The culture war has come for Silicon Valley Bank.
Top Republicans have zeroed in on the failed bank’s stances on sustainability and diversity as proof that its management team cared more about promoting a progressive agenda than safeguarding the more than $150 billion its customers had placed in uninsured deposits.
Now, after Biden officials took unprecedented steps to rescue the thousands of high-tech startups that held accounts, far-right activists and GOP luminaries are ripping into the Northern California institution’s embrace of cultural lightning rods such as workplace inclusion and climate consciousness.
Florida Gov. Ron DeSantis over the weekend battered Silicon Valley Bank leaders for being too focused on so-called “woke” initiatives to defuse the time bombs on its balance sheet. Meanwhile, social media fusillades from the likes of Sen. Josh Hawley ( R-Mo.) and Rep. Marjorie Taylor Greene (R-Ga.) injected a dose of identity politics into bone-dry debates over banking regulations.
As regulators raced to defuse worries over the prospect of a broader financial crisis, conservative policymakers who claim environmental, social and governance (ESG) initiatives portend the decline of modern capitalism are taking a victory lap.
“Rather than doing their job on risk management, they must have allowed themselves to be distracted by other things,” Sen. Bill Hagerty, a Tennessee Republican who sits on the Senate Banking Committee, told POLITICO on Tuesday evening. “I think banks should be in the business of banking, not social engineering.”
Policy battles over ESG are nothing new at this point. But Silicon Valley Bank’s implosion last week – which set off concerns about a contagion that would threaten other financial institutions – has uncorked a new strain in the GOP’s self-styled war on woke. And SVB’s high-profile efforts to present itself as a good corporate citizen makes for easy fodder.
The bank’s 2022 ESG report boasted plans to invest more than $16 billion in low- and moderate-income communities and climate-friendly businesses over the next five years. It also pledged to bolster its leadership ranks with Black and Hispanic/Latino employees and to build relationships with diverse suppliers.
DeSantis, a potential Republican frontrunner in the 2024 presidential election, used an appearance on Fox News’ “Sunday Morning Futures” to blast the bank for being “so concerned with DEI and politics” that it “really diverted from them focusing on their core mission.”
The former Trump acolyte isn’t shying away from those claims either – a sign that some Republicans view those attacks as a winning message as policymakers scramble to respond to the Biden administration’s bank rescue.
DeSantis is “leading the national conversation on the dangers of putting a political agenda before a fiduciary duty,” said Jeremy Redfern, a spokesman for the governor.
There’s little evidence Silicon Valley Bank’s ESG policies had any role in its demise. The bank’s balance sheet was exposed to investments that lost value when interest rates climbed. When SVB tried to raise cash to account for the losses, well-heeled venture capitalists and tech startups raced to draw down their deposits — more than 90 percent of which exceeded the FDIC’s deposit insurance limit of $250,000.
Customers pulled $42 billion from the bank on March 9, according to California regulators, a massive run that forced regulators to step in and shut it down.
Attributing those failures to ESG or diversity policies “is absolutely ridiculous,” Rep. Maxine Waters, the top Democrat on House Financial Services, told POLITICO, adding that claims that ESG or diversity pledges contributed to its failure are “a racism argument.”
“People are going to see through those kinds of arguments,” she said.
Actual precipitating causes aside, Silicon Valley Bank’s positions on issues are now a target for Republicans who claim its political posturing may have a hand in its rescue.
The West Coast “elites” who ran SVB had “lost focus on what really matters,” said West Virginia Treasurer Riley Moore, a Republican who has already announced that he’s running for Congress in 2024. It’s “a great example, unfortunately, of what ESG ultimately – I believe – will do to the free market capitalist system here in this country. It will destroy it.”
Republican attacks on Wall Street and corporate America’s embrace of ESG have accelerated in recent years. Despite its origins as a talking point for corporate types, it’s showing signs of being an effective wedge for GOP power brokers looking to sow dissent among their rivals.
Republicans were backed by three moderate Dems facing tough slates in 2024 in a recent vote aiming to reverse a Biden administration rule that allows fiduciaries to weigh environmental, social and governance considerations in making investment decisions. At the state level, policymakers like Moore are pulling public money away from asset managers and banks over what they see as ideological differences on ESG.
“The fools running the bank were woke and almost became broke, but the Democrats and the Fed swooped in to make sure their woke donors at SVB didn’t go under,” Greene said in a tweet shortly after Biden officials announced the rescue plan on Sunday night.
SVB’s political activity paints a more complicated picture. Its federal political action committee has spent just under $300,000 since 1998, and it has spread money among California candidates from both parties. In addition to funding Bay Area Democrats like Reps. Zoe Lofgren and Anna Eshoo — whose districts include many of the businesses and venture funds SVB had relied on for deposits — the committee also donated more than $20,000 to committees tied to Speaker of the House Kevin McCarthy.
The bank’s customer base was no less ideologically diverse. Until last week, portfolio companies backed by a venture fund belonging to Republican mega-donor Peter Thiel — one of Hawley’s biggest supporters — counted SVB as their bank. It was also a key partner for clean energy investors and top Silicon Valley firms like Union Square Ventures, whose executive contributions tilt more toward Democrats.
What’s more, while the bank’s depositors have been made whole, its leadership was removed by regulators on Friday. Federal relief will not extend to SVB’s financial backers and unsecured creditors.
Spokespeople for Hawley and Greene did not respond to requests for comment.
— Jeremy White and Jordan Wolman contributed to this story.