The argument that federal demands on banks to have diverse leaders played a role in the collapse appears specious. Representative Maxine Waters of California, a top Democrat on the House Financial Services Committee, did include a diversity and equity provision in the expansive Wall Street regulation law that passed in 2010, to encourage more hiring and promotion of women and workers of color by financial institutions. But Silicon Valley Bank’s leadership was not particularly diverse.
Like many banks, S.V.B. had expressed an interest in sustainable investing and diversity. The bank planned to devote a small portion of its funds — at least $5 billion by 2027 — to sustainable businesses. (It had $212 billion in assets and held $74 billion in loans in December 2022.) The bank had also adopted hiring policies that promoted diversity.
But a more prosaic issue was at the center of its collapse: Silicon Valley Bank focused too much of its business in one sector, technology, and parked too much cash in long-term Treasury bonds, whose low interest rates then failed to keep up with an unanticipated rise in inflation. When worried depositors demanded their money, the bank had to sell holdings at a loss, which fueled a panic.
“S.V.B. failed — while its chief risk officer position sat vacant for eight months as its financial standing deteriorated — because it failed to address two key risks: concentration in your client base, and rising interest rates. This is a failure of ‘Banking 101,’” Senator Elizabeth Warren, Democrat of Massachusetts, wrote on Tuesday in a scathing letter to Greg Becker, the president of the bank until it collapsed.
Indeed, one of the first depositors to sound the alarm was Founders Fund, owned by the Republican megadonor Peter Thiel. The fund withdrew its money last Thursday and told its portfolio companies to switch banks, according to Bloomberg. The bank failed the next day.
The fact that Mr. Thiel has given millions of dollars to the conservative political action committee Club for Growth did not dissuade the group from sharply criticizing the Biden administration’s rescue efforts. And the organization failed to explain how Mr. Thiel fit into its critique of the bank’s “woke” investments and “liberal” clients.
“Taxpayers should not be forced to bail out the well-connected and wealthy because a bank prioritized woke causes above smart investing,” said David McIntosh, the organization’s president. “Changing the rules after the crash to prop up liberal investors at the expense of taxpayers is pure crony capitalism.”
