Texas senator Ted Cruz says the amount of capital fleeing US banks is particularly concerning and could signal pain for everyday Americans.
Cruz says capital is leaving the smaller financial institutions in favor of the larger banks, creating a consolidation of wealth within the most dominant enterprises.
In an interview with Bloomberg, Cruz says Silicon Valley Bank (SVB) may have received special treatment from connections in Washington during its collapse last month. He says it sends a grave message to smaller businesses in the US.
“It’s a real problem and you saw the Biden administration step in and bail out the customers at Silicon Valley bank, and… I think many of those customers were politically well connected, political supporters of the President and I gotta say that leaves a lot of Main Street sitting behind wondering ‘Well, what happens if I don’t have a lot of lobbyists with stroke in this White House?’
And we need to have clear standards that apply that are transparent. I’m really concerned about the fallout in particular on concern that we’re seeing a flight of capital away from community banks, away from mid-sized banks, to the giant banks.
I think that’s really harmful. One of the great strengths of our economy is the multitude of small community banks we have that finance small businesses, that finance entrepreneurs and if depositors say ‘Well, I’m safe if I’m at a giant bank, but at a smaller bank I’m not,’ that really has a negative impact across the board.”
The former presidential candidate is currently teaming up with Ohio Senator Jim Jordan to compel San Francisco Federal Reserve Bank President Mary Daly to provide information and documents relating to the collapse of SVB.
“We are seeing a flight of capital away from small and mid-sized community banks and into large banks. This is extremely concerning – small banks support main street businesses. [Representative Jim Jordan] and I have demanded answers from the SF Fed on what caused SVB to fail.”
The two Senators address Daly in a letter, requesting a full response by May 9th.
“Indeed, the need for transparency from the Federal Reserve is greater than ever. In the weeks following SVB’s meltdown, the American people lost a great deal of trust in the Federal Reserve, and the SF Fed in particular.
For instance, Democrat Senator Elizabeth Warren said she does not have faith in your leadership of the bank. To begin restoring public trust and faith, we, therefore, expect the SF Fed to welcome our requests and give prompt and complete responses.”
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