Conservative politicians and commentators are blaming the failure of Silicon Valley Bank on its “woke” diversity policies and socially and environmentally conscious investments.
Jay Ersapah, a former chief risk analyst and financial risk manager at Silicon Valley Bank, has become a lightning rod for the finger-pointing. A woman of color who identified as queer, Ersapah was named to Silicon Valley Bank’s “Outstanding LGBT+ Role Models List 2022.”
Some conservative voices suggest that because she favored LGBTQ initiatives and started a pride campaign before the bank lost billions, she was distracted from the important work of risk management.
“I think that the system, that the administration has pushed many of these banks into [being] more concerned about global warming than they do about shareholder return,” Home Depot co-founder Bernie Marcus said in a Saturday Fox Business News interview. “And these banks are badly run because everybody is focused on diversity and all of the woke issues and not concentrating on the one thing they should, which is shareholder returns.”
“Jay Ersapah might’ve been busy with more important projects at the bank, such as LGBTQ issues, rather than assessing risk $SIVB,” stock trader The_Real_Fly tweeted.
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MSNBC’s Chris Hayes mocked what he described a “comically preposterous” MAGA claim that wokeness caused the SVB collapse.
“Folks, we’ve got an outbreak of woke banks,” Hayes said, airing footage of conservative public figures including Florida Gov. Ron DeSantis and Fox News personalities Tucker Carlson and Jesse Watters trying to blame diversity policies, liberals and President Joe Biden for the bank’s collapse.
“The bank’s collapse was due to financial missteps and a bank run,” New York Times fact check reporter Linda Qiu wrote. “The firm’s policy on diversity, equity and inclusion — also known as D.E.I. — is similar to ones that have been broadly adopted in the banking sector. So is its approach to taking environmental and social considerations into account when investing — referred to as E.S.G. — although that has become a target of conservatives. In fact, Silicon Valley Bank is considered about average in the industry when it comes to these issues.”
What about the bank’s bad interest rate hedging and its risky startup deposit base?
In fact, lack of diversification is one of multiple reasons the bank failed, according to Jay Jung, founder and managing partner of Embarc, a strategic finance advisory. Other factors included a classic bank run, where many customers withdrew their deposits simultaneously due to fears of the bank’s solvency. Many SVB depositors were startups that deposited large amounts of cash from investors when tech was in high demand during the pandemic.
SVB partnered with nearly half of all venture-backed U.S. tech and healthcare companies. Selling part of its US Treasuries portfolio at a loss to cover a run on the bank led to a sharp selloff in other U.S. bank stocks.
“Lots of banks hold large portfolios of bonds and rising interest rates make these less valuable — the SVB situation is a reminder that many institutions are sitting on large unrealized losses on their fixed-income holdings,” said Russ Mould, investment director at UK broker AJ Bell.
Some market observers and traders have compared the Silicon Valley Bank collapse to that of Lehman Brothers, and say it could create a systemic risk to the entire system at a time when interest rates are high, and the U.S. is on the brink of a recession.
Interest rate hikes were considered a contributor to the collapse of Silicon Valley bank, as well as Silvergate Bank and Signature, which also failed in March.
“This would not have happened if the rates hadn’t gone up so quickly and these portfolios hadn’t gone underwater so much,” said Alexander Yokum, an analyst at CFRA Research who covers banking.
SVB has been accused on Twitter of embracing diversity while not having a diverse leadership. According to the bank’s latest inclusion report, 30 percent of its leadership and 8 percent of its board were nonwhite, New York Times reported. These demographics would make Silicon Valley Bank one of the more racially diverse financial institutions, according to the New York Times.