The largest bank failure in American history happened in 2008, at the height of the Great Recession and the big bank bailouts that helped birth a major right-wing movement. The second- and third- largest ones happened last week.
Federal regulators moved quickly on Friday to take over Silicon Valley Bank (SVB) after it became insolvent. Over the weekend, they did the same for New York-based Signature Bank, which had seen customers withdraw billions after SVB’s collapse. On Sunday, the Treasury Department, the Federal Reserve, and the Federal Deposit Insurance Corporation (FDIC) assured the customers of both banks that they would be able to access all their funds on Monday, hoping to prevent bank runs elsewhere and ensure companies with millions parked in the banks can make payroll. But in doing so, the Biden administration quickly sparked a political backlash echoing that of 2008.
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The government response to the financial crisis that year, particularly the bailouts that rescued big banks, helped fuel the Tea Party movement that became a defining force in the Republican Party. Now, prominent Republicans are seizing on the federal response to the latest banking crisis to further a prominent line of attack in conservative circles: that elite corporations with liberal agendas are thriving at the expense of ordinary Americans.
“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,” Florida Governor Ron DeSantis, widely considered a frontrunner for the 2024 Republican presidential nomination, told Fox News, referring to diversity, equity, and inclusion initiatives embraced by many employers.
Other Republicans, including Rep. Marjorie Taylor Greene of Georgia and House Oversight Committee Chairman James Comer of Kentucky have derided Silicon Valley Bank as “woke,” suggesting its political leanings were behind its failure.
SVB largely catered to Silicon Valley tech start-ups and venture capitalists, who are among the right’s favorite bogeymen. The bank had also committed $5 billion to sustainable finance, while the GOP has become increasingly critical of Environmental, Social, and Governance (ESG) investing. The bank’s employees received annual bonuses hours before the FDIC seized it.
Read more: Most of Silicon Valley Bank’s Deposits Were Not Insured
Arguments that the bank failed because it was “woke” don’t hold water, Aaron Klein, a senior fellow in economic studies at the Brookings Institution, tells TIME. Instead, he says it was poor judgments that led to the bank’s failure.
“Big businesses that had large amounts of money parked at this bank didn’t pay attention to the bank’s underlying financial condition, perhaps wrongly trusting the Federal Reserve, as the bank’s regulator, was monitoring the situation,” Klein says.
The FDIC regularly insures $250,000 per depositor per bank, but 85% of SVB’s funds were uninsured, amounting to billions of dollars extra that the federal government has now pledged to cover. President Biden has promised that taxpayers won’t bear the costs of his administration’s guarantee, but that the money will come from the Deposit Insurance Fund, which is funded by fees that banks pay.
“Regular Americans are going to pay more at their bank in assessments so that big businesses and crypto firms that had money in Silicon Valley bank get paid off in full,” Klein says.
Senator Josh Hawley, a Missouri Republican, tweeted on Monday that he would introduce legislation to prevent banks from passing on new fees to customers to fund costs related to SVP’s collapse, suggesting that the government’s efforts represent a “woke bailout” that his constituents won’t pay for.
Some Democrats started pushing back Monday on efforts to fit the collapse of a regional bank into the Republican practice of working “woke” into nearly every line of attack.
“Count me in for all the ‘woke means everything I don’t like or understand’ content. Tremendous,” Senator Chris Murphy of Connecticut tweeted. “FYI it was a Republican super donor who backed the bank and then led the run that created the crisis.”
Murphy then jokily added, “Woke! It’s all woke!!”
Yet the definition of another word—bailout—was becoming part of the emerging political debate on Monday.
“Joe Biden is pretending this isn’t a bailout,” tweeted Republican presidential candidate Nikki Haley, a former South Carolina Governor. “It is.”
For its part, the Biden administration has highlighted the differences between its latest efforts and the ones it made to bolster banks during the financial crisis, when some big banks received federal aid that allowed them to stay in business and retain much of their leadership. The administration has emphasized that its response this time is focused on making depositors whole, while the management of the failed banks was fired and the institutions’ investors aren’t getting they’re money back.
“A lot of the arguments you saw from the Silicon Valley crowd, the couching from the Biden administration, created a bit of a smokescreen that stops people from seeing the essence of what’s happening,” Republican entrepreneur and author Vivek Ramaswamy, who is running for president, tells TIME. “But if people understand the essence of what’s happening, they should be, and they are, understandably frustrated.”
Members of both parties agree that ordinary people should not pay the price for the banks’ downfalls, but are feuding over who to blame. Many Democrats point the finger at a Republicans-led bill that former President Donald Trump signed in 2018 rolling back regulations for medium-sized banks like SVB and Signature. Republicans, on the other hand, fault companies and the banks themselves for making bad business decisions.
Ramaswamy points out that SVB lobbied for the regulatory rollback that allowed it to fall below the threshold of “systemically significant,” but is now getting a backstop thanks to a “systemic risk exception.”
“You can’t have it both ways,” he says. “I think that is part of what creates populist frustration, and if I’m being really honest, I think it’s justified. Tech startups effectively got bailed out for their own risk management failures.”