Beyond Woke Banks Go Broke

By Theodore R. Malloch
March 14, 2023

(Views expressed by guest commentators may not reflect the views of OAN or its affiliates.)


There are numerous reasons why certain American banks, like Silicon Valley Bank (SVB), the 16th largest in the country, have gone or will go out of business. SVB lost $209 billion in assets and it was gone in a 48 hour rapid collapse, the second largest in all of US history.

The reasons why are not being fully reported in the biased press and are covered over by the Biden government in an attempt to sweep the real causes under the rug and to forestall contagion across the entire financial system.  As a result of bad policy, poor management, risky investments, and putting ESG and wokeness as their foremost priorities, SVB and other banks fail.

SVB, the bank for venture capital and tech start-ups, located in Santa Clara, CA was notorious for its model of banking. It funded risky leveraged venture deals, tech millionaire lifestyles, and hedge funds that were premised on high-risk-high reward. The model worked for a stretch of time until the Biden economic policies and those of the Federal Reserve caught up. Biden pumped $6 trillion into the US economy in short order, taking inflation to a forty year high and is hell bent in its laundry list of yet more spending, higher taxes, and socialist woke regulation, to keep the craziness going. It’s latest “make believe” budget would put the US debt at over $50 trillion in the next ten years and see interest on that debt swirl totally out of control.

The California company’s tipping point came last Wednesday, when SVB announced it had sold $21 billion worth of its securities at a roughly $1.8 billion loss and said it needed to raise another $2.25 billion to meet clients’ withdrawal needs and fund new lending. That news sent its stock price plunging and triggered a panic-induced wave of withdrawals from VCs and other depositors. Within a day, SVB stock had tanked 60% and led to a loss of more than $80 billion in bank shares, globally. Signature Bank in New York went under on Sunday and others were in panic mode with depositors redeeming for cash and/or moving to larger money center banks that had healthier balance sheets and were “too big to fail.”

SVB got caught in the cross hairs of the Biden economy, fueled by wokeness and rising interest rates, period. Here are the six reasons that bank and potentially others with similar models, some regional banks, and those who misjudged risk portfolios and the duration of bond yields, could see the same end.  

Fed Interest Rates

The Fed generally raises rates to beat inflation and bring it back to its preferred 2 percent level. That is until something breaks. Until SVB, nothing broke. Now we see a sharp sell-off of banking stocks. It looks like the SVB crisis could even derail the Feds desired tightening. Can they raise rates yet higher? The sudden collapse of Silicon Valley Bank is forcing a broader rethink among investors about the prospects of regional banks. That, in turn, could lead to a pullback in lending from firms that face pressure to raise deposit rates as the Fed has cranked interest rates higher to fight inflation. The reality is the Fed did too much, too fast, too late and is wrong yet again.

Poor Management

“People are just shocked at how stupid the CEO is” one Silicon Valley Bank insider said. “You’re in business for 40 years and you are telling me you can’t raise $2 billion privately? Get on a jet and fly to Kuwait like everyone else and give them control of one-third of the bank.” SVB Bank had an extremely faulty business model, a dumb CEO and team around him, wokeness galore, and a board of directors that had no idea what it was doing or controls. With 90% of the board Independent, roughly half women, 1 black, 1 LGBTQ, they were way ahead in their diversity demands but only one had banking experience. Noticeably, SVB actually went without a chief risk officer for eight months and their chief administrative officer was the CFO at Lehman Brothers before it collapsed in 2008.


Woke Priorities

SVB has scrubbed its former woke website but it focused on diversity, inclusion, and equity and spent a great deal of internal time and money foisting such leftist propaganda. It held constant training sessions on trendy woke topics and was at the forefront of ESG investing. SVB had a penchant for everything green, lefty and so-called climate change. Some have argued that the DIE and ESG casting took the banks’ mind off its core business—which was supposed to be banking.

