Republican attempts to claim SVB as ‘woke bank’ crumble

Republican claims that Silicon Valley Bank (SVB) – which collapsed last week – was “too wide awake to fail” may make for good soundbites, but they don’t necessarily correspond to the reality of a federal intervention that was intended to protect depositors while allowing the bank to fail.

Notable GOP figures were quick to blame the failure of the bank, the second largest in U.S. history, on the diversity and inclusion policies it touted. SVB has described itself on its website as a “pro-woman brand” and “strongly committed to the values ​​and policy of equal employment opportunity in all of our employment practices”.

Elise Smith, co-founder and CEO of Praxis Labs, an inclusivity education company founded by women of color, said such diversity policies were “crucial to navigating such unpredictable circumstances.”

The March 10 bankruptcy of SVB led to federal intervention to secure depositors’ funds with the bank, as it did with Signature Bank when it failed 48 hours later. The Biden administration’s pledge to cover deposits, including those over the $250,000 limit insured by the federal government, was intended to limit the impact of the collapse on the broader economy.

SVB had primarily served tech companies and start-ups, and there were many big brands with billions tied up in deposits, from gaming company Roblox to streaming giant Roku, media outlet BuzzFeed and the company of financial technology Circle.

Analysts had warned that without government intervention, SVB’s collapse would have precipitated the closure of potentially thousands of businesses that depend on their deposits for their day-to-day operations.

Since its collapse, conservatives have suggested that the company’s emphasis on so-called “woke” policies led to its failure.

“Throughout our company, we strive to build a diverse workforce without regard to gender, race, color, age, national origin, religion, sexual orientation, disability status, pregnancy, gender identity, genetic information, veteran status, or any other classification protected by federal, state, provincial, or local law or ordinance” , the company said on its diversity, equity and inclusion (DEI) page.

“They’re so concerned about DEI and politics and all kinds of things,” Florida Gov. Ron DeSantis, a likely Republican presidential candidate, told Fox News on Sunday. “I think it really distracted them from focusing on their core mission.”

Senator Josh Hawley, a Republican from Missouri, went further. On Thursday, he told NBC that the bank was bailed out by the federal government, and it was done because it was “too wide awake to fail.”

Referring to the bank’s investment in climate change solutions, he said it meant that SVB was “really politically connected and pursuing an agenda, which I’m sure they have offered to people here, who see that , ‘It’s important, we’ve invested all of this, you can’t let this sink in!'”

“My view is that they should be treated like everyone else,” Hawley added.

“You only get protection if you’re a woke billionaire who gives Democrats a lot of money,” Hawley told Fox News on Thursday. “Why is this bank being bailed out? ” he added. “Because it’s a bunch of woke billionaires.”

But Praxis Labs’ Smith dismissed that view.

“It is disappointing to hear the blame placed on SVB’s investment in diversity, equity and inclusion (DEI) as the reason for its collapse,” she said. Newsweek. “What we hear from people-focused leaders is the opposite: our current market uncertainty and ongoing societal unrest actually underscores the importance of continuing to invest more in DEI’s people and efforts.

“It’s ‘people skills’ like empathy, collaboration and inclusive leadership that are key to navigating such unpredictable circumstances and instilling resilience in teams,” she added.

Federal regulators shut down SVB after a run on the bank in which depositors rushed to withdraw their funds all at once. It was sparked by an announcement two days earlier that she had sold securities at a loss to fill a hole in her finances, according to CNN.

The hole appeared after the Federal Reserve dramatically raised interest rates to fight inflation, which also caused bond prices to plummet. The SVB was among many banks that invested in government bonds when interest rates were close to zero during the pandemic.

While the Federal Deposit Insurance Corporation (FDIC) protected SVB’s customer deposits beyond the usual insured limit, it did not bail out the bank. Instead, its depositors’ accounts were moved to a new federally run “bridge bank” with a new CEO. The same thing happened with Signature Bank.

While SVB touted its DEI credentials, many of its customers were small businesses and dozens of everyday banking customers. Even among client billionaires, some were quite the opposite of Democratic donors.

Peter Thiel, the co-founder of PayPal and Palantir who has been a key supporter of Republican politicians including former President Donald Trump and Hawley himself, told the FinancialTimes that he had $50 million of his own funds “locked up” in the bank.

Newsweek contacted Hawley’s office via email for comment.

Contrary to Republican claims, Heather Shen, co-founder and chief product officer of Praxis Labs, suggested SVB may not be inclusive enough.

“Study after study shows that greater diversity and inclusion lead to better business outcomes,” she said. Newsweek. “Failure to embrace diverse perspectives leads to missed opportunities to create impactful products and services that speak to and generate value for everyone.”

A 2020 report from consulting firm McKinsey found that “the relationship between the diversity of leadership teams and the likelihood of financial outperformance has grown stronger over time.”

Prior to its collapse, five of SVB’s 12 board members were women, and there was only one member who was a person of color. A recent diversity and inclusion report showed that 46% of its workforce was female, as were 38% of its senior executives.