Moneda Moves (152): We Need To Talk About How DEI Became Entangled in SVB Coverage
It has been a week…to observe and learn from the news cycle. Our newsletter is coming to you today to document our observations in the last week around the news from the biggest bank to fail since the 2008 financial crisis, its effect on businesses and how DEI has become entangled, erroneously so, in the conversation following an opinion column in the Wall Street Journal.
We’re journalists by trade, so first here’s a few resources we’ve found helpful in getting the full recap of what went down last week from the news (sans op-eds):
Banking Turmoil: What We Know (NYT)
What really went wrong at Silicon Valley Bank (The Economist)
For 40 years, Silicon Valley Bank was a tech industry icon. It collapsed in just days (NPR)
The background on the downfall of Silicon Valley Bank & closure of Signature Bank plus where deposits are now
About a week ago, we learned about the downfall of Silicon Valley Bank, which stood at more than $200 billion in assets. It was a bank that has served by and large tech startups, their executives and more than two thousand venture capital firms. On Wednesday, it announced its sudden losses leading to a bank run — or many users of the bank running to pull their funds. It was a few days later when the FDIC, the consumer deposit insurance provider for banks, announced it would take over.
Reports cite that as most of its competitors do, while it kept some deposits on hand, a good amount of it was used to buy long-term debt. It’s these kind of investments that would prove to be sound when interest rates remained low, which we now know they haven’t. So when interest rates rose, a domino effect ensued. The bank had losses, and clients ran to withdraw their money. Also caught in a pickle was Signature Bank, when concerned clients following the SVB news called the bank — and many with more than the government-insured $250,000 in the bank. By that Sunday, Signature Bank was closed by New York Regulators.
How DEI became entangled in the conversation and how damaging it can be if we don’t address it
Fast-forward to today and the Biden administration has ensured depositors will have access to their funds while the FDIC has called on a special exception to pay uninsured depositors and essentially further protect the economy at large (for the broader ecosystem, the aftermath of the banks’ failures is still developing). This has raised some productive conversations on bank regulation.
The less productive conversations: When DEI got brought into the conversation via a WSJ Opinion piece titled “Who Killed Silicon Valley Bank” where the author Andy Kessler wrote:
“Was there regulatory failure? Perhaps. SVB was regulated like a bank but looked more like a money-market fund. Then there’s this: In its proxy statement, SVB notes that besides 91% of their board being independent and 45% women, they also have “1 Black,” “1 LGBTQ+” and “2 Veterans.” I’m not saying 12 white men would have avoided this mess, but the company may have been distracted by diversity demands.”
Some iteration of this rhetoric was also published via Tucker Carlson’s show on Fox News (also opinion) where he called into question the banking abilities of SVB and the underrepresented founders it worked with, plus the value of diversity overall.
So, why identify these hot takes? Not only are they a distraction from the news itself, they are also damaging to underrepresented founders —not to mention there is outstanding evidence and data that companies investing in diversity and wage equality outperform their competitors.
Case in point: when the Just DEI Index Concept from Just Capital, representing companies who prioritize disclosure of diversity, equity and inclusion, is compared to the Russell 1000, it solidly outperforms, as Brandon Gomez reported for CNBC. Another example is McKinsey’s report, which proved out in 2019 that companies in the top quartile for gender diversity on executive teams were 25 percent more likely to have above-average profitability than companies who lagged behind in this category.
To read more on the importance of this issue, I’d recommend Ellen McGirt’s RaceAhead who also called out this damaging coverage what we find it to be: a distraction.
Finally, a question with an answer that is still developing: How are founders doing?
We want to know how founders are doing and they have indeed begun to sound off on LinkedIn and via their personal platforms. Just a few pieces of insight as to what last week was like from founders and advocates. Take this as a reminder to check in on founders in your network:
What the SVB Meltdown Means for Diverse Founders | La Familia Co-Founder Cheryl Campos
I want to call attention to the fact that we are early in finding the full impacts of the developments last week on especially underrepresented founders. Head over to Nicole Casperson’s Fintech Is Femme latest newsletter for tracking on that front.
We will return next week with our usual cadence of our latest season of Moneda Moves, but in the meantime check on your up-and-coming entrepreneurs. This week was no easy feat.
Con poder,
Lyanne
Resources for Latino and BIPOC-led businesses this week.
A new accelerator for Black and Latino entrepreneurs by Square 💰: If you’ve been following this newsletter a while, you know that businesses owned by people of color bring in sizable revenue. Black-owned businesses have brought in $141 billion in 2020, per the Pew Research Center. Meanwhile, Latino-owned businesses have averaged to generate around $500 million, that’s according to Biz2Credit. Square, the point of sale solution, is creating an accelerator to acknowledge the capital gap. From now until April 1, it will take applicants for its inaugural accelerator: any Black or Latino business owner “registered under clothing & accessories, health & beauty, home goods & furniture, or food & beverage sectors,” in the first three years of business, using Square.
Those selected to be a part will receive $20,000 in funding and mentorship from the likes of Ayesha Curry, Rosario Dawson, and Rashad Bilal of Earn Your Leisure. A shout-out to the comms team over at Square for putting this amazing opportunity on our radar.
Thank you for joining us! Until next time, catch us here on Moneda Moves.