According to Texas Senator Ted Cruz, the quantity of capital exiting US institutions is particularly troubling and might spell trouble for ordinary Americans. According to Cruz, capital is abandoning smaller financial institutions in favor of larger banks, resulting in a concentration of wealth within the most powerful firms.
Cruz claims in an interview with Bloomberg that Silicon Valley Bank (SVB) received preferential treatment from Washington connections during its collapse last month. He believes it sends a dire message to small firms in the United States.
“It’s a serious concern, and you saw the Biden administration jump in and bail out Silicon Valley bank clients, and… I believe many of those customers were politically well-connected, political supporters of the President, which leaves a lot of Main Street thinking, ‘Well, what happens if I don’t have a lot of lobbyists with contacts in this White House?’
And we must have clear, transparent standards in place. I’m particularly concerned about the consequences of the notion that we’re witnessing a flight of capital away from community banks, mid-sized banks, and large banks.
That is really dangerous. One of our economy’s great assets is the abundance of little community banks that support small businesses and entrepreneurs. If depositors say, ‘Well, I’m safe if I’m at a huge bank, but I’m not at a smaller bank,’ that has a pretty bad impact across the board.”
The former presidential candidate is collaborating with Ohio Senator Jim Jordan to compel San Francisco Federal Reserve Bank President Mary Daly to release information and papers about SVB’s demise.
“We are witnessing a capital flight away from small and mid-sized community banks and toward large banks.” This is highly worrying since tiny banks help Main Street companies. [Representative Jim Jordan] and I have asked the SF Fed to explain what caused SVB to fail.”
The two Senators write to Daly, demanding a complete response by May 9th.
“Indeed, the Federal Reserve’s transparency is more important than ever.” The American people lost considerable trust in the Federal Reserve, particularly the SF Fed, in the weeks following SVB’s implosion.
For example, Democrat Senator Elizabeth Warren stated that she did not trust your bank’s leadership. To begin restoring public confidence and faith, we want the SF Fed to welcome our demands and respond promptly and completely.”