Matthew Stoller set out the dangers of the decision to protect SVB depositors
The reaction to the rescue of Silicon Valley Bank has been acutely divided — but not along political lines. On one end there are Democratic economic advisors, establishment Republicans and venture capitalist libertarians like David Sacks, who featured on UnHerd this week to defend the decision. On the other are populist politicians from Left and Right like Senators Elizabeth Warren and J.D. Vance who are leading calls to crack down on the banking industry’s loose regulatory framework.
One figure to have offered his full-throated support to the latter camp is economist Matthew Stoller. Stoller is Director of Research at the American Economic Liberties Project and writes the Substack ‘BIG‘. He joined Freddie Sayers to explain why he thinks the SVB bailout was so disastrous, arguing that it was wholly unnecessary:
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In Stoller’s opinion, the SVB crisis was a storm in a teacup, whipped up by executives who didn’t want to deal with the inevitable fallout from their “bad risk management”.
Which begs the question: what would have happened had the Fed done nothing? According to Stoller, SVB depositors, over time, would have been more or less alright had the crisis been left to follow a natural course:
Stoller believes the whole banking system needs a revamp. First and foremost, the too-big-to-fail banks need to be dismantled and regulated “more aggressively”, with the result being “more banks, closer to communities, that allow for risk management”. Another solution, which may be less palatable to many, is to offer everyone and anyone the ability to bank directly with the Federal Reserve, risk free. Concerns over privacy and governmental control were brushed aside. In any case, Stoller declares it a myth that the Government isn’t already pulling the strings: