CNN Newsroom: Rep. John Garamendi (D-CA) is Interviewed about Biden's Banking Comments

Interview

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Good morning.

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What you have just seen over the last three days is extraordinary leadership. This president didn't dither, he didn't go sit there and wring his hands. He took very strong action. Action that in many ways is extraordinary, but absolutely necessary. He has put in place a secure American banking system.

And this follows on what he did immediately after becoming president two years ago. He put together, with Congress, the American Rescue Plan. And that was for banks and businesses all across this nation.

So, once again, we've seen extraordinary leadership by a very courageous president that's willing to step out front and settle down the situation and put this American economy on a solid footing.

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Right.

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No. No. Well, who's getting bailed out here? Certainly, the stockholders and the bank are going to lose - probably lose everything. Certainly the managers are going to -- they've been fired. They're losing. And so the equity in the bank itself is blown away.

However, the depositors, who thought that they were dealing with a solid bank, they're going to be hold - they're going to be held harmless. And they'll be able to access their money. So, there are serious losers here. So, the moral hazard doesn't disappear. The moral hazard for the equity investors in the bank and the managers, they're gone. I mean, they've lost -- and that's the way it should be. But those of us -- now, I'm not in this bank -- but those men and women and businesses that thought they were dealing with a good, solid bank, they're not -- they're going to be held harmless. And that's the way it should be.

And also do keep in mind that there was a run on the bank, a panic, a classic panic. The president and his administration stepped in and simply put a stop to it and said, no, we're not going to allow that to happen. And we're going to make sure that the banking system is solid. That is pure, solid, courageous leadership, because he's going to take heed.

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Look, nonetheless, the banking system is solid.

Yes.

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Oh, absolutely. The problem here goes right back to the Fed rapidly raising interest rates. Now, this bank did what in other times would have been a very solid investment. They invested in American bonds. The U.S. government bonds. They -- their miscalculation was how rapidly the Fed was raising the interest rates, which de-valued the bonds that they held. And then that led to the run. They had to sell those bonds at a loss. And now suddenly we've got a company - we've got a bank that's upside down.

Yes, the Fed has to be very careful here. If they do another very rapid -- and they're talking about it -- rate increase, it's going to have two effects. Those companies' banks and others that are holding U.S. government bonds -- and this is also all around the world -- they're going to see a devaluation in the value of those bonds if they're not held to maturity.

Secondly, in his recent testimony, the chairman of the Federal Reserve basically discounted the fact that he is in the process of throwing 2 million Americans out of work.

His solution is to throw Americans out of work, to put them on the bread lines.

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And, I'm sorry, that is not the right solution. Look at the corporate earnings. Take a look at the corporate earnings for the petroleum industry. Never been higher. Take a look at the corporate earnings for the rail industry. Never been higher.

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Therein lies a lot of the problem. The price of gasoline, for sure.

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We should. We should make every effort to make sure that every bank, large, small, medium, and huge, all of those should have very strict regulations. You let this thing run wild and you're going to get collapses along the system.

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So, yes, they should be held accountable. And we should do that. Will we do that? Well, let's hold ourselves to account here. I'm for it. We'll see whether Republicans are.

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Thank you, Jim.

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