The Fifth United States Deputy Secretary of the Treasury and founder of the investment bank Evercore startled CNN earlier in the week by saying that the American finanical system was on the verge of being nationalized. The comments came following the collapse last week of Silicon Valley Bank and Monday’s federal takeover of Barney Frank’s Signature Bank.
Altman served as the Assistant Secretary of the Treasury during the presidency of Jimmy Carter from 1977 until 1981. He went back to Washington as Deputy Secretary of the Treasury in the Clinton administration, serving from January 1993 until he resigned in August 1994, as the Whitewater controversy embroiled Hillary in one of her first major scandals.
The Daily Caller writes, “What the authorities did over the weekend was absolutely profound. They guaranteed the deposits, all of them, at Silicon Valley Bank. 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,” Roger Altman, a former deputy Treasury secretary in the Clinton administration, told CNN host Kaitlan Collins. “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.”
Federal regulators shut down Silicon Valley Bank Friday after its stock price collapsed and customers began a bank run following the financial institution’s disclosure of a $1.8 billion loss on asset sales due to high interest rates, CNBC reported. Depositors who had accounts at Silicon Valley Bank and Signature Bank, which was shut down by regulators Sunday, will be able to fully recover their funds, the FDIC announced Sunday in conjunction with the Treasury Department and the Federal Reserve.
“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,” Altman continued. “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. Technically speaking, they haven’t. But in a broad sense, they are verging on that.”
When Collins called Altman’s statements “remarkable,” Altman emphasized that he had not said the banks had 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,” Altman explained. “That would be the type of nationalization we have seen in many other countries throughout 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.”
Markets Insider noted that Altman’s remarks “follow dire warnings from others in the financial world about what the SVB rescue means.
On Monday, ‘Shark Tank’ star Kevin O’Leary said he would never buy a bank stock again and characterized the SVB regulatory action as effectively nationalizing the banking industry.
And Citadel’s Ken Griffin told the Financial Times that the government’s aid to depositors was a danger to the nation’s economic identity.
‘The US is supposed to be a capitalist economy, and that’s breaking down before our eyes,”‘ he said.”
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