The Boys Who Cried ‘Woke!’
"As soon as it was clear that Silicon Valley Bank would not survive the weekend, conservative influencers and Republican politicians had a culprit in sight.
“They were one of the most woke banks,” Representative James Comer, the top Republican on the House Oversight Committee, said during a segment on Fox News.
The governor of Florida, Ron DeSantis, also spoke to Fox News about the collapse of the bank, and he also blamed the bank’s diversity programs. “I mean, this bank, they’re so concerned with D.E.I. and politics and all kinds of stuff. I think that really diverted from them focusing on their core mission,” he said.
A Saturday headline in The New York Post declared, “While Silicon Valley Bank Collapsed, Top Executive Pushed ‘Woke’ Programs.” And over at The Wall Street Journal, Andy Kessler wondered if “the company may have been distracted by diversity demands.”
On Twitter, a number of prominent conservatives took this message and ran with it. Donald Trump Jr. said that “SVB is what happens when you push a leftist/woke ideology and have that take precedent over common sense business practices.” Stephen Miller, a key White House aide to Donald Trump, accused the bank of wasting its funding on “trendy woke BS.” And Senator Josh Hawley, Republican of Missouri, complained that “these SVB guys spend all their time funding woke garbage (‘climate change solutions’) rather than actual banking and now want a handout from taxpayers to save them.”
It is unclear whether these conservatives are working from the same memo or just have the same narrow obsession. Regardless, there is no evidence that any diversity, equity and inclusion initiatives were responsible for the collapse of Silicon Valley Bank. It is nonsense. And while it shouldn’t be taken seriously on its own terms, this deflection is worth noting for what it represents: the relentless effort to mystify real questions of political economy in favor of endless culture war conflict.
The real story behind the collapse of Silicon Valley Bank has much more to do with the political and economic environment of the previous decade than it does with wokeness, a word that signifies nothing other than conservative disdain for anything that seems liberal.
As its name suggests, Silicon Valley Bank was tied tightly into the financial infrastructure of the tech industry. Founded in 1983, it claimed to bank for “nearly half of all U.S. venture-backed start-ups,” and it worked closely with many venture capital firms. It is risky for a bank to take most of its deposits from a single tightly knit industry. But for much of the past decade, low interest rates, easy money and cheap loans meant that this industry was on the upswing. As tech boomed, so did S.V.B.
“Flush with cash from high-flying start-ups,” my newsroom colleague Vivian Giang explained, Silicon Valley Bank “did what most of its rivals do: It kept a small chunk of its deposits in cash and it used the rest to buy long-term debt like Treasury bonds.” As long as interest rates stayed low, those bonds promised safe returns.
Interest rates did not stay low. To fight inflation and reduce the price of consumer goods, the Federal Reserve raised interest rates seven times in 2022. With each increase, Silicon Valley Bank lost money on its bonds. Worse, the interest rate surge affected venture capital firms and the entire world of tech start-ups, harming the bank’s portfolio as those companies shed value and reduced deposits. Clients started to withdraw money to meet their liquidity needs, and last week, in order to fund these redemptions, Silicon Valley Bank announced it had sold $21 billion in bonds, at a loss of $1.8 billion. The bank then let it be known that it would sell $2.25 billion in shares to cover the loss.
Worried clients began to withdraw more money, which spooked investors, a development that pushed more clients to withdraw even more money. (Peter Thiel’s Founders Fund reportedly called for its start-ups to pull their cash while they still could.) On Friday, as the bank run gained steam, California’s financial regulatory agency announced that it had taken possession of the bank and placed it under the receivership of the Federal Deposit Insurance Corporation.
That is the immediate situation. But there is a larger context. Silicon Valley Bank had a significant number of large and uninsured depositors — clients with accounts totaling more than the $250,000 maximum guaranteed by the F.D.I.C. Ten years ago, the bank might have been subject to a stress test by the Federal Reserve, which would have forced the bank to diversify its investments.
But in 2018, Trump signed a bipartisan bill that shielded regional banks like S.V.B. from regulatory scrutiny under the Dodd-Frank Act. Greg Becker, the bank’s chief executive, actually lobbied for this change, urging the government to raise the threshold it used for judging systematic risk, from $50 billion in assets to $250 billion in assets.
In the fourth quarter of last year, Silicon Valley Bank reported more than $200 billion in assets.
It’s not as if no one thought this collapse could happen. “The failure of Silicon Valley Bank is a direct result of an absurd 2018 bank deregulation bill signed by Donald Trump that I strongly opposed,” Senator Bernie Sanders said in a statement on Sunday. Senator Elizabeth Warren made a similar point in an essay published in The Times on Monday, in which she also mentioned the failure of the New York-based Signature Bank in the aftermath of S.V.B.’s collapse: “Had Congress and the Federal Reserve not rolled back the stricter oversight, S.V.B. and Signature would have been subject to stronger liquidity and capital requirements to withstand financial shocks.”
All of this is to say that if you want to understand the collapse of Silicon Valley Bank, you have to understand the political environment that led Congress to loosen regulations on regional banking institutions. You have to understand the interests involved, the ideologies involved and the personalities involved, like DeSantis, who voted for the deregulation bill as a congressman.
The people who blame wokeness for the collapse of a bank do not want you to understand or even think about the political economy of banking in the United States. They want to deflect your attention from the real questions toward a manufactured cultural conflict. And the reason they want to do this is to obscure the extent to which they and their allies are complicit in — or responsible for — creating an environment in which banks collapse for lack of appropriate regulation.
This, again, is just one example of how bad actors and interested parties try to obscure serious questions about the structure of our society with claims that serve only to muddy the waters. You don’t have to look hard to find others.
Put simply, you show me a scene from the so-called culture wars, and I’ll show you what’s behind it: a real issue with real stakes for real people."