As the global banking crisis stretches into its third week, President Joe Biden has turned to a familiar playbook — lay low and point the finger at Congress.
Publicly, aides and top White House officials say lawmakers have a responsibility to intervene. Unprecedented executive actions are being discussed behind closed doors, but Biden’s spokespeople are refusing to detail those deliberations while warning of the legal and practical obstacles to unilateral moves.
Treasury Secretary Janet Yellen ruled out one dramatic option — the government offering blanket coverage to all uninsured deposits — in testimony on Capitol Hill on Wednesday. And Biden has for days avoided public appearances where he might be required to comment on the issue, hoping a schedule packed with Hollywood celebrities and travel will project calm.
All told, the approach — keeping Biden out of the limelight and putting the onus on lawmakers and regulators — is similar to how the administration is handling the negotiations on raising the debt ceiling, providing a dry run of the White House’s strategy before the next test of the financial system.
“We are going to do everything we can to use the tools that are given to us to make sure that the American people feel confident, and they should,” White House Press Secretary Karine Jean-Pierre said Tuesday. “But, again, we can’t let Congress off the hook, they have to take some actions as well.”
New approach
Biden’s public deference to regulators is a contrast from the opening days of the crisis, when the White House and Treasury Department worked feverishly to stem the fallout from the collapse of Silicon Valley Bank and Signature Bank, and evokes a strategy the administration believes will also prevail in the debt-ceiling fight.
Aides say Biden’s relative silence shouldn’t be confused for inattentiveness. The president has been briefed daily by chief of staff Jeff Zients and economic adviser Lael Brainard, both just weeks into their new positions.
Brainard met privately with JPMorgan Chase & Co. Chief Executive Jamie Dimon on Wednesday at the Financial Services Forum, where executives are discussing how to shore up beleaguered banks.
Taking that work behind closed doors is rooted in an effort to avoid sparking market fears and in limiting expectations for Biden to act in other crises. There’s an auxiliary benefit: while Yellen and Federal Reserve Chairman Jerome Powell’s words have moved markets and drawn scrutiny throughout the crisis, the president has remained largely unscathed.
Biden’s decision to withdraw publicly is a change from his aides’ efforts to highlight his work early on to create backstops and guarantee deposits.
The White House also played a crucial role as matchmaker in arranging a $30 billion injection from major banks for First Republic Bank, another wobbling institution.
By last Friday, though, Biden appeared confident they had avoided the worst, offering a one-word response — “Yes” — when asked if the situation had stabilized.
Still, warning signs flashed through the weekend. On Sunday, UBS Group AG announced its takeover of rival Credit Suisse, in an emergency deal brokered by the Swiss National Bank. And Biden may have to recalibrate again, with First Republic still teetering.
Debt standoff
The Federal Reserve on Wednesday raised interest rates by a quarter percentage point and signaled it’s not finished hiking, despite the risk of exacerbating the crisis.
But Biden’s team has made clear they’ve moved into a different phase of their response. Rather than putting the president front and center to ease fears, the White House has pointed to the Treasury Department and federal regulators.
White House aides this week cited the banking crisis in pushing Republicans to abandon efforts to trade a debt-ceiling hike for spending cuts.
“House Republicans are so bought and paid for by wealthy special interests that instead of reflecting on the economic chaos created by their deregulatory agenda, they’re immediately trying to worsen that chaos to rig the American economy even more in factor of big corporations and wealthy executives,” White House spokesman Andrew Bates said in a statement.
Biden is in a staredown with House Speaker Kevin McCarthy, as the Treasury Department invokes extraordinary measures to avoid breaching the ceiling and defaulting on its debt. Biden has dismissed calls to consider executive actions as a stopgap, saying Congress is responsible for raising the limit. He’s insisted he won’t negotiate with Republicans.
Barring congressional action, officials haven’t determined what they might do if a worst-case banking scenario develops. They’re studying, for instance, if Treasury has emergency powers to expand deposit guarantees if the situation deteriorates. Yellen pledged Tuesday she wouldn’t hesitate to act if needed.
Biden’s team this week has focused on other issues, such as China and Russia, eliminating so-called “junk fees,” conservation efforts, and even welcoming the cast of Apple TV’s “Ted Lasso” to a briefing. On Tuesday, Biden feted singer Bruce Springsteen and actress Julia Louis-Dreyfus at an award ceremony.
But, as with the debt ceiling, deferring to lawmakers can become a waiting game. Biden’s demand that Republicans specify their plans for raising the ceiling have yielded nothing. And his calls for tougher banking regulations have little chance of getting through Congress.
Senator Ben Cardin, a Maryland Democrat, said lawmakers want to protect deposits but acknowledged there may be less urgency if the crisis has abated.
“We do hope the banking system is solid and that it is stable and that there are no other banks that go under, and that depositors have confidence and we don’t see any rush to withdraw money or change money from one bank to another,” he told Bloomberg Television on Tuesday. “If that’s the case, then the need for Congressional action is not as urgent as would otherwise be necessary.”