Failure to Ascertain Risk

Many of SVB’s customers were venture capital-backed tech startups that grew quickly during the pandemic, with significant cash holdings they kept at SVB. As interest rates surged and the economy slowed, many of these players burned through their cash, driving down the bank’s deposits. The bank did not adjust or adapt its lending or investments. It had a mismatch. The duration on the treasury securities it held were not in step with the market in a period of very rapid interest rate rises. The portfolio duration, a measure of risk, moved to six years from about four years during 2022. SVB compounded the problem by relying on institutional deposits, with the vast bulk of its deposit base consisting of accounts of well more than $250,000, the limit for FDIC insurance. This made it more vulnerable to a run.

Selfish Unethical Leadership

SVB employees received their annual bonuses just hours before regulators seized the failing bank, according to people with knowledge of the payments. And the bank’s CEO, Greg Becker, sold $3.6 million in company shares less than two weeks before SVB revealed the massive losses that prompted its collapse, according to regulatory filings. Other insider trades show the CFO and CMO selling shares too. What did these executives and others anticipate? When did the insider selling really begin? That money should all be clawed bank. Depositors have already sued the bank and there will doubtless be more class action suits. As I wrote in my book, The End of Ethics about the 2008 financial disaster, this company lacked a moral compass and acted to enrich the top executives, not shareholders.

Fondness for the Democrats and Favor Seeking

SVB and its employees historically gave large contributions to the Democrat Party and to the Biden election. 97 percent of all money went to Democrats. They sought favor with the left of center politicians and the California Governor. SVB lobbied in Washington, DC and with their regulators, who were seemingly asleep on the job, to allow them loopholes and special arrangements. In the months before Silicon Valley Bank’s collapse, the bank’s lobbying groups fought a proposal requiring financial institutions to increase payments into the Deposit Insurance Fund that protects depositors from bank failures. SVB, argued that risk of bank failures was low and insisted that requiring banks to pay more into the fund would harm financial institutions’ bottom lines. They had a reputation for skirting banking regulations and playing it loose.

The result of these six failures led to the demise of Silicon Valley Bank and there is a lesson for other banks to learn here, if they want to survive and thrive.


HSBC has now scooped up the UK arm of failed Silicon Valley Bank, securing the deposits of thousands of British tech firms that hold money at the lender. Had a buyer not been found, SVB UK would have been placed into insolvency by the Bank of England following the stunning collapse of its parent in the United States. HSBC Holdings plc announced that its UK ring-fenced subsidiary, HSBC UK Bank plc, is acquiring Silicon Valley Bank UK Limited (SVB UK) for £1. SVB UK had loans of around £5.5bn and deposits of around £6.7bn. It is rumored that SVB in the US did not draw any buyers in a late hour auction after PNC and RBC dropped out of the running  and that Goldman Sachs will buy some of its assets at next to nothing.

From highflyer to bankruptcy and all at record speed. A financial system where credit market institutions borrow short and lend long has built-in instability. As long as depositors think their demand deposit funds are available at the drop of a hat, when in fact they are tied up in mortgages and other long-term loans and bonds, bank runs will always be a risk. If they specialize in wokeness they also lose sight of their real intended purpose.

When in trouble, “Big Government” will always step in to protect “Big Business” and print tons of money to cover up their mistakes. But don’t worry, it won’t cost the taxpayer a dime.

Ted Roosevelt Malloch is CEO of Roosevelt Global Fiduciary LLC. He served as Research Professor for the Spiritual Capital Initiative at Yale University, Senior Fellow Said Business School, Oxford University and Professor of Governance and Leadership at Henley Business School where he co-led the Director’s Forum.  His most recent books concern the nature of virtuous enterprise, the practices of practical wisdom and “virtuous business,” the pursuit of happiness, the virtue of generosity and the virtue of thrift.  His latest book is Common Sense Business, co-authored with Whitney MacMillan, former Chairman and CEO of Cargill, the world’s largest privately held company. He has served on the executive board of the World Economic Forum (DAVOS); has held an ambassadorial level position at the United Nations in Geneva, Switzerland; worked in the US State Department and Senate; did capital markets at Salomon Brothers on Wall Street, and has sat on a number of corporate, mutual fund, and not-for-profit boards. He was very active in the Trump campaign of 2016. Ted earned his Ph.D. in international political economy from the University of Toronto and took his B.A. from Gordon College and an M.Litt. from the University of Aberdeen on a St. Andrews Fellowship.  

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