Republicans are blaming the collapse of two major banks over the weekend on “woke” investment practices, once again dragging the effort to address the climate crisis into America’s increasingly polarizing culture wars. But their reasoning doesn’t align with assessments from leading economists who have mostly tied the bank failures to risky bets on cryptocurrency—not clean energy—and the plummeting value of government-backed securities amid rising interest rates.
Regulators seized control of Silicon Valley Bank in California on Friday, and Signature Bank in New York on Sunday, hoping to safeguard customer funds and prevent a wave of account withdrawals from triggering a larger financial crisis. Those two collapses mark the second and third largest bank failures in U.S. history behind Washington Mutual’s collapse in 2008, which helped spark the Great Recession.
“We see now coming out they were one of the most woke banks in their quest for the ESG-type policy and investing,” Kentucky Rep. James Comer, a Republican and chair of the House Oversight Committee, said on a Sunday morning Fox News program—referring to climate-friendly investment funds that take environmental, social and governance factors into account.
Florida Gov. Ron DeSantis—who is being floated as a potential GOP frontrunner in the 2024 presidential election—also appeared on the Fox show, where he suggested diversity and equity efforts could be to blame. “I mean, this bank, they’re so concerned with DEI and politics and all kinds of stuff,” he said. “I think that really diverted from them focusing on their core mission.”
Other high-profile Republican pundits and far-right lawmakers, including Donald Trump Jr., Georgia Rep. Marjorie Taylor Greene and Missouri Sen. Josh Hawley, chimed in with similar accusations on social media. And Suzanne Downing, a former communications director of the Alaska Republican Party, explicitly blamed financial institutions “buying into climate change theology” in a Sunday op-ed.
But those accusations have been broadly refuted by leading economists who place the blame more squarely on rising interest rates from the Federal Reserve’s efforts to tame inflation, plus decisions by the banks to invest in Treasury bonds and other government-backed securities, as well as cryptocurrency like Bitcoin.
“I don’t have a clear idea of what woke is and it seems to change by the day. Maybe government bonds are now woke, but that is what got them into trouble,” Dean Baker, a senior economist at the Center for Economic and Policy Research who predicted the 2008 housing bubble crash, told Business Insider.
According to analyses by Baker and other well known economists, the fall of Silicon Valley Bank, which held some $220 billion in assets and was America’s 16th largest commercial bank before its collapse Friday, was tied largely to the bank’s decision to buy up government bonds amid the tech boom between 2019 and 2022, when many Silicon Valley companies were flush with cash.
Between the end of 2019 and the first quarter of 2022, deposits to Silicon Valley Bank more than tripled to $198 billion, far outpacing the national average, Marc Rubinstein, a former hedge fund manager and popular financial analyst, noted in his assessment.
With deposits skyrocketing and demand for loans relatively low, the bank chose to invest the bulk of that money in government bonds, he said, which tanked in value as the tech boom faded and the Fed raised interest rates to curb inflation. As clients began asking for their money back, Silicon Valley Bank was forced to prematurely sell $21 billion in bonds at a $1.8 billion loss, triggering an old-fashioned bank run, Rubinstein concluded.
Signature Bank’s collapse can be explained even more simplistically. As the finance trade publication Barron’s noted in its apt analysis, “the bank’s connections with cryptocurrency seem to have spooked depositors after Silicon Valley Bank collapsed, prompting a run on the bank’s deposits which, in turn, prompted action from regulators.”
Some New York Democrats echoed that reasoning, saying the regulatory takeover of Signature Bank was intended to send a message to U.S. banks to stay away from the cryptocurrency business. The New York-based bank, which held more than $110 billion in assets, had—similarly to Silicon Valley Bank—pivoted to accepting cryptocurrency deposits right before the industry blew up last year, with blockchain companies like FTX losing billions of dollars in a matter of days.
Other Democrats, including Massachusetts Sen. Elizabeth Warren and President Joe Biden, have also attributed the bank collapses in part to the Trump administration rolling back financial regulations aimed at preventing financial crashes.
It’s true that both banks had notable ties to climate change efforts. Silicon Valley Bank had stated it would invest at least $5 billion by 2027 to support sustainability efforts and pledged to become carbon neutral by 2025. The bank also funded more than 1,500 climate tech startups. And Signature Bank voluntarily joined a leading climate risk disclosure program, essentially championing the kind of financial rules that Republicans have now targeted as part of their war against “woke capitalism.”
But a growing number of economists have supported climate-friendly investment practices as beneficial for the global economy, warning that failing to address the dangers of rising temperatures could result in trillions of dollars in lost revenue worldwide over the coming decades.
In fact, clean energy investments generated returns that were seven times higher than those from fossil fuel companies between 2011 and 2021, according to a joint report by the Centre for Climate Finance at Imperial College Business School and the International Energy Agency. And Pitchbook forecasts that the climate tech sector will become a $1.4 trillion market—with a compound annual growth rate of 8.8 percent—within the next five years.
While Republicans didn’t address those data points in their arguments over why Silicon Valley Bank and Signature Bank failed, the figures weren’t lost on Baker, the economist from the Center for Economic and Policy Research. “I don’t know if making money’s now woke,” he said. “I mean, some of them might be doing it because they think it’s good for the planet, but I mean they’re doing it as profit making companies—and they are making profits.”
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