LARRY KUDLOW: Biden’s first full year in office mangled the economy

FAN Editor

As Edward Lawrence reported, the latest in the alleged banking crisis saga is that a bunch of big banks are going to try to move deposits into First Republic Bank in order to stabilize the situation. That’s how I understand it. First Republic stock jumped over 30% on the news. It was a very good day for stocks in general — the Dow up 375, the S&P 500 up 2% as of this reading.

Now it’s a very interesting private sector approach if it’s true. Kind of hearkens back to the days before there was a Federal Reserve or FDIC or any of these goofy federal bank regulators that seemed to bungle everything they touch. Remember this story when J.P. Morgan allegedly sat down with Theodore Roosevelt during the panic of 1907 and basically said, “You have your man talk to my man, and we’ll take care of this.”

I don’t really know if that story is true. It’s a fabulous anecdote, not even I was around to confirm it back then. Anyway, back to the main story today. The Wall Street Journal and The Washington Post are breathlessly reporting that bank regulators huddling with the big banks like JPMorgan, Bank of America, Citi, Wells Fargo and others are trying to work out a deal as early as this evening. I think the idea is depositors who’ve fled the rogue Silicon Valley Bank and First Republic could somehow be turned back to one or both of those banks.

For First Republic, people are talking about $30 billion, but it really is more complicated. I mean, after all, the deposits are the private property of the depositors. They own it. So, presumably, somebody has to ask those individuals who own the deposits if they want to go back to First Republic. I’m sure deposit rates can be agreed upon, but something’s got to go through the accounting line by line to figure out who moved what from where to where, or maybe this is going to be done differently. I don’t know.


Now, I can see why lefties and the FDIC would like this, since they hate big banks and they’re the ones who bungled the sale of SVB to one of the big banks in the first place last weekend. If they had put their populist ideology aside, they might have made a deal last Sunday and avoided bailing out uninsured depositors, which apparently not only includes Silicon billionaires and lesser lights, but also the Chinese, and who knows who else is bailed out. Ultimately, a private sale of SVB would take both the FDIC and taxpayers off the hook. 

Now, sources say the First Republic is in better shape, which I guess means their duration risk management and their asset liability mix is not as disastrous as Silicon Valley Bank’s. I don’t know much about their woke management story. Maybe that’s going to come out later. Hat-tip to the Babylon Bee for reminding us that Joe Biden is trying to tax all the Silicon Valley billionaires on all that money the federal government just gave them. Now, if that sounds stupid, it is, but that’s a topic for another riff.

Meanwhile, Janet Yellen told the Senate Finance Committee today that all is well in the banking system except for these two banks. I’m not sure anyone really believes this. It could conceivably be true, but as I’ve said, the Fed’s Treasury lending facility is a good thing and may in fact be a fire breaker. So, this may not, in fact, be a true nationwide financial crisis. It certainly doesn’t yet look or feel anything like 2008, but then again, banking contagions can pop up any time and with the sharp rise in interest rates, the stage has been set for some mighty big problems. Therefore, no one’s crystal ball can be clear about this kind of thing, least of all my own, but here’s something I can be very clear about. Janet Yellen today shilling for Joe Biden’s huge untruths about the economy. 

JANET YELLEN: Over the past two years, the United States has experienced an historic economic recovery. In January 2021, our country was in the middle of an economic calamity triggered by the coronavirus pandemic. 

Well, here we go again. The economic calamity she was describing, which allegedly occurred under former President Trump, was actually a huge rebound from the pandemic collapse during the second half of 2020. By the beginning of 2021, the economy was growing at 6.5% real with a 1.4% inflation rate. These are factoids and Biden has had so many Pinocchios for his untruths about his early months in office. In fact, Biden’s whole first year continued the Trump boom, adding up to about 6% growth, primarily from the Trump tax cuts that Biden tried to repeal but failed.


Meanwhile, Biden’s first full year in office, which was 2022, so mangled the economy with inflationary spending, unbelievable record-setting regulations, the war against fossil fuels and the subsequent inflation that led to this banking crisis to begin with, that the economy slumped to only 0.9% for the year, with 6.5% inflation — and the inflation is still today three times the Fed’s 2% target and the massive run-up of rates by the Fed, who at first denied inflation, then scrambled to grow hair in their chests that really put everybody at risk: banks at risk, companies, working folks, housing, manufacturing, real wages falling.

It’s really a shame to see Ms. Yellen, who knows better, buy into these Biden untruths. We all remember her hostage video last year when she finally acknowledged there was an inflation problem. Even Obama advisers like Larry Summers and Jason Furman had predicted it, and she was in complete denial. Anyway, that is my riff. We’ll see how this story plays out. 

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