Shut Up About “Woke.” I’m Trying to Actually Understand the Bank Collapse.

“Woke” capitalism didn’t bring down Silicon Valley Bank.

People line up outside a Silicon Valley Bank branch in Wellesley, Mass., on Monday.Steven Senne/AP

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Silicon Valley Bank collapsed on Friday amid a bank run. The reasons are complex, even for those well-versed in the jargon of finance. (I am not.) The gist is that the Federal Reserve has raised interest rates in hopes of taming inflation. That requires banks to pay higher rates on their deposits. But since SVB’s assets (like loans) were issued at lower rates, they earn far less. At the same time, the higher rates from the Fed caused Treasury bonds to go down in value. SVB over-diversified on Treasury bonds and had too much money in long-term assets at the moment depositors wanted to withdraw money, as Michael Hitzlik explained in the Los Angeles Times.

So, you can blame increased interest rates. You can blame deregulation for allowing SVB to act as more of an investment tool than a bank, which made it particularly susceptible to a bank run. You can blame the very idea that this is how financialized capitalism works. You can even maybe blame Peter Thiel? Or, if you choose not to attempt to understand what happened, you can blame some DEI programs and say the word “woke” a lot.

“I mean, this bank, they’re so concerned with DEI and politics and all kinds of stuff,” Florida Gov. Ron DeSantis said. “I think that really diverted from them focusing on their core mission.” The idea, as a former Trump economist said on Fox News, is that SVB over-invested in green-energy products, leading to its doom.

“SVB is what happens when you push a leftist/woke ideology and have that take precedent over common sense business practices,” Donald Trump Jr. tweeted, not mentioning the role his father played in loosening bank regulations.

Investor Andy Kessler, in a Wall Street Journal opinion column, went so far as to suggest that SVB’s focus on diversity and inclusion was somehow responsible for the bank’s collapse:

Was there regulatory failure? Perhaps. SVB was regulated like a bank but looked more like a money-market fund. Then there’s this: 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.

This is, of course, nonsense. As my colleague Michael Mechanic explained in a newsletter last week, American conservatives (and some Democrats) have been loath to accept any whiff of progressivism in our financial institutions. That’s why the Senate blocked a Labor Department rule that would have allowed retirement fund managers to let clients invest in ESG funds—those that consider environmental and social factors. And it’s also why they choose to focus not on Silicon Valley greed or lax government regulations, but on the bank’s stated support of LGBTQ causes.

Do you think Bear Stearns was “distracted by diversity demands”? Lehman Brothers? Bailey Building and Loan from It’s a Wonderful Life? Give me a break.

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