Did Silicon Valley Bank (SVB) collapse because it was too “woke” in the favored taunt of the right? That’s the charge made by Republican presidential contenders Donald Trump and Ron DeSantis, by the Republican House Oversight Committee Chair James Comer, and by the Wall Street Journal editorial page, among others. The charge, however, is preposterous – revealing not for what it says about SVB’s failure but for what it says about the ugly politics now dominating the right.
SVB was “so concerned with DEI (Diversity, Equity, and Inclusion) and all kinds of stuff,” charged DeSantis, that it “really diverted from them focusing on their core mission.” “SVB is what happens when you push a leftist/woke ideology and have that take precedent over common sense business practices,” said Trump–who is familiar enough with bankruptcy to know better. The Wall Street Journal suggested the SVB board was “distracted by diversity demands.”
Really? No one claims that Credit Suisse, the massive Swiss bank, was too “woke” when it had to be taken over this week – or Signature Bank when it went under or First Republic Bank when it was given a lifeline. SVB was the bank of Silicon Valley and the libertarian, free enterprise entrepreneurs of the tech industry. Its supposedly distracted board had exactly one person of color, a minority of women, and a couple of veterans. Its senior leadership was over 60 percent white, led by its white male president. SVB did tout a “clean energy sustainable finance department, but no loans had been made by the division when the bank went belly up.
So if anything, SVB was brought down not by a new “wokeness” but by old banking maladies – greed and deregulation. The favored bank of Silicon Valley, SVB, expanded rapidly as the tech start-ups multiplied over the past years. Under $250 billion in assets, it enjoyed far less federal scrutiny, particularly after the 2018 deregulation signed by Donald Trump (and lobbied for by the SVB president).
It was also a bank run waiting to happen. Over 90 percent of its deposits were uninsured, in accounts with more than the $250,000 FDIC guarantee limit. Seeking to invest its burgeoning deposits, it bought a lot of long-term Treasury bonds that offered higher interest rates than the bank paid out to depositors. As long as the tech industry boomed, SVB was raking it in.
Then the Federal Reserve started raising interest rates to bring down inflation. Tech start-ups began to draw down on their deposits in SVB as their growth slowed. The federal bonds that SVB invested in lost value as interest rates went up. The bank president, knowing SVB was in trouble, cashed in a few million of his shares just before the bank was forced to sell $21 billion in bonds at a loss of $2 billion. Not surprisingly, uninsured depositors panicked, and a classic run on the bank ensued until the Biden administration stepped in to stop what quickly became a nationwide banking crisis – not because so many banks were “woke,” but because a lot of them were caught with the same problem of unrealized losses in long-term bonds – over $600 billion by federal estimates at the start of this year. Across the country, depositors are taking their money out of mid-sized banks and putting it into large banks that are thought to be safer since they are more tightly regulated.
So why this outcry against “wokeness” on the right? One reason (of course) is that Republican politicians like DeSantis and Trump–who championed and signed on to financial deregulation don’t want to talk about the need for greater scrutiny over the banks. Another is the race to the bottom on the right. Donald Trump took over the Republican Party by rousing fears among his base about immigrants, crime, civil rights, the LGBTQ community, and more. Ron DeSantis has followed suit, focusing on “corporate wokeness,” from ESG (Environmental, social, and governance) principles to diversity and equity concerns. He’s assaulted public schools for making students “uncomfortable,” teaching about gender or American history and signing laws to tell teachers what to teach or what books to ban.
Republicans hope to win support from angry and frustrated white working people by rousing their fears of the other – Blacks, gays, immigrants, and LGBTQ members, and avoid admitting that their policies of tax cuts for the rich, deregulation, free trade, and systematic rollback of worker protections – from the right to organize to affordable health care – have been ruinous.
The result is a poisonous politics of division that is far more damaging to this country than the crisis triggered by the SVB failure. At the end of the day, the Federal Reserve and banking regulators have sufficient resources to bolster the shaky banks, head off a national banking panic, and keep depositors whole. What remains in question is whether there is enough decency and patriotism to keep the haters and dividers from driving us ever further apart.
You can write to the Rev. Jesse Jackson in care of this newspaper or by email at jjackson@rainbowpush.org. Follow him on Twitter @RevJJackson.
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