SVB, DEI, and ESG

Did an alphabet soup of wokeness cause Silicon Valley Bank to fail?

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Silicon Valley Bank in Menlo Park, Calif. (Photo by John Brecher for The Washington Post via Getty Images)

Silicon Valley Bank collapsed last week—a not exactly surprising event as interest rates rise after years of easy credit. But out of the thousands of banks in America, why did SVB go under? Florida Gov. Ron DeSantis shared his own theory during an interview with Fox News’ Maria Bartiromo: “This bank, they’re so concerned with DEI and politics and all kinds of stuff. I think that really diverted from them focusing on their core mission.”

Did wokeness kill America’s 16th largest bank?

First, it’s important to understand what’s being discussed. DEI—diversity, equity, and inclusion—programs have become widespread in the world of business and education. Such programs incorporate initiatives like unconscious-bias training while emphasizing diverse hiring practices and more inclusive language. ESG—which stands for “environmental, social, and governance,” referring to objectives of stakeholder capitalism—also has been a big part of Republican rhetoric going into the 2024 election. In Republican circles both terms, along with woke and wokeness, have become shorthand for political progressive overreach.

DeSantis isn’t alone in suggesting DEI, ESG, or just general wokeness played a role in SVB’s downfall. GOP Rep. James Comer, chairman of the House Oversight Committee, called SVB “one of the most woke banks in their quest for the ESG-type policy and investing.” Donald Trump Jr. tweeted, “SVB is what happens when you push a leftist/woke ideology and have that take precedent [sic] over common sense business practices.” Right wing activist Charlie Kirk, Sen. Mike Lee, and Rep. Andy Biggs also jumped on the SVB woke train.

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  1. Avatar photo
    Ben Connelly

    Wasn’t going to comment but the fact that you ended with that quotation forces me to. The Dispatch’s populist critics will assume it’s indication of your wokeness, Alec. I know that isn’t true, but I do think it was a poor choice.

    No, ESG didn’t cause SVB to fail. However, “stakeholder capitalism” is an irresponsible (from a fiduciary standpoint) back-door for socialism. Long live the “heartless,” “greedy,” profit-maximizing Milton Friedman devotees who singlemindedly pursue shareholder value.

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  2. Bigdonmck

    Kindly, So what? C'mon. A degree in administration...in ANY field... is HUGELY insufficient to handle the duties of a risk officer at any bank...much less the 16th largest bank in America where hundreds of millions of dollars are involved. Regardless of her background.
    But I'm not blaming Olson. I'm blaming SVB and its Board for leaving the risk officer position open for so long. Olson was on the job for less than 3 months before the joint crashed and burned. The Board screwed up....big time. It happens. Again, i'm a proponent of merit over DEI. And this is coming from a guy who actually was a poly/sci major with a minor in biz adm.
    Like I said, let's just disagree and call it a nite. if you ever hit the South Side, I'll buy a beer.

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  3. Bigdonmck

    In another comment I said the reason SVB failed was because of their government securities holdings. I agree with you that "they played fast and loose". I do think their Board was top heavy with "woke" folks. And I agree with Kessler's column that the Board may have been "distracted" because of that. But bottom line...it was the govt securities that sank SVB. If a "non-woke" board had acted in the very same fashion, SVB would have crashed and burned.
    As Mudskipper stated in a very brief and to the point earlier comment, "they screwed up".

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  4. Edward Grant

    Governance is the sole job of management. To the extent it is distracted from that job, it is sowing the seeds of failure. Scrap the E and the S, and for God’s sake scrap the psychobabble of testing employees’ “implicit biases.” I also think SVB forked over $73 million to BLM, Inc. Whether wokeness caused this boneheaded investment strategy or not (the more plausible explanations are even worse monetary policy from the Fed and fiscal policy from Congress and WH), the collapse provides insight into how far management has strayed from the sole reason for its existence.

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  5. Trichwages

    Thanks, Alec. You always get stuck fact checking stupid things that stupid people say that sometimes not so stupid people believe. Poor you.

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  6. Avatar photo
    Todd T

    I thought this was a Fact Check article and the answer to the headline would be “No”

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  7. Avatar photo
    JohnF

    In what sane universe do we look to the likes of Donald Trump Jr., Charlie Kirk, James Comer, and Andy Biggs to try to understand the complex circumstances underlying the failure of a regional bank?

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    1. Sampsoncrisp

      Or de Santos, who is revealing himself to be somewhat of a knuckle dragger.

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  8. Johnnyberge

    “ Every bank larger than it has incorporated DEI into its business model and established a chief diversity officer or similar position or council. ”

    I think most all medium to large scale companies include policies related to diversity and gender/religion accommodations, even if only as a provision of their HR policies. It’s simply a requirement to navigate potential discrimination and harassment exposure. Many do this quietly, while others highlight it.

    The argument being offered here is red-herring culture war bait, as exemplified by those promoting it.

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  9. Avatar photo
    Show Jay Janney the 🚪!

    Some people may ask what should people with a lot of money do? For starters, you could give it to me, and I promise to be responsible with my own money. But if youa re greedy and don't want to give it to me, here's a Forbes article to consider.

    https://www.forbes.com/advisor/banking/ways-to-insure-excess-deposits/

    I'll snip-quote a few lines of the article:
    "The Certificate of Deposit Account Registry Service, or CDARS, represents a network of banks that insure millions for CD savers. Here’s how it works. You sign a CDARS placement agreement and custodial agreement, then invest money with a CDARS network member. This money is then divided into CDs issued by different CDARS banks. So, theoretically, you could invest $5 million with CDARS and have it split into multiple CDs, each of which would be protected by the $250,000 FDIC insurance limit".

    "If you’re specifically looking for banks that insure millions, you might consider an option like MaxSafe. Offered by Wintrust, MaxSafe allows depositors to increase their FDIC insurance limits from $250,000 to $3.75 million."

    "The Depositors Insurance Fund (DIF) is another option for insuring excess deposits. This program covers deposit account balances beyond the $250,000 FDIC limits at member banks. So, once you exhaust your FDIC coverage limits, you’re still protected. There are no forms to fill out to take advantage of this coverage—you simply need to have accounts at a DIF member bank."

    I'm not endorsing any of these methods, but highlighted them to show that yes, there are ways to increase insurance coverage on your bank deposits. I'd add that the FDIC insures per account, which means if you open an account in your name, and your wife opens an account in her name, each gets the $250k insurance.

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  10. Jim.H

    Did an alphabet soup of wokeness cause Silicon Valley Bank to fail?......short answer is Yes.

    Also, they were lazy....

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