The collapse of Silicon Valley Bank has unified Americans with a shared anger. Everyone—left, right, and center—knows that something is wrong.

Executives sold off millions of dollars of stock before the crash, the bank paid out bonuses as it was collapsing, and the Federal Reserve created a brand new program (once again, Washington, D.C., is deciding who is “too big to fail”). But in their hard times, most Americans don’t receive a parachute payment or government bailout.

Our economic seas are so rough that the financial experts at Silicon Valley Bank made a bad bet on U.S. Treasurys—one of the safest asset classes—and sank their bank. At the end of 2022, the bank was holding on to over $17 billion in U.S. Treasurys and another $91 billion in government-issued mortgage-backed securities that function similarly to U.S. bonds.

These bonds were purchased when interest rates were 1.5%. As interest rates rose north of 5%, those bonds could only be sold for a substantial loss.

Inflation and rising interest rates killed Silicon Valley Bank, slowly moving its balance sheet out of balance. Depositors became suspicious and withdrew their money.

Their suspicions were confirmed as the bank sold bonds at a huge loss and could not give depositors all their money back. This is a devastating outcome from an asset class that practically every Econ101 textbook teaches is the “risk-free rate.”

For decades, investors have treated U.S. bonds as the safest of investments. But because of government-induced inflation and rising interest rates, U.S. bonds have lost value, poisoning the balance sheets of banks across America.

And so, this weekend, Federal Reserve Chair Jerome Powell threw the banking industry a gigantic lifeline.

The Federal Reserve’s statement on Sunday outlining its actions to “bolster the capacity of the banking system” was an acknowledgement of a potentially widespread financial crisis. As the Federal Deposit Insurance Corporation reported, the balance sheets of America’s banks contain $620 billion in unrealized losses.

The Fed created a new Bank Term Funding Program, where banks can use their underwater bonds as collateral for loans. Importantly, the Fed wrote that “these assets will be valued at par.” Instead of selling bonds at a loss, banks can use them to get a 12-month loan while the Fed pretends that the value of those bonds has not cratered.

The emperor has no clothes—we can all see it. But with this new program, the Fed really hopes you can try to unsee it. Americans are concerned their own bank may be at risk, and the D.C. swamp hopes Americans will pretend it’s not happening so nothing has to change in Washington.

But inflation doesn’t just happen, and interest rates didn’t raise themselves. This is all a direct result of the trillions and trillions in extra spending that Congress pumped into our economy.

Silicon Valley Bank made a bad bet—perhaps an unforgivable bet. It bet that Congress would control its spending addiction.

Most Americans wouldn’t make that bet, and so they are justifiably angry. Americans would do well to direct their anger at Congress in order to drive positive change.

In 2023, Congress must finally kick its addiction to spending. The national debt is now north of $31 trillion, nearly $250,000 per American taxpayer. Congress needs to cut spending and enact sensible reforms to help our economy recover.

There is a real opportunity for change—Congress has run up against the debt ceiling, a crucial tool to protect Americans from uncontrolled spending in Washington. We must now use it to force Congress to make the right choices.

The American people should not sign off on any debt limit increase unless Congress caps spending at fiscal year 2022 levels and institutes programmatic cuts, reforms, and pro-growth policies that offset the increase in the debt ceiling.

Getting our fiscal house in order will begin to calm the economic seas. More than any bailout or loan program, this is what is needed to ensure there are no more emergencies like the one at Silicon Valley Bank.

Everyone—left, right, and center—will benefit from calmer economic waters.

This piece originally appeared in the Daily Caller.

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