By The Editorial Board
April 13, 2023
Political turmoil was one consequence of the 2008 global bank panic as voters in many countries rebelled in various ways against politicians they thought had failed to avert a crisis and then spent vast sums of taxpayer money cleaning up the damage. Recent events in Switzerland suggest the latest bailouts won’t be more popular.
The lower house of the Swiss Parliament this week rebuffed Bern’s forced merger last month of UBS and failed rival Credit Suisse. That deal included 109 billion Swiss francs ($120 billion) in liquidity and credit guarantees from Swiss taxpayers.
Not so fast, said lawmakers when they voted 71-102 against the measure. It’s a symbolic vote, which may explain why you haven’t heard much about it. Taxpayers are stuck with the deal on the say-so of the cabinet. Much of the support is being channeled through the central bank, avoiding democratic scrutiny.
But this legislative protest is a warning. Bern’s Credit Suisse rescue is controversial because Swiss voters bristle at the sums involved and question the point in creating a local banking behemoth that will be too-even-bigger-to-fail. Lawmakers’ vote follows testy shareholder meetings at both institutions this month as the banks’ owners—who pointedly weren’t consulted about the merger, for which UBS is paying three billion francs in shares—vented their own frustrations with Bern’s Credit Suisse rescue.
Meanwhile, Washington’s bailout for Silicon Valley Bank depositors is leading depositors and bankers in other parts of the U.S. to suspect they wouldn’t be treated as favorably as the Democratic donors in the tech industry were. It’s a reasonable guess. If regulators plan to tear up the banking rulebook in a crisis, they’d better be ready to demonstrate they’ve done so fairly.
Take these episodes as a warning. The turmoil in last month’s banking mini-panic started in financial markets, but it’s unlikely to stay there if more financial failures come to light. What begins as an economic fiasco could become a political uproar as it did after the 2008 bailouts—with similarly unpredictable results.
Meanwhile, Washington’s bailout for Silicon Valley Bank depositors is leading depositors and bankers in other parts of the U.S. to suspect they wouldn’t be treated as favorably as the Democratic donors in the tech industry were. It’s a reasonable guess. If regulators plan to tear up the banking rulebook in a crisis, they’d better be ready to demonstrate they’ve done so fairly.
Take these episodes as a warning. The turmoil in last month’s banking mini-panic started in financial markets, but it’s unlikely to stay there if more financial failures come to light. What begins as an economic fiasco could become a political uproar as it did after the 2008 bailouts—with similarly unpredictable results.