Republicans and conservative influencers have settled on their reason for the collapse of Silicon Valley Bank.
It wasn’t the 2018 repeal of stricter regulations on regional banks, passed on a bipartisan basis and signed into law by former President Donald Trump. It wasn’t a bank run triggered by nervous venture capitalists and start-up founders. It wasn’t even interest rates hiked by the Federal Reserve to curb inflation.
Conservatives have instead united around blaming “wokeness” for the bank’s collapse, arguing without evidence that the existence of diversity, equity and inclusion programs led to mismanagement.
“This bank, they’re so concerned with DEI and politics and all kinds of stuff — I think that really diverted from them focusing on their core mission,” Florida GOP Gov. Ron DeSantis said on Fox News on Sunday.
“SVB = too woke to fail,” Sen. Josh Hawley (R-Mo.) wrote on Twitter.
Former President Donald Trump, Donald Trump Jr., House Oversight Committee Chair James Comer, Trump adviser Stephen Miller and the big business-friendly Wall Street Journal opinion page have all made similar arguments as Republicans, who fiercely fight any attempt to regulate Wall Street and the broader financial industry, work to shift blame from far more obvious culprits.
Insisting “wokeness” is to blame for the bank’s failure — and the need for a subsequent bailout by federal authorities aiming to prevent a broader run on regional banks — is an attempt by the GOP to shift the terms of discussion from regulation and the power of the banking industry, where most Republicans’ Wall Street-friendly views are out of step with public opinion, to culture war grounds, where they feel they have an advantage.
The rhetoric, which echoes the party’s attempt to blame poor and Black homeowners in the aftermath of the 2008 financial crisis, also follows longstanding conservative efforts to demonize any attempt to diversify workforces and a more recent obsession with the purportedly liberal lean of big business on cultural issues. (BuzzFeed, HuffPost’s parent company, banked with SVB.)
“Woke,” which began as African American vernacular to encourage awareness of social injustice, has increasingly become the GOP’s all-purpose epithet to discredit any institution breaking from the party’s political and policy goals, applied to everything from the military to the media.
The GOP’s focus on “wokeness” has irritated Democrats, who view the issue as irrelevant to what should be done with bank regulation in the future and how to resolve the crisis.
“It is indeed SUPER WOKE to hold high volumes of uninsured deposits and fail to manage risk by over relying on illiquid long term bonds and inadequately hedging against rising interest rates,” Sen. Chris Murphy (D-Conn.) wrote on Twitter, with no small amount of sarcasm.
Lucas Kunce, a progressive antitrust expert and Marine Corps veteran who is running for the Democratic nomination to challenge Hawley in deeply Republican Missouri, blasted Hawley as a phony populist more interested in scoring culture-war points than regulating a runaway industry.
“He’s going to do anything he can to fuel the charade he’s got going on,” Kunce said of Hawley’s attacks on the bank. “Nothing about banks getting Congress to rewrite the rules. Nothing about reform or protecting Missourians. We need real banking reform.”
Hawley, for his part, promised to introduce legislation barring banks from saddling customers with the fees necessary to pay for the bailout, and said he would make sure “responsible community banks” were exempt from the levies.
Evidence of Silicon Valley Bank’s supposed “wokeness” is also thin. While the bank did deploy the rhetoric on race and gender issues now mainstream in corporate America, there is little evidence that it was an outlier or that it impacted the bottom line.
In a Wall Street Journal op-ed, columnist Andy Kessler noted the bank’s board was 45% women, with one Black member and one member who is LGBTQ.
“I’m not saying 12 white men would have avoided this mess, but the company may have been distracted by diversity demands,” Kessler wrote.
A glance at the bank’s board of directors shows typical financial industry backgrounds rather than a collection of the unqualified. The one Black director was Richard Daniels, a former top executive at Kaiser Permanente who previously worked at JPMorgan Chase and Capital One.
The same bank document that Kessler cited on board diversity also recommends that SVB shareholders vote against an independent racial justice audit, arguing the company already did more than enough on diversity, equity and inclusion, and asserting a host of boilerplate platitudes.
“We are on a journey and will continue to evolve,” the board wrote. “Over time, we expect to identify opportunities and new approaches to address systemic racism and social injustice as we continue to seek diverse perspectives, learn from our efforts, and improve upon our existing processes and programs. We are committed to continuous learning and improvement based on actual feedback and data, and sharing our progress with our stockholders and broader community.”
Conservative influencers, along with the Rupert Murdoch-owned New York Post, have also spotlighted Jay Ersapah, the head of financial risk at Silicon Valley Bank UK. Erasph regularly discussed her background as a queer immigrant and promoted the company’s diversity initiatives. But Silicon Valley Bank UK was not responsible for the collapse of its California-based parent and did not suffer from the bank run. A major British bank, HSBC, purchased the UK branch on Sunday.
Efforts to blame financial calamities on racial minorities aren’t new for the GOP. In 2008, when a wave of mortgage foreclosures froze the financial system, led to the collapse of Bear Stearns and resulted in massive government intervention to save major banks and automakers, Republicans blamed federal affordable housing goals.
The consensus view of that financial crisis fingered the lack of regulation around derivatives trading as an underlying cause. Many Republicans, however, pushed an alternative angle, blaming government efforts to increase home lending to Black people, the poor and young people as feeding a wave of foreclosures.
Senate Republican Leader Mitch McConnell, for instance, pointed to Fannie Mae and Freddie Mac — the government-backed mortgage lenders that offered many loans to the poor — as the “main protagonists in the financial meltdown” in a 2010 speech. And a GOP appointee to the Financial Crisis Inquiry Commission — a government body assembled to investigate the causes of the crisis — devoted a lengthy dissent to arguing government housing policy was essential to the crisis.