US Republicans are blaming the nation’s second-largest bank failure on corporate “wokeness,” rather than insufficient regulation, bad business decisions, or anxious customers racing to withdraw their funds, reports said.
Silicon Valley Bank, according to House Oversight Committee Chairman and Kentucky Republican James Comer, is “one of the more woke banks in their drive for ESG-type policy and investing.”
“SVB is what happens when you push a leftist/woke ideology and have that take precedent over common sense business practices,” Donald Trump Jr. has said in a tweet, as well. Andy Kessler of the Wall Street Journal claimed that one reason for the Silicon Valley Bank’s downfall was its diverse board, which was roughly half female and included one Black member, one LGBTQ member, and two veterans.
But What is Woke and Did it Really Lead to SVB’s Fall?
The term ‘woke’ derives from Black political history and gained popularity during the rising Black Lives Matter movement in 2014, said a report by Vox. It has roots in “an understanding of systematised white brutality against Black people,” as journalist Aja Romano observed, as the report says, but in recent years it has been co-opted by the right as its ‘favourite boogeyman’.
Since its inception, the concept of becoming (and remaining) “woke” has taken on a different, more complex meaning, especially on social media.
By 2010, woke had become synonymous with left-wing politics, socially liberal causes, feminism, LGBT activism and cultural issues, race equity culture issues, and more, the report said.
Meanwhile, in 2020, the Oxford Dictionary defined it as ‘Alert to injustice in society, especially racism.’ The Urban Dictionary defines it as ‘The act of being very pretentious about how much you care about a social issue.’ This sheds light on the different meanings of the word taken today.
Why the Criticism to Woke?
According to the report, the term “woke” is becoming obsolete. A cult of social justice is using the term as a slogan. Being awake is inextricably linked to the identitarian left.
Rather than confronting bad ideas or issues of race equity in culture through discussion, debate, or protest, woke people are now attempting to intimidate their opponents into silence. This, combined with hateful speeches and imposing their illiberal ideologies on others, encapsulates today’s woke culture, a report by BingeDaily says.
Was ‘Woke’ Behind SVB Fall?
According to a report by New York Times, experts have broadly agreed that the bank’s demise had little to do with “wokeness.” The collapse was due to a bank run precipitated by a decline in start-up funding, rising interest rates and the firm’s sale of government bonds at a huge loss to raise capital, the report says.
Itay Goldstein, a finance professor at the University of Pennsylvania’s Wharton School, told the New York Times, that the bank’s loans to environmental and community projects “were not an important factor behind the collapse of SVB.” “There is no immediate indication that these loans precipitated the run by investors,” he was quoted as saying.
SVB Not Alone in Its Diversity Investments
Silicon Valley Bank was likewise not an exception when it came to diversity goals or E.S.G. investments, the New York Times says. Investment in these assets in the United States is estimated to reach $33.9 trillion by 2026 and according to a Consumer Financial Protection Bureau report from 2022, 59 per cent of banks offered lending programmes expressly for women and minority-owned businesses, which would fall under the “social” umbrella of E.S.G.
Harvard Business School professor George Serafeim told the New York Times that blaming the loss on such initiatives demonstrated either “a fundamental lack of grasp of how banks work or the willful misattribution of causality for the bank’s failure.”
In a recent report, Silicon Valley Bank stated that it would invest approximately $16.2 billion over the next few years to fund small enterprises and community development initiatives, affordable housing, and renewable energy. This level of investment amounted to nearly 8% of the company’s $209 billion in assets.
According to three measurements created separately by the financial research organisations MSCI, Morningstar, and Refinitiv, Silicon Valley Bank ranked around average on E.S.G. problems among all banking institutions. Among the top 30 banks, its MSCI A rating placed it on par with 11 others, while 11 others obtained the better AA grade, indicating that they are leaders. Morningstar rated the California lender as one of the lowest of all 30 banks. And its Refinitiv score was lower than that of all but one financial institution, and it was on par with Signature Bank, which failed earlier this week.
Then Why Did SBV Collapse?
As per a report by CNN, during the period of near-zero interest rates, SVB invested billions of dollars on US government bonds. What appeared to be a safe investment quickly unravelled as the Federal Reserve aggressively raised interest rates to combat inflation.
Bond prices decline when interest rates rise, hence the rate increase undermined the value of SVB’s bond holdings. According to Reuters, the portfolio was yielding an average of 1.79% last week, well below the 10-year Treasury yield of roughly 3.9%.
At the same time, the Fed’s rate hikes increased borrowing costs, forcing tech businesses to devote more funds to debt repayment. At the same time, they were having difficulty raising new venture capital money. Companies were forced to use SVB deposits to fund operations and growth, the report said. Read the full report here
The Future of the Term ‘Woke’
According to Jonathan McWhorter, Opinion Writer for The New York Times, what has happened to “woke” is “a demonstration of negative associations gunking up well-intentioned labels. In his opinion, a mature societal view of language will recognise that words are more than just what they mean in a book called the dictionary, and that words referring to societal or controversial issues – i.e., the interesting ones – will frequently require replacement about once a generation. He is confident that a replacement term for “woke” will emerge sooner rather than later – he predicts around 2028. The question is not whether but when, and “woke” will not be alone.
Inputs from the New York Times contributed to this report
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