Republicans Are Lying About the Silicon Valley Bank Failure
Republican race-baiting and gay-baiting reach new lows
Lying is the right wing’s default mode
We know that dishonest narratives are the currency of Republicans. We see it in portraying the January 6 mob of right-wing terrorists as “tourists.” We see it in the claims that the East Palestine railway disaster was Pete Buttigieg’s fault. Now, we see it again, as the right-wing claims that the Silicon Valley Bank fiasco is the result of “wokeism”.
Providing no evidence for his assertions, Congressman James Comer (R-Ky) called SVB “one of the most woke banks” because of its “ESG-type” policies”. Ron DeSantis, never one to avoid a microphone, said on Sunday that Silicon Valley Bank’s diversity, equity, and inclusion requirements “diverted from them focusing on their core mission.” Again, he didn’t bother to provide a scintilla of evidence for that claim. Nor did he bother to tell us just how those requirements diverted the bank from its core mission.
Reaching as low as it possibly could, the Wall Street Journal had this to say:
“In its proxy statement, SVB notes that besides 91% of their board being independent and 45% women, they also have “1 Black,” “1 LGBTQ+” and “2 Veterans.” I’m not saying 12 white men would have avoided this mess, but the company may have been distracted by diversity demands.”
The dog whistle becomes a fog horn
What may have once been a dog whistle has turned into a foghorn for the right: “The world is conspiring to turn everything that is dear to us over to Blacks, gays, and transgenders.” Anger that was once directed mostly at liberal college professors, pundits, and legislators is now focused on just about any institution one can name. Schools are teaching our kids Critical Race Theory. Libraries are sponsoring drag shows so as to lure children into a gay lifestyle. Banks are failing because they’re too focused on hiring minorities who don’t measure up.
What really happened
Let’s review what happened to Silicon Valley Bank (SVB) to see if we can find a mote of DEI, ESG, or any other hint of “wokeism” anywhere in the story.
The bank had lots of money sitting around via deposits from its Silicon Valley market: startups and small tech firms. SVB needed to find places to put that money because deposits don’t pay for big bonuses. So the bank, in its wisdom, overinvested in low interest long-term U.S. bonds.
There’s nothing safer on the planet than U.S. debt, right? Well…yes and no. The debt is safe in the sense that there is zero chance of default. On the other hand, like any other bond, that debt is subject to market risk: when interest rates go up, the value of those bonds goes down.
And that’s what happened to SVB. It saw the value of those U.S. bonds that made up a disparate share of its assets go down significantly as interest rates have risen sharply over the past months. Suddenly, instead of being cash rich, the bank was asset poor. Depositors got wind of this and started taking their money out. SVB told the world, “We’ve suddenly experienced an embarrassing shortage of cash so we’re going to try to raise some.” That announcement really spooked depositors, who started demanding their money just like George Bailey’s customers did back in Bedford Falls. Just as George told his customers, SVB didn’t have the depositors’ money in a vault, so the FDIC shut them down.
Another financial institution, Signature Bank, failed for essentially the same reason: Depositors demanding their money back right now. In both cases, the banks suffered liquidity crises. Signature had just over 5% of its assets in cash and SVB had 7%, compared with the industry average of 13%.
Let’s take a moment to reflect on the “wokeism” charge made by the right-wing extremists. Unless one believes that gay, Black, or transgender employees made the decisions to hold too many low-interest bonds, there’s nothing to see here. Nor did SVB hold an overabundance of “ESG” assets…they were good old, patriotic U.S. bonds, after all.
As Ron Popeil used to say, “But wait…there’s more!” In response to the wave of catastrophic bank failures in 2008, Congress passed (with only two Republican votes) the Dodd-Frank Act. That legislation contained a number of features, among them, a “too big to fail” policy that required banks with over $100B in assets to carry out “stress tests” to assess their ability to withstand just the sort of mishaps that SVB and Signature Bank experienced. In 2018, though, after the banking industry spent more than $2.1B in efforts to rid themselves of restraints contained in the Dodd-Frank Act, Congress passed the ironically named Economic Growth, Regulatory Relief, and Consumer Protection Act. That Act, passed by a GOP-controlled Congress and signed by Donald Trump, raised the definition of “too big to fail” from $100B to $250B. SVB had $200B in assets last Friday when it failed. Signature Bank had $110B when it failed. Both banks then would have been subject to the stress tests, which likely would have uncovered their risky circumstances long before last Friday. Senator Elizabeth Warren is right: “These recent bank failures are the direct result of leaders in Washington weakening the financial rules.”
It’s their fault
The lies of the right, then, are a dodge to distract us from the real culprits here: Donald Trump and Republican legislators. That they seek to place the blame on Black, gay, and transgender men and women is altogether reprehensible
