Washington.- Nobody can say that Mike Pence and Bernie Sanders are political allies.
But faced with the spectacular failure of two banks, the right-wing former vice president and the Social Democratic senator express remarkably similar positions. Republican Pence deplored that “we live in a world where certain politically favored companies are propped up, supported and bailed out by the government.” Sanders, an independent who votes with the Democrats, says that “we cannot continue down the path of more socialism for the rich and tough individualism for the rest.”
This sentiment reflects the populism that has permeated both traditional parties in the past 15 years, ever since flimsy financial institutions raised concerns about the broader economy. The 2008 financial crisis sparked a political realignment that rejected elites and ruling class figures, with often unpredictable results for both Democrats and Republicans.
“There is a growing discontent with corporate greed, which is not so much left vs. right as top vs. bottom,” said Adam Green, co-founder of the Campaign Committee for Progressive Change, the first national group to supported the populist-leaning presidential campaign of Senator Elizabeth Warren in 2020.
In the wake of the 2008 crisis, the Republican Party was taken over by the tea party movement, which called for government shrinking and limits on federal spending. Donald Trump was elevated at the expense of leaders more identified with the establishment such as Jeb Bush, John Boehner and Paul Ryan.
On the Democratic side, Occupy Wall Street activists denounced the party’s long-standing ties to big business and energized Sanders’ aggressive fight for the 2016 Democratic nomination against Hillary Clinton. Warren, a bankruptcy expert at Harvard University, became a national political figure with the creation of the Consumer Financial Protection Bureau. This figured so prominently in her campaign that at her rallies her supporters chanted “CFBP,” the acronym for the office.
Meanwhile, a new generation of young lawmakers aligned with social democracy, like New Yorker Alexandria Ocasio-Cortez, entered Congress, in many cases after displacing established figures.
The result of all this is a deeply fractured political environment in which members of both parties answer to a voter base that disbelieves in the institutions and disdains the political niceties that were de rigueur in Washington.
At the White House, President Joe Biden tried to navigate those troubled waters by saying Monday that taxpayers will not pay to help failing banks.
“This is important: Taxpayers will not bear any loss,” said Biden, whose early days as Barack Obama’s vice president were consumed by the response to the financial crisis.
The current turbulence is different from that one. The 2008 crisis was centered on bad mortgage loans held by many banks, while this week’s seems to be limited to banks that were not properly prepared for interest rate hikes.
And while some of Wall Street’s most prominent firms like Washington Mutual and Bear Stearns collapsed in 2008, there is now little concern about the strength of institutions deemed “too big to fail.” Reforms passed after the crisis subjected institutions to increased surveillance and regulation, higher capital requirements, and regular stress tests that determine their ability to survive sudden shocks.
Some of the most dramatic moments of the 2008 crisis—such as a rare White House meeting between President George W. Bush, Democratic nominee Obama, and Republican nominee John McCain—took place weeks before the election. This time, the instability occurs when the presidential campaign is in its infancy.
But those who have their eyes on the White House in 2024 repeat the familiar populist concepts.
Pence, who has yet to formally declare his candidacy, said Biden was “disingenuous” in saying taxpayers would not ultimately bear bailing out the banks.
Nikki Haley, a former Trump ambassador to the UN who proclaimed his campaign for president last month, said bluntly: “The era of big government and bailouts must end.”
Trump, who is embarking on his third presidential campaign, chose to resort to fear in predicting a new depression like that of the 1930s, just as he did in the 2008 crisis.
“WE WILL HAVE A GREAT DEPRESSION MUCH LARGER AND MORE POWERFUL THAN THE ONE OF 1929,” he wrote on his social network. “THE PROOF IS THAT THE BANKS ARE ALREADY STARTING TO FALL!”
Asked about the argument by Warren and other Democratic leaders that banking regulations imposed after the 2008 crisis and reduced by Congress during his administration helped prevent current problems, Trump told reporters Tuesday that “the repeal (of regulations) is good.”
“If not, there would be a lot more banks in trouble because of regulations,” Trump said, adding that interest rates were too high.
Heading into a widely anticipated presidential campaign, Florida Gov. Ron DeSantis has led the populist Republican bent into so-called culture wars over race and gender. Without presenting any evidence, he said that diversity, equity and inclusion requirements at Silicon Valley Bank “prevented them from focusing on their core mission.”
Green said that just as Warren rode the wave of outrage over the 2008 crisis to become a national figure, “it is clear that Trump’s strategy is to outwit the Republicans and neutralize Biden on populist economics, just as he did to Hillary Clinton.”
If regulators prove able to quickly tame financial turbulence, the long-term political consequences could be little. But the force of populist politics will endure, especially since Congress must decide in the coming months whether to raise the debt limit. This, once a mere rite of passage, threatens to escalate into a showdown if the Republicans refuse to raise the nation’s borrowing authority, which could result in a catastrophic default.
James Henry, a global law specialist at Yale University and managing director of the Sag Harbor Group, a computer science consultancy, blamed the fall of Silicon Valley Bank on decades of weak regulation and a “small elite” of venture capitalists and related bankers. with the leadership of both parties.
But Henry said the Biden administration had no choice but to intervene, given the potentially greater financial threats to the tech sector, making it difficult to diagnose the consequences of the crash on ideological grounds.
“There are no libertarians in the financial crisis,” Henry said. “Both parties are looking to be bailed out.”
