The sudden collapse of Silicon Valley Bank two weeks ago was like waking up in a nasty place that you hadn’t anticipated and had a hard time shaking off as whatever caused it had occurred during your sleep.
The billion-dollar question coming to mind may be whether more banks would collapse and an all-out, 2008-style financial crash would follow – especially after the smaller Signature Bank failed two days after SVB.
SVB was taken over by the Federal Deposit Insurance Corporation (FDIC) on March 10 (Friday) and Signature Bank – on March 12 (Sunday).
William Isaac, a former FDIC chairman in the first Reagan administration in the 1980s, already predicted more bank failures.
His prediction ominously came the day Signature Bank was about to fail. Billionaire Bill Ackman made a similar prediction.
For the time being, it remains unclear whether they might be right – as Biden’s Treasury Secretary has now claimed the US banking system is safe, and international markets stabilized.
Yet, there is also a trillion-dollar question whose ugly face is popping up even harder than the one above:
Did wokeism do it? In other words…
Did Silicon Valley Bank collapse because of its alleged embrace of Wokeism, “social justice warrior” -ism, ESG (“environmental, social, and governance) investing,” embracing DEI (“diversity, equality, and inclusion”) policies, progressivism, corporate Marxism-Communism, identity politics and the gender ideology, Big Tech leftism, and any aspects of the far-left ideological mix?
Did SVB abandon or at least compromise financial reason and sound investing in order to embrace and promote politics of the far-left variety?
To put it even more bluntly, did it go broke because it had gone woke – as one of America’s best-known memes goes?
The reason the question about wokeism in banking – and overall “woke capitalism” is bigger than wonderings about whether more bank failures are coming up is that the former could be even more dangerous than the latter.
Suppose SVB collapsed due to wholeheartedly espousing woke politics. In that case, the longer-term repercussions for the US economy might be beyond catastrophic, way more damaging than your blunt global financial crisis and recession.
Considering how many and how much American corporations and multinationals have been adopting wokeism, and social justice causes in recent years, many more American banks and big businesses could become unprofitable and unsustainable.
Business is about creating added value, generating earnings, and turning profits. In contrast, corporate wokeism may make the US economy look like that of the state-dominated economies of Communist China and the former Soviet Union.
All things considered, it may be fair to suggest that corporate wokeism per se did not cause the collapse of Silicon Valley Bank.
Yet, the case can probably be made that its embrace of woke policies may have contributed to the preconditions for the bank’s downfall as “social justice” causes may have distracted its management’s focus from risk monitoring, risk assessment, and reaction.
MSM Telling the ‘Classic Run on the Banks’ Story
On March 10, 2023, Silicon Valley Bank managed to make history by becoming the largest bank to collapse since the 2008 financial crisis, and by doing so in less than 48 hours.
The SVB, which had been the go-to bank for technology corporations and tech startups for 40 years, suffered an abrupt bank run, whose effect was worsened by the fact that it was big-account clients who pulled their cash.
Mainstream media, that is, pro-left propaganda media practically did not consider any effect that SVB’s embrace of ESG, DEI, and general progressivist politics may have had on its collapse.
They focused on the financial explanation, which makes sense:
The Guardian emphasizes how Silicon Valley Bank “invested heavily” in US government bonds, including mortgage-backed. Bond prices fell when the Fed started raising the interest rates to tackle Bidenflation. Meanwhile, some tech clients were pulling money to deal with the harsher economic climate, SVB got short on cash and started selling the bonds at a loss.
It generated a $1.8 billion loss by selling $21 billion worth of bonds.
That spooked customers and investors and led to a run.
CNN points out that the SVB panic particularly exploded due to its announcement it would sell new shares worth $2.25 billion to prop up its balance sheet.
The New York Times dwells on how the bond and share sales were supposed to “reassure” clients and investors – a plan devised with the help of SVB adviser Goldman Sachs – which, however, went “awry” as it had the “opposite effect.”
CNBC notes the mind-blowing effects of the ensuing panic as customers ended up pulling a “staggering $42 billion” of SVB deposits on March 8 and March 9.
The mainstream media have therefore told the “conventional story”: the banking technicalities of what happens when some wrong business and communication decisions cause a fatal bank run.
SBV Had Gone Woke. A Lot.
CNBC, CNN, The New York Times, and the like don’t seem to care to deliberate whether the SVB management made significant mistakes or at least omissions because it was too busy doing something else.
For instance, going woke.
Conservative media outlets, however, paint a stunning picture in which Silicon Valley Bank had become heavily invested in corporate wokeism while possibly downplaying or overlooking significant risks or recruiting personalities who weren’t exactly good fits for its supposedly profit-chasing structure.
Reports that two key SVB executives actually worked at the troubled Lehman Brothers and Deutsche Bank ahead of the 2008 crash exposed intriguing aspects of the big picture to the now-failed bank.
It turned out that Silicon Valley had no risk manager for eight months during 2022-2023, at a time when it was heavily involved in woke activities – a situation described by Fortune magazine as a “risk management nightmare” at SVB. The one that was appointed recently had worked for Deutsche Bank, as noted above.
It has also emerged that only a single member of the SVB board had “investment banking” experience, while the rest were Democrat “megadonors.”
At the same time, as The Daily Mail puts it under a “Go Woke Go Broke” handle, the bank had hired a board that was “obsessed with diversity,” held a month-long celebration of LGBT pride, and poured $5 into a “healthier planet” initiative.
Among other things, Silicon Valley Bank managed to donate $73 million to far-left Black Lives Matter causes, while Signature Bank was also in the fray with almost $1 million in donations.
A CEO’s op-ed in the same paper blasted “woke-obsessed bankers” in combination with President Joe Biden’s “spending juggernaut” as significant threats to both banking stability and the economy as a whole.
A column at The Wall Street Journal suggested precisely that woke distractions might have prevented SVB’s management from noticing the risk from the Fed interest rate hikes. Naturally, the radical left immediately attacked the article’s author as a hateful human being.
Bernie Marcus, the elderly founder of Home Depot, also blasted a woke SVB management more obsessed with global warming than with returns.
Some have blamed President Joe Biden’s leftist spending spree of $4 trillion in taxpayer money for causing a tech investment bubble that ultimately left SVB exposed.
Even with its extensive coverage of the “woke activism” inside Silicon Valley Bank, The Daily Mail rejected claims that had directly caused its downfall.
However, the case remains open, and with all the revelations about how much SVB had embraced the progressivist Democrats’ far-left agenda, one’s mind boggles as to why the bank’s management wasn’t preoccupied solely with watching out for risks and boosting shareholder returns, instead of going political.
The same trillion-dollar question looms large over countless other banks and big businesses in the US and beyond.
To paraphrase the world-famous meme from above, “go woke might well spike the chances that you go broke.”