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Learning from 2008, the Biden administration avoids the unpopular word: bailout

LEILA FADEL, HOST:

The history of bank bailouts seems to be informing the way President Biden is approaching banks today.

STEVE INSKEEP, HOST:

There's a history of anger. You may recall this. In 2008, the United States spent hundreds of billions of dollars to face the financial crisis, and people really did not like the spending. Congress even rejected the bailout once before passing it. And that anger lasted. It was the backdrop to the rise of the Tea Party movement on the right, Occupy Wall Street on the left, in the years that followed. And what came after that was Donald Trump's presidency, built in part on anger against the government.

FADEL: Which could explain something the Biden administration is doing now.

INSKEEP: They have intervened in the banking sector after two regional banks failed recently, but they have insisted this is not a bailout.

NPR's Asma Khalid begins with a man who knows why.

ASMA KHALID, BYLINE: Bob Inglis was a member of Congress from South Carolina. But in 2010, after a dozen years in office, he was overwhelmingly defeated by a fellow Republican.

BOB INGLIS: I'd committed various heresies against Tea Party orthodoxy. I committed the mortal sin of voting for TARP, the Troubled Asset Relief Program, President Bush's rescue of the banks.

KHALID: The Tea Party had risen up in conservative circles - and in part out of anger at taxpayer dollars being used to bail out banks. And Inglis says voters could not forgive him.

INGLIS: There was a sense that the public was picking up the bill for the bad behavior.

KHALID: That anger also gave birth to Occupy Wall Street. It united the right and the left and sparked an economic populism that some would say even led to the election of Donald Trump. And so when President Biden explained why his administration had stepped in to rescue Silicon Valley Bank and Signature Bank, he did not utter the word bailout.

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PRESIDENT JOE BIDEN: No losses will be borne by the taxpayers. Let me repeat that. No losses will be borne by the taxpayers.

KHALID: Still, some Republicans, especially those eyeing a 2024 presidential run, were eager to point fingers at Biden.

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DONALD TRUMP: Joe Biden is leading us toward a Great Depression. I've been saying it for a long time. There should be no bailouts.

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TIM SCOTT: The greatest form of corporate cronyism that we've seen in a very long time.

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MIKE PENCE: You have to connect this, too, to the failed policies of President Joe Biden and his administration on this economy.

KHALID: That was former President Donald Trump, South Carolina Senator Tim Scott and former Vice President Mike Pence. But Republicans are not the only ones calling this a bailout. Even some on the left, like Adam Green with the Progressive Change Campaign Committee, don't buy the administration's semantic argument.

ADAM GREEN: It's politically toxic for politicians in either party to be seen as bending the rules to favor the rich and powerful. And whether you call it a bailout or not, that's what is happening here.

KHALID: Green understands why the administration immediately acted, but he says a lot of people still think of the intervention as a bailout. And so Biden would be wise to focus on holding bankers responsible. Otherwise, he worries there could be consequences in 2024.

GREEN: I think it's an Achilles heel, potentially, if Democrats are left holding the bag for what's seen as a bank bailout while someone like Donald Trump or DeSantis come along and basically seize, absurdly, the mantle of economic populism.

KHALID: I asked a bunch of political analysts how this banking turmoil could affect 2024. And frankly, the consensus is that it is way, way too early to know. But beyond rhetoric, there are other policy lessons learned from the last big bailout in 2008. Jim Messina was a top aide to Barack Obama, and he points out that this most recent rescue is different.

JIM MESSINA: The shareholders of the banks and the bondholders of the banks don't get made whole, and they go bankrupt. And I think that's an evolution from 2008, in part because of the politics.

KHALID: The other big political takeaway from 2008 is that the government needs to respond more quickly. Brendan Buck was an aide to two former Republican leaders in the House, John Boehner and Paul Ryan.

BRENDAN BUCK: I think this administration probably realizes that the biggest risk is erring on the side of doing too little and that if this is a moment that we get through because they act aggressively and it's forgotten about in a few months, then this is not a problem for them.

KHALID: In other words, the biggest risk in doing too little is that the bank failures spread, and that could alter the course of Biden's presidency.

Asma Khalid, NPR News. Transcript provided by NPR, Copyright NPR.

Asma Khalid
Asma Khalid is a White House correspondent for NPR. She also co-hosts The NPR Politics Podcast.