffer even more liquidity dries up, revealing the true economic weakness underneath that Dems have denied for the past few years.  So, if Biden and the Dems get what they want (more strict capital requirements for banks), then there will be an even swifter collapse of markets and the overall economy due to lack of liquidity.

By the end of 2018, markets began to plunge anyway under the strain of higher interest rates, which led to the Fed reversing course, and this seems to be what Democrats are really hoping for.  They have called for endless liquidity measures and have consistently demanded lower rates and looser monetary policy.  However, when Donald Trump’s Administration called for rate cuts during his term, Dems attacked.  Once again, when Republicans do it, it’s wrong; when they do it, it’s good policy.

Another issue to consider is that each successive program by the Fed to employ bailouts and QE accelerates the inflation crisis.  While both sides of the aisle seem to want helicopter money when they are in power so they can boast about rising stock markets and improved employment, the Dems are now facing a systemic stagflationary event; the same event they originally claimed did not exist.  This means that any pursuit of new QE in the face of a credit crunch would lead to an immediate spike in inflation once again, crushing the middle class.

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