Former Bridgewater CEO and possible 2024 U.S. Senate hopeful Dave McCormick slammed what he said was a “decade” of bad monetary and fiscal policy from government leaders that led to recent bank meltdowns.
McCormick made the claim during a DVJournal podcast interview regarding the historic collapse of Silicon Valley Bank (SVB) and the federal government’s scrambling efforts to contain the fallout.
Acknowledging that “anybody that’s predicting too much” about the crisis “probably is too confident” about the “dynamic situation,” McCormick—who is widely viewed as a likely Senate challenger to incumbent Democrat Sen. Bob Casey next year—argued there are “a set of root causes” that led to SVB’s collapse.
“We’ve had a decade or more of misguided fiscal policy and misguided monetary policy,” McCormick said. “We’ve had fiscal policy that has been enormous spending, and that spending has accelerated dramatically under Joe Biden.
“Discretionary spending has gone up by about 40 percent,” he continued. “You’ve had the three big pieces of legislation, which have added something like $18 trillion of new spending over the next 10 years, and that’s a huge driver of inflation.”
McCormick further argued that “very low interest rates” have driven financiers to adjust their spending and investment practices accordingly, driving them to “lock in long-duration treasuries and things like that in search of yield.
“And when the Fed raised rates to essentially offset the inflation that they helped create, that created a crisis at SVB because those treasuries that they held in their balance sheet went down in value,” he said. “They had to sell capital to try to close the hole, and that spooked their depositors and their depositors started to take out money.”
McCormick called the present chaos “the tip of the iceberg in terms of the problem,” one that “[won’t] go away until we get our fiscal house in order and back to our normal monetary policy.”
McCormick, who is promoting his new book “Superpower In Peril,” is increasingly being viewed as a favorite for the 2024 Senate race, with many analysts and strategists balking at the prospect of another bid by state Sen. Doug Mastriano, who lost his gubernatorial bid against Gov. Josh Shapiro last year.
However, a Public Policy Polling survey this week showed Mastriano with a sizeable lead ahead of McCormick in a potential 2024 GOP primary matchup.