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CNN  — 

Two converging crises are testing American confidence in their financial well-being.

There’s a banking crisis, which regulatory officials and big American banks very much want you to believe is ending after decisive action over the weekend to take over and swallow up another failing bank.

And there’s a debt crisis, which is becoming more urgent as the US approaches the “X-date” – when it would default – and on which opposing lawmakers aren’t currently talking to each other.

Treasury Secretary Janet Yellen said Monday the X-date could arrive as soon as June 1. But it has been a moving target.

President Joe Biden on Monday called the top four congressional leaders, including House Speaker Kevin McCarthy, to discuss raising the debt ceiling, according to two sources familiar with the matter.

First, on banks, action and agreement

Americans woke up Monday to news that a third US bank, First Republic, had failed. Having catered to wealthy coastal clients, First Republic had been on the edge of collapse since March, when two other regional banks failed.

First Republic Bank was taken over by the Federal Deposit Insurance Corporation on Monday, and most of its assets were sold to JPMorgan Chase. The culmination of government regulators and the banking industry came together to protect creditors and maintain confidence in the banking system as a whole without exposing taxpayers to an unpopular bailout.

“Nobody is crying over First Republic Bank,” said Christine Romans, CNN’s chief business correspondent, during an appearance on “CNN This Morning.”

“But you don’t want chaos and turmoil to spread to the rest of the banking system,” she added, explaining the takeover.

The former Treasury Secretary Larry Summers, speaking to Bloomberg before the takeover, said it’s important to tamp down troubles in the banking system because they can easily spread.

“These things are like forest fires,” said Summers. “It is much easier to prevent them than it is to contain them after they start to spread.”

Praising the intervention, Biden tried to reassure Americans that the banking system was “safe and sound” during an appearance in Washington, DC, on Monday.

Maintaining confidence

None of that means this is a golden chapter for the American financial system. The failure of three banks this year suggests a hard look at how banks are overseen. And the Federal Reserve has lost some credibility among top economists.

“It remains to be seen whether the still-simmering financial turmoil triggered by SVB’s (Silicon Valley Bank) collapse will boil over into a deeper crisis, but investors and depositors have no reason to trust the Fed’s assurances that it will not,” Joseph Stiglitz, a Columbia University professor and Nobel laureate, wrote for MarketWatch. “Only meaningful reforms of deposit insurance, governance, regulatory structure and supervision can restore confidence in banks and the Fed’s credibility.”

In fact, the FDIC is advocating to raise the amount of deposits insured above the current $250,000 cap. Read more on that developing story.

Now, the debt crisis and the X-date

If only American lawmakers could take a cue from the First Republic saga and get into a room to solve the debt crisis.

Instead, Republican and Democratic lawmakers are still posturing even though the country is a month or so away from the X-date, when it begins defaulting on its debts.

What exactly would happen immediately after the X-date is not entirely clear, but it could lead to a crisis of confidence in the US government, making it more difficult to continue to finance Social Security and Medicare; threaten the value of the dollar, which has been a cornerstone of the world economy; and tip the country into a recession. Read more predictions here.

Not speaking

Rather than clearing their calendars to make sure the government can continue to write checks for all the debt it has already accrued, lawmakers are still in their partisan corners.

Last week, House Republicans made their opening bid in the negotiations by passing a bill to indiscriminately lop off billions in federal spending, revert to 2022 spending levels, undo anti-climate change spending championed by Democrats and impose new work requirements for Medicaid recipients. The bill, which is a nonstarter in the Senate, would also guarantee another debt debate this time next year.

This week, rather than hash things out, McCarthy is in Jerusalem, meeting with Israeli Prime Minister Benjamin Netanyahu.

“The president still hasn’t talked to me,” McCarthy said, making clear he wants to negotiate with Biden.

Not a ‘deadbeat nation’

The White House, meanwhile, has argued there should be no negotiation over paying bills for debt sold to cover spending already authorized by Congress.

“America is not a deadbeat nation,” Biden said during that event in Washington, using the term associated with parents who fail to pay child support. “We have never ever failed to meet the debt. And as a result, one of the most respected nations of the world, we pay our bills and we should do so without reckless hostage taking from some of the MAGA Republicans in Congress.”

Worried about the debt debate, not the banks

I asked Justin Wolfers, a professor of economics and public policy at the University of Michigan, what separates the debt crisis from the banking crisis.

He told me over the phone he’s not at all worried about the money he has deposited in an American bank, arguing he has complete confidence in the FDIC to cover deposits, as it and banks have done for all three banks that failed this year.

He also pointed out the bank failures represent three relatively small institutions by US standards.

But he is extremely worried about the US defaulting on its debt.

“This generation of bank regulators learned from the mistakes of the Great Depression and the 2008 financial crisis,” Wolfers said, suggesting they have no qualms about stepping in early to maintain confidence in the financial system.

There is no similar confidence in the nation’s politicians to do the same.

“There’s a great fear that this generation of legislators are more irresponsible, more polarized and more willing to do damage than any previous generation,” he said.

We will, at some point in the very near future, get to the place where Biden and McCarthy, along with other top Democrats and Republicans, must come together to avoid a default or deal with the aftermath of its occurrence. The question is whether the economy is damaged in the meantime.

“I will tell you that I am more worried than I’ve ever been in my career, at this moment, about the sky actually falling,” Wolfers said, noting that in previous standoffs over the debt ceiling, Republicans have ultimately stood down in the face of pressure from more moderate wings of the party. It’s not clear that will happen this time.