Fighting to bring back the social safety net, a crisis of trust & social media contributing to bank failures
Welcome to The Fulcrum’s daily weekday e-newsletter where insiders and outsiders to politics are informed, meet, talk, and act to repair our democracy and make it live and work in our everyday lives.
In March 2020, the economy grinded to a halt as the COVID-19 pandemic forced widespread shutdowns of businesses. As Congress watched the economy collapse, it responded by doing something lawmakers have resisted since the 1960s: a large expansion of the social safety net.
Emergency paid sick and family leave, modernizing and expanding unemployment insurance, monthly tax payments to families with children and expanded health care access all were passed during the emergency. In turn, it rescued families and the U.S. economy from a crash that could’ve rivaled the Great Depression.
But these programs were temporary. President Joe Biden tried to extend them through his Build Back Better agenda, but Congress failed to find the votes. Now, activists are pressing to foster the permanent return of these benefits.
In a key scene in the classic Frank Capra film, “It’s a Wonderful Life,” George Bailey (played by a noble, sincere James Stewart), faced with a run on his family-owned bank instigated by the evil, grasping Old Man Potter (played by a sneering Lionel Barrymore), tries to convince his friends and neighbors that their money is safe, even though he cannot meet their demands of mass withdrawals. He tries to explain that “the money isn’t here in the safe,” but has allowed the citizens of Bedford Falls to build homes and finance their needs at a reasonable price. If Potter is allowed to take over the bank, he warns, “There will never be another decent home built in this town.”
At first, he gets nowhere. The deposits are not insured and those who have mobbed the bank, although they like George personally, are terrified the bank will run out of money and they will be left with nothing. George, pleading with them to listen, is forced to pay out cash to a couple of the depositors who remain unmoved. But soon his pleas begin to sway the men and women he has known all his life and who have been doing business with the bank since his father began it. The demand for withdrawals ceases, the bank is saved, and Potter is foiled.
The failure of Silicon Valley Bank on March 10, 2023, came as a shock to most Americans. Even people like myself, a scholar of the U.S. banking system who has worked at the Federal Reserve, didn’t expect SVB’s collapse.
Usually banks, like all companies, fail after a prolonged period of lackluster performance. But SVB, the nation’s 16th-largest bank, had been stable and highly profitable just a few months before, having earned about US$1.5 billion in profits in the last quarter of 2022.
However, financial history is filled with examples of seemingly stable and profitable banks that unexpectedly failed.
At a time when political rights are being contested, Dahlia Lithwick shares her thoughts on the women who are working tirelessly through the law and legal system in pursuit of justice and a more democratic society. Lithwick is the senior legal correspondent at Slate and host of Amicus, Slate’s award-winning biweekly podcast about the law.