Why Republicans Are Blaming the Bank Collapse on Wokeness

The only problem with this line of attack is that it makes no sense.

Picture of Ron DeSantis giving a speech in a lectern, looking as if he is decrying something
Scott Mcintyre / NYT / Redux

A financial panic like the one that struck several U.S. banks over the past few days presents a dilemma for the committed partisan. You don’t want to side with the failed Silicon Valley Bank and other collapsing institutions and come across as coddling the rich, but you also don’t want to root for the bank to fail and end up being a cheerleader for broader economic collapse. This is especially tricky for Republicans, who spent the weekend looking for a way to criticize President Joe Biden’s handling of the crisis, even as they waited to see what his handling of the crisis would be.

But a few prominent Republicans found a third way: Blame it all on wokeness.

“I mean, 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,” said Florida Governor and presumptive presidential candidate Ron DeSantis.

“SVB is what happens when you push a leftist/woke ideology and have that take precedent over common sense business practices,” tweeted Donald Trump Jr., presumably in contrast to the commonsense business practices that have led Trump family businesses to declare bankruptcy multiple times. “This won’t be the last failure of this nature so long as people are rewarded for pushing this bs.”

“We see now coming out they were one of the most woke banks in their quest for the [Environmental, Social, and Governance]-type policy and investing,” Representative James Comer of Kentucky, chair of the House Oversight Committee, said.

And Representative Marjorie Taylor Greene offered a nonsensical statement, even by her standards, saying that “the fools running the bank were woke and almost became broke.”

This is a clever maneuver, sidestepping messy questions about whether and how to rescue the failing banks by instead attaching the panic to an existing narrative about “wokeness” in the Democratic Party. It also avoids the risk of appearing to be against entrepreneurs who might lose their shirts in bank collapses, or against the financial system that has historically backed Republicans. The only flaw is that the line of attack makes no sense.

In reality, Silicon Valley Bank failed because it made some bad business bets. It invested deposits in long-term assets such as Treasury bonds. As the Federal Reserve raised interest rates, those investments lost value while simultaneously squeezing many of the depositors. The result was a bank run, complete with lines outside branches.

That’s unfortunate for SVB and for its customers (though the Treasury Department says it has a plan to make sure depositors don’t lose any funds, at no cost to taxpayers), but there isn’t an obvious role in this story for wokeness or DEI programs, and to the extent there might be one, DeSantis, Trump, and Comer aren’t explaining it. None of this is to say that SVB didn’t adopt some trappings of liberal identity politics; Trump Jr., for example, focused on a screenshot of an executive at SVB who touted her work on LGBTQ issues.

The reason that SVB would want to advertise its programs on DEI, ESG, and other matters is not because it was in thrall to woke ideology. It’s because that was a good business decision. Just look at the bank’s name: It caters to startups in a very liberal, highly diverse marketplace. Positioning itself as a socially conservative bank would have been a truly unwise business decision.

But SVB was, at heart, a bank, and its goal was to make money. The bank didn’t fail because it was obsessed with diversity. It failed because it had done a poor job hedging its risks, and macroeconomic conditions turned perilous. A classical liberal would say this is a good thing; sometimes businesses fail.

DeSantis, however, is no classical liberal. He’s demonstrated that he is not only willing but eager to meddle in private companies’ business in order to enforce social policies, most prominently in his showdown with Disney. Although DeSantis is the most prominent example of this big-government tendency, he is not alone. As The Dispatch notes, Republican politicians have been on a crusade against ESG for months now, proposing some remarkably intrusive measures to force private companies to stop operating in ways that they think are good for business. Those companies might be wrong about the business effects, but traditionally, conservatives have left those decisions to businesses, for reasons of both ideology and political expediency.

The “wokeness” offensive fits comfortably into the new populist strain in the GOP. Despite the historical alliance between Republicans and the financial sector—forged out of a shared opposition to the stricter regulation Democrats traditionally favored—certain factions of American conservatism have long been suspicious of banks and big business, seeing them as leeching off virtuous Americans. The history stretches from Andrew Jackson’s assault on the Bank of the United States to William Jennings Bryan’s famous “Cross of Gold” speech and on to the present day.

That makes it a ready line of attack for today’s new populists, and means that whether the SVB panic proves to be a passing episode or the start of a broader economic problem, the nation is likely to hear much more of the same for a long time to come.