Bank collapse hits home for Black-owned banks as Republicans blame 'woke' culture
After the collapse of Silicon Valley Bank (SVB) and Signature Bank, two of the largest banks in America that cater to the tech industry, consumers are on edge.
SVB was the first to fall after a hike in interest rates led to a decrease in the value of the bank’s assets. Two days later Signature Bank was forced to close after it was hit with a drastic number of withdrawals following the failure of SVB.
The closures of the financial institutions mark the biggest bank collapse since 2008. According to experts it's a crisis for all banks. But Black- and community-owned banks often bear the brunt of such failures.
“We are gravely concerned about the impact on the community bank system as a whole,” Dominic Mjarten, president and CEO of Optus bank, a Black-owned bank founded by Black leaders in 1921, told Yahoo News. “I don’t think this is a crisis for Wall Street necessarily. I think this is a crisis for Main Street.”
On Monday, President Biden assured Americans that the nation's banking system is secure after the fallout. “Americans can have confidence that the banking system is safe. Your deposits are safe. No losses will be borne by the taxpayer,” Biden said during a press conference. “Managers of these banks will be fired. Investors in these banks will not be protected.”
For some investors, the demise of both banks is a stark reminder of the economic crisis in 2008. And since the recent collapse some politicians are blaming “woke” programs and practices for the downfall of Silicon Valley Bank. Though “woke” is generally defined as having an awareness of racism, injustice, and discrimination, it has been used as a catch-all for progressive politics.
Silicon Valley Bank, according to its website, billed itself as an institution focused on maintaining a workforce that builds “diversity, equity, and inclusion [DEI].”
“So these SVB guys spend all their time funding woke garbage rather than actual banking and now want a handout from taxpayers to save them,” Sen. Josh Hawley, a Missouri Republican, said on Twitter.
Florida Gov. Ron DeSantis agreed, “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,” the Republican said on Fox News’ "Sunday Morning Futures."
But experts say the banks’ undoing had nothing to do with its push for diversity, equity and inclusion.
“Woke nothing. No one is awake at all. And it's not the reason they failed. They failed because their CEO cashed out [millions],” Mehrsa Baradaran, a law professor at the University of California, Irvine, and author of The Color of Money: Black Banks and the Racial Wealth Gap, told Yahoo News. “It’s so offensive. They feel like they’re gods and so it must not be their fault. So let’s look at who we can blame and I think it’s the wrong people for sure.”
Aron Betru, the chief strategic officer at Trident, a company that invests in small businesses, says blaming DEI policies for SVB and Signature Bank’s downfall is dangerous. To the contrary, he said the lack of diversity could have been at issue.
“I would argue that they didn't have enough diversity of thought, which was part of the reason why they had these failures,” Betru said. “I think we need to be vigilant and make sure that folks understand diversity of thought, empirically, has always been a benefit to the decision maker.”
As some banks aim to focus on diversifying their ranks, the number of Black-owned banks in America has decreased over the years. There are over 5,000 insured financial institutions in the U.S., but fewer than 25 of them are Black-owned, according to the Federal Deposit Insurance Co.
“There is a need for more Black banks,” Nicole Elam, president and CEO of the National Bankers Association, which represents minority-owned and -operated banks, told Yahoo News. At its peak, there were 134.”
During times of financial turmoil or instability in the market, minority- and community-owned banks, which may be some of the “wokest” of all financial institutions, are often hit first, experts say.
“As we’ve learned from history, when we have any hiccups, or any challenges in our financial system, underserved communities feel that impact first and recover last,” Mjarten said.
Martin says his bank is already feeling the impact of the current banking crisis because consumers are in a state of uncertainty; this causes customers to migrate to other institutions that they assume are more stable.
“The money is essentially already leaving the communities that we serve. It’s migrating over to larger institutions that are not as equipped to serve some of the smaller, underserved parts of our economy that we are,” Mjarten said.
But liquidity and assets have been leaving Black-owned banks for decades. According to the Committee for Better Banks, only 15% of new bank branches were established in low-income communities from 2010 to 2021.
“I’m not surprised. I’m very disappointed and it’s a manifestation of deep systemic issues, frankly, that have been brewing for 400 years,” Mjarten said.
Experts say a diverse financial ecosystem is necessary to fill the gaps in minority communities, but when Black-owned banks endure changes in the market it hurts BlPOC communities the most.
“When you have banks like us pulling back from lending because we’re concerned about our ability to raise enough liquidity to weather whatever storm may come, even though we’re sitting in a very good spot today with almost 50% liquidity. That’s a crisis, in my opinion,” Mjarten said.