Mike Pence and Bernie Sanders are hardly political allies.
But after two major bank failures, the conservative former vice president and the democratic socialist senator strike strikingly similar tones. Pence, a Republican, lamented that “we live in a world where certain politically favored businesses are supported, supported and bailed out by the government.” Sanders, an independent in the Democratic caucus, said “we cannot continue down the path of more socialism for the rich and rugged individualism for everyone else.”
Their sentiment reflects the populism that has permeated both political parties in the 15 years since faltering financial institutions last caused concern for the broader economy. The financial crisis of 2008 unleashed a political realignment that cast aside perceived elites and establishment figures, often with unpredictable results for Democrats and Republicans alike.
“There’s a growing dissatisfaction with corporate greed, which is less about left versus right than top versus bottom,” said Adam Green, co-founder of the Campaign for Progressive Change Committee, which was the first national group to back the populist of Massachusetts Senator Elizabeth Warren. -boosted the 2020 presidential campaign.
In the wake of the 2008 crisis, the Republican Party was overtaken by the tea party movement, which called for smaller government and limits on federal spending. Donald Trump ultimately rose to the occasion at the expense of more established leaders like Jeb Bush, John Boehner and Paul Ryan.
Among Democrats, Occupy Wall Street activists drew attention to the party’s longstanding ties to big business and continued to help fuel Sanders’ aggressive challenge to Hillary Clinton during the 2016 campaign. Harvard University became a national political figure who helped create the Consumer Financial Protection Bureau. This was so central to her White House bid that her supporters sometimes chanted “CFPB” at her rallies.
Meanwhile, a new generation of younger lawmakers aligned with democratic socialists, including New York D-Alexandria Ocasio-Cortez, joined Congress, often toppling longtime incumbents.
The result is a deeply fractured political environment in which members of each party cater to a base of voters who are skeptical of institutions and uninterested in the political cultures that once ruled Washington.
At the White House on Monday, President Joe Biden tried to navigate those forces by insisting that taxpayers would not be on the hook for any bailout of failed banks.
“This is an important point: No loss will be borne by taxpayers,” said Biden, whose first days as vice president under Barack Obama were consumed by the response to the financial crisis.
Today’s turmoil is different from that time. While the 2008 crisis focused on risky mortgages held by many banks, this week’s problem appears more narrowly confined to institutions that were ill-prepared for rising interest rates.
And while some of Wall Street’s most prominent firms, including Washington Mutual and Bear Stearns, collapsed in 2008, there is no longer any concern about the power of companies deemed “too big to fail.” That’s because reforms adopted in the wake of the crisis have tightened scrutiny of such institutions, subjecting them to greater regulation, tighter capital requirements and regular stress tests to see if they can survive sudden shocks.
Some of the most dramatic moments of the 2008 crisis — including a rare White House meeting between then-President George W. Bush, Democratic nominee Obama and GOP nominee John McCain — occurred just weeks before the election. This time, the volatility is playing out with the presidential campaign in its infancy.
However, those eyeing the White House in 2024 are fueling many now-familiar populist themes.
Pence, who has yet to formally declare a presidential campaign, said Biden was “disingenuous” in saying that taxpayers will not ultimately be responsible for the government’s response to bank failures.
Nikki Haley, Trump’s former ambassador to the UN, who declared on the campaign trail last month, was more direct: “The era of big government and corporate bailouts must end.”
Trump, who is launching his third presidential campaign, has turned to fear, predicting another 1930s-style recession, in a manner similar to what he did amid the 2008 crisis.
“WE WILL HAVE A GREAT DEPRESSION MUCH BIGGER AND STRONGER THAN THE ONE IN 1929,” he wrote on his social media platform. “AS PROOF, THE BANKS ARE ALREADY BEGINNING TO FAIL!!!”
Asked about Warren and other top Democrats arguing that banking regulations imposed after the 2008 crisis, which Congress eased during his administration, helped avoid the current problems, Trump told reporters on Tuesday that “coming back was good.”
“Otherwise you would have a lot more banks right now in trouble because they were being eaten alive by regulations,” said Trump, who also complained that interest rates were too high.
Ahead of a highly-anticipated presidential campaign, Florida Gov. Ron DeSandis has pushed the Republican Party’s populist leanings into the so-called culture wars around race and gender. Without presenting any evidence to support his claim, he said the diversity, equity and inclusion requirements at the failed Silicon Valley Bank were “displaced from them by focusing on their core mission.”
Green said that, just as Warren channeled anger over the 2008 crisis into national political prowess, “Donald Trump clearly has a strategy to run away from the Republicans and neutralize Joe Biden on populist economic issues, as he did with the Hillary Clinton.”
If regulators can quickly tame the current banking turmoil, the long-term political fallout may be limited. But the power of populist politics will endure, especially as Congress must decide later this year whether to raise the debt limit, a once-common ritual that now threatens to turn into a showdown if Republicans refuse to lift the nation’s borrowing authority . Failure to do so will result in a potentially disastrous default.
James Henry, a global justice fellow at Yale University and managing director of the Sag Harbor Group, an information technology consulting firm, blamed Silicon Valley Bank’s failure on decades of weakened regulation and a “small elite” of venture capitalists and bankers connected to top leaders of both parties.
But Henry also said the Biden administration had no choice but to step in, given that arguably the biggest financial threats spread across the tech sector — making it difficult to diagnose failure along ideological lines.
“There are no libertarians in the financial crisis,” Henry said. “Both sides are trying to save themselves.”