VICTOR JOECKS: So-woke Silicon Valley Bank now so broke
Bankers should focus on running sound banks, not pushing leftist dogma.
Here’s what passes for a radical idea these days: Bankers should focus on running sound banks, not pushing leftist dogma.
Within the past week, the Silicon Valley Bank went from one the nation’s 20 largest banks to … kaput. It was a stunning collapse, but it wasn’t the only one. Signature Bank fell shortly thereafter. It’s possible more banks will go under.
There are myriad political and policy issues to dissect here. Start with the Federal Reserve’s role in manipulating the money supply. There’s the failure of experts and regulators to see this coming. In a touch of irony, Barney Frank is on the board of Signature Bank. He’s the “Frank” in the Dodd-Frank Act that was supposed to prevent things such as this.
The bank’s customers shouldn’t receive a bailout beyond the $250,000 that is federally insured, especially not by executive fiat. Doing so creates a major moral hazard going forward. A bailout will likely hurt President Joe Biden politically. Expect Republicans to attack cronyism — and rightfully so.
But it’s worth looking more closely at SVB, too. It used to be that business leaders focused primarily on running a great and profitable enterprise. Sure, businesses engaged in political lobbying and charitable contributions, but those were secondary pursuits. The company’s executives hired and promoted people primarily based on their merit and skill.
SVB had different priorities. Its had only one board member with substantial banking experience.
“The board values representation that reflects diversity in other important categories, including gender, age and race/ ethnicity, as well veteran status, sexual orientation and geography,” the company’s 2022 proxy statement said. The company bragged that women compromised 45 percent of its board. It highlighted having one Black and one LGBTQ+ board member.
Last year, the company also set a goal that all of its employees would participate in diversity, equity and inclusion education. It set racial and sex quotas for senior leaders. It bragged about using “DEI metrics dashboards to advance accountability and representation.”
If only the company prioritized representation from people who knew what they were doing — regardless of their sex, race or sexual orientation.
Woke priorities permeated SVB’s business practices. Last year, it pledged to provide $5 billion in loans and other funding to “support sustainability efforts” by 2027. It also set a goal of carbon neutrality by 2025. But it didn’t have a chief risk officer in place for eight months last year. Oops.
SVB and its investors learned the hard way that diversity isn’t a replacement for merit and competence. Reality doesn’t care about the sexual and racial breakdown of a company’s employees. What matters is their ability.
Running a multibillion-dollar business is hard. When CEOs prioritize woke trends, they undermine their core reason for existing — running their companies. When the Federal Reserve injects cash into the economy, it’s easier to mask misplaced priorities. When the slowdown comes, look out.
SVB won’t be the last company to learn the truth of this maxim: Go woke, go broke.
Contact Victor Joecks at firstname.lastname@example.org or 702-383-4698. Follow @victorjoecks on Twitter.