Silicon Valley Bank Got Woke, Went Broke

(Peter C. Earle, American Institute for Economic Research) As these things tend to, the collapse of Silicon Valley Bank (SVB) has given rise to a host of wide-ranging discussions….

In the post-FTX world, no account of corporate incompetence or wrongdoing is complete without a review of the subject’s political activism. In the case of SVB, a line that figured prominently on the values page of the website (before it was replaced by the sterile FDIC receivership page) is that “[they] take responsibility.” About that, we shall see.

More interestingly, the SVB website spared no opportunity to trumpet a commitment to gender, race, and ethnicity within their workforce and senior-executive ranks. It did so in an appropriately data-effusive manner including percentages, charts, and the like. Another quantitatively intensive page, explaining its Greenhouse Gas/carbon footprint policy, did so as well. One wonders, if some of that computational power had been directed at conducting simple “what-if” simulations regarding the future path of interest rates, would a greater calling have been fulfilled? 

On Twitter over the weekend, an account (now locked) commented that

[t]he SVB collapse has been devastating in more ways than one: They supported women, minorities, & the LGBTQ community more than any other big bank.This includes not just diverse events, but actual funding. SVB helped us move one step forward; without them, we move two steps back. 

Those sentiments deftly dismiss the more salient issue: SVB was a mismanaged bank. Whatever communities it served so faithfully in the past are now facing the uncertainties associated with fiscal maladministration. Maladministration, one finds, is exactly like its victims: unbiased, genderless, raceless, and ageless. Clients of many banks which focused on risk management, instead of leftist ideologies, slept soundly this weekend.

It’s likely that over the past weekend SVB depositors were as pleased with their bank’s deep commitment to diversity, equity, and inclusion as individuals with funds in FTX brokerage accounts were to learn about Sam Bankman-Fried’s devotion to “effective altruism.”

And while it will be likely derided as a specious association, it is curious that virtually all of the firms which have recently detonated in spectacular fashion were devout standard-bearers of the environmental, social, and governance (ESG) doctrine.

Perhaps wounded and hamstrung depositors, employees of firms dependent upon those deposits, and the many vendors, suppliers, contractors, and other businesses impacted by the bank’s implosion will find solace in knowing that (although their money is either lost or will be inaccessible for some period of time) SVB was included in Bloomberg’s Gender-Equality Index for five years running.