DeSantis and other prominent Republicans blame ‘woke’ politics for Silicon Valley Bank’s collapse instead of bankers miscalibrating risk
- Some Republicans blamed “woke” investment strategies for Silicon Valley Bank’s downfall.
- Economists say the bank was squeezed by high interests rate and a balance sheet laden with Treasury bills.
- The GOP has increasingly portrayed itself as against “wokeism” in all aspects even when the definition is unclear.
Conservatives are blasting their new boogeyman of wokeism after the second-largest bank collapse in US history, eschewing the more straightforward story of problematic balance sheets in favor of raw politics.
Sen. Josh Hawley complained that Silicon Valley Bank executives were spending their time on funding “woke garbage (“climate change solutions”) rather than actual banking and now want a handout from taxpayers to save them.”
“SVB = too woke to fail,” Hawley tweeted on Monday.
To Florida Gov. Ron DeSantis, the culprit was “Diversity, Equity, and Inclusion.” The bank website says it was building a global workforce celebrating “greater dimensions of diversity.”
“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,” DeSantis said on Fox News’ “Sunday Morning Futures.”
Rep. Jim Comer, head of the House Oversight and Reform Committee, blasted “Democrat inflation” and called Silicon Valley Bank “one of the most woke banks in their quest for the ESG-type policy and investing,” a reference to environmental, social, and governance policies.
“This could be a trend and there are consequences for bad Democrat policy and I think we need to keep an eye on all the banking sector right now,” the Kentucky Republican said, also on Fox News’ “Sunday Morning Futures.”
—Aaron Rupar (@atrupar) March 12, 2023
Combating “wokeism” has become one of the main rallying points on the right in everything from education to investments. DeSantis made that fight central to his book that he’s touting in politically important states like Iowa before an expected presidential run. He has led the charge to divest state-owned funds from hedge fund banks that use the environmental, social, and governance framework.
Sen. Ted Cruz of Texas, himself a former presidential candidate, announced last week that he’s penning a new book titled “Unwoke: How to Defeat Cultural Marxism in America.”
“The Far Right is starting to use ‘woke’ in the all purpose way that Smurfs say ‘smurf,'” tweeted comic book writer Dan Slott.
In his Wall Street Journal column on Sunday, author and investor Andy Kessler made the point that “the company may have been distracted by diversity demands.”
The now-failed bank previously pledged to be carbon neutral by 2025. It had also loaned out billions through targeted reinvestments in low- and moderate-income communities in Massachusetts and California. It’s not clear what pledges and or moves Republicans have a problem with, but it is worth noting that a much simpler explanation exists for the bank’s struggles.
Economists and banking experts so far have chalked up Silicon Valley Bank’s failure to much more apolitical circumstances. The bank, favored by the tech class and big-name IPOs, invested much of its funds into long-term Treasury bills and mortgage bonds. This strategy slowly squeezed the bank after the Federal Reserve raised interest rates. As the bank sustained losses, venture capitalists urged depositors to pull their funds. Silicon Valley Bank then had to sell its assets at a loss to fork over cash it didn’t have, an increasingly untenable chain reaction that ended only when regulators shut the institution down.
“I don’t have a clear idea of what woke is and it seems to change by the day. Maybe government bonds are now woke, but that is what got them into trouble,” Dean Baker, a senior economist at the Center for Economic and Policy Research who predicted the 2008 housing bubble crash, told Insider.
Regulators closed the Silicon Valley Bank on Friday, a stunning break to a period of relative banking stability in the wake of the 2008 financial crisis. The Federal Deposit Insurance Corporation, the FDIC, quickly put the financial institution under its control. Federal officials later made clear that a special fund would be used to reassure customers that all of their deposits would be accessible, including money far beyond the FDIC-insured $250,000.
‘It’s a complaint against capitalism’
When it comes to SVB’s depositors, “it’s a cross section of companies and yeah, Silicon Valley has some companies that probably would fit whoever’s definition of woke,” Baker said. “Many of them wouldn’t at all.”
And when it comes to Republican finger-pointing over bailouts for banks who invest in DEI, Baker noted that “it’s common for companies pretty much across the board now to try to have more diversity.”
“I know they don’t like that, but that’s probably the vast majority of companies in the country now,” Baker said. “I don’t know. I mean, it’s a complaint against capitalism — they do it because they think it’s good business.”
While companies may be investing in “woke” priorities like clean energy, it’s because they’re making money from doing so.
“I don’t know if making money’s now woke,” Baker said. “I mean, some of them might be doing it because they think it’s good for the planet, but I mean they’re doing it as profit making companies — and they are making profits.”