Republicans are divided over who to blame for the collapse of Silicon Valley Bank and its effect on the financial sector, focusing either on "woke" bank policies or high inflation and interest rates.
Silicon Valley Bank collapsed last week after a historic run on deposits, leading to clients withdrawing $42 billion in a single day. By the end of Thursday, the bank had a $958 million negative cash balance, and its stock price had fallen about 60%. Regulators stepped in and shut down the bank.
SVB COLLAPSE: FED’S PLAN FOR RATE HIKES FALL BY THE WAYSIDE
President Joe Biden called for a broad deposit guarantee to mitigate the fallout from the banking crisis, but some Republicans have criticized the proposal as a bailout for big banks.
"Woke" at center of blame game
Several Republicans, such as Rep. James Comer (KY) and Gov. Ron DeSantis (FL), were quick to blame "woke" investments and policies for the bank's failure.
Last year, the bank committed $5 billion in "loans, investments, and other financing to support sustainability efforts" by 2027. The company pledged to be carbon-neutral by 2025 and promoted diversity, equity, and inclusion initiatives.
"This bank, they’re so concerned with DEI and politics and all kinds of stuff. I think that really diverted from them focusing on their core mission,” DeSantis told Fox News over the weekend.
Comer echoed DeSantis's statements, calling Silicon Valley Bank one of the “most woke banks in their quest for the ESG-type policy and investing.”
Rep. Marjorie Taylor Greene (R-GA) and Sen. Josh Hawley (R-MO) suggested that regulators backstopped deposits over the typical $250,000 limit due to its left-leaning values.
"The Treasury’s sure fire economic method of saving banks who are divested in ESG and DEI," Greene tweeted on Sunday. "And just like that the FDIC limit of $250,000 doesn’t matter anymore."
Regulation and inflation as cause of collapse
On the other side, some GOP leaders are blaming record-high levels of inflation for the institution's collapse.
Silicon Valley Bank's clients rushed to withdraw money last week, taking out $42 billion in a single day. The withdrawals, combined with a high rate of assets tied up in bonds saddled with large unrealized losses, are considered to be the main drivers of the bank's collapse. Since then, stock futures in the United States and Europe have dipped into the red.
Credit Suisse, a Swiss bank, saw shares decline over 20% to an all-time low for the second day in a row.
Some Republican lawmakers disagreed with politicians using the bank's collapse to push their own opinions forward rather than focusing on the measures taken to prevent a financial crisis.
"We have politicians dancing around in a hackish way, trying to drive their own agenda," House Financial Services Committee Chairman Patrick McHenry (R-NC) said on CNBC Tuesday morning. "We have folks that are opining so that they can actually have a greater platform."
McHenry added that he believes the Federal Reserve and Federal Deposit Insurance Corporation are "doing the right thing" in accordance with the law.
SILICON VALLEY BANK COLLAPSE: BIDEN VOWS TO 'STRENGTHEN OVERSIGHT AND REGULATION'
“In the near term, the important thing is to be an adult and not assign political blame right now,” Rep. Andy Barr (R-KY), chairman of the House Financial Services subcommittee overseeing the FDIC and other regulators, said Tuesday on Fox Business.
Biden reassured the public the "banking system is safe" and that it should not be worried about its deposits, echoing many that Silicon Valley Bank fell due to improper regulation.
However, Barr said the president should acknowledge that high inflation, a constant topic that Republicans blame on Democrats, contributed to the bank's downfall.
"Let me just say this was not a failure of regulation as the president suggests, it was a failure of — in the proximate cause, of course, was the failure of bank management — but also a failure of bank supervision, and a failure of government policy as the underlying cause, overspending by the Democrats that fueled inflation, and then a monetary policy kept interest rates too low for too long," Barr said.
Inflation fell to 4.6% in February, as measured by the producer price index, ahead of the Federal Reserve's decision next week on whether to raise interest rates in the wake of the banking collapse and share declines.
House Speaker Kevin McCarthy (R-CA) joined the latter group of GOP lawmakers in his first public statement on the looming financial crises.
"Biden’s reckless spending caused record inflation and rapid interest rate hikes that broke family budgets and banks too," McCarthy tweeted on Tuesday. "We must restore fiscal sanity."
During the Trump administration, the Senate passed a bill that rolled back several policies under the Great Recession-era Dodd-Frank Act, exempting Silicon Valley Bank from regular risk management and stress testing.
CLICK HERE TO READ MORE FROM THE WASHINGTON EXAMINER
However, Barr pointed to insufficient regulators rather than the substance of the regulations themselves.
"The underlying causes [were] basic fiscal and monetary policy errors and a failure, not of a lack of regulation, but inadequate bank supervision,” Barr said. “The regulators need to do some soul searching about extracurricular political errands they are on instead of basic nuts and bolts bank supervision.”