Last Friday, the Federal Deposit Insurance Corporation announced that California’s Silicon Valley Bank had failed and that the FDIC was taking control of its remaining assets. According to initial accounts, SVB ran out of cash to fulfill customer withdrawals because too many customers were asking for their money all at once—a classic bank-run panic—and too many of the bank’s assets were Treasury bonds that had been issued before interest rates went way up. The bank needed to raise money fast, in other words, but couldn’t because no one (relatively speaking) wanted to buy its old, busted low-yield bonds when new-hotness high-yield bonds are everywhere.
There is still a lot to sort out regarding who exactly is responsible for the panic and for SVB’s overinvestment in gauche older bonds. When Republican Florida Gov. Ron DeSantis appeared on the Fox Business channel on Sunday, though, he had a unified theory. “I mean, this bank, they’re so concerned with DEI and politics and all kinds of stuff,” he said. “I think that really diverted from them focusing on their core mission.” (DEI means “diversity, equity, and inclusion.”)
DeSantis may have been taking his cue from this Twitter post from last Thursday, which was retweeted by huge right-wing accounts like Donald Trump Jr. and Mike Cernovich and turned into a New York Post article:
The theory is that SVB’s risk-management chief was too preoccupied by diversity initiatives—and perhaps by being so diverse herself!—to manage risk. The take has since caught on. “I’m not saying 12 white men would have avoided this mess, but the company may have been distracted by diversity demands,” Wall Street Journal columnist Andy Kessler said regarding the makeup of SVB’s board of directors in a piece published Sunday. (As others have pointed out, the bank’s C-suite itself appears to have come pretty close to achieving Kessler’s dream-team ideal.) Arizona Rep. Andy Biggs asserted Monday that SVB’s resources were “blown on woke/DEI initiatives.”
The risk manager in question, though, is misidentified in @The_Real_Fly’s tweet as “Head of Financial Risk at SVB”; as is made clear in the very screenshot attached to the tweet, she actually worked at the bank’s U.K. subsidiary. That subsidiary has been sold to HSBC in a transaction arranged by the U.K’s central bank, which says that none of the money held by SVB U.K. for its depositors has been lost.
Bloomberg, meanwhile, reports that in late 2020, SVB execs rejected “an internal recommendation to buy shorter-term bonds as more deposits flowed in”—a course of action which would have “reduce[d] the risk of sizable losses if interest rates quickly rose”—because it would have been too costly up front. (Bloomberg also says that some at the bank continued pushing to “reposition the company’s balance sheet into shorter duration bonds” throughout 2022 as well.)
In other words—per Bloomberg—risk assessments at SVB did correctly identify a potential problem, but the reason it wasn’t addressed was financial rather than ideological. And the company’s wokeness-obsessed executive in charge of monitoring risk wasn’t its executive in charge of monitoring risk.
Claims that this or that thing was consumed from within by wokeness, though, need not be deeply rooted in fact to divert a news cycle away from uncomfortable questions about, for example, the number of Republican senators who voted in 2018 to ease capital requirements for midsize banks like SVB. (That number was “all of them.”) It’s an especially useful scapegoat in the context of corporate misconduct, because any company that’s screwed something up in a way that might implicate conservative ideology and/or the influence of donors and lobbyists in politics has probably also issued a statement at some point about diversity, social justice, equity, or whatever. (Even Fox has a diversity and inclusion webpage which, like Jay Ersapah’s purportedly incriminating blurb above, touts its support of Employee Resource Groups, aka ERGs.)
After the East Palestine, Ohio, train derailment in February, railworkers’ groups described the crash as the natural consequence of cuts to staffing and inspection standards imposed on the industry by private equity. Three months prior, Transportation Secretary Pete Buttigieg—a former management consultant described by Fortune magazine as the 2020 Democratic primary’s “big business candidate”—had actually met with Norfolk Southern’s CEO to discuss the company’s interest in cutting crew sizes. What Republican Ohio Sen. J.D. Vance and Fox News host Tucker Carlson attacked Buttigieg over instead was that he’d spent 30 seconds of a recent 25-minute appearance at a conference for county-level officials urging the audience, in nonbinding terms, to be aware of past discrimination against nonwhite workers when hiring for infrastructure projects. (To be fair to Vance, he did later propose a bill that would subject rail companies to increased regulatory scrutiny.)
The actual chief risk officer at Silicon Valley Bank, for the record, was a woman whose official biography says she “enjoys spending time with her husband and three daughters,” emphasis ours. Exonerated?
