As told to by Kalyn Womack
On the surface, it is widely believed that the Silicon Valley Bank collapse was a combination of mismatching asset liability pricing as well as duration risk in the bond portfolio. Translation: because the rates have gone up faster and further than any time in history, the bank’s asset liability strategy looks like it may have been off.
In SVB’s case, these issues spooked both investors as well as depositors and a confluence of events as such is not a recipe for success. There are only few things that can really cause something like this. Nothing I’ve read suggests, factually that SVB’s investment into Black business owners was the root cause for the bank’s collapse.
SVB was reaching out to the Black community and Black entrepreneurs in an attempt to close the racial-wealth gap, an issue that has existed for so long. It may not have been the solution but it was certainly an effort. If we were to compare their initiative to JP Morgan’s, for example, the bank attempted to expand the opportunities for access to capital to those who have been traditionally left out of the system. I don’t see any time, anywhere where the ability to do that in a safe and sound manner has caused any major issues for banks. It’s quite frankly the opposite. If we’re going to have a strong economy that expands then we need to have opportunities for all to participate in it.
I believe in capitalism. What I don’t believe in is crony capitalism, when the same people always get the same opportunities no matter how many times they’re successful or unsuccessful. When you talk about broadening opportunities for everyone no matter what they look like, there’s this undercurrent of: “That’s something that you can’t do because it’ll break the system.” No, actually, it’ll strengthen the system. Getting more Black folks access to capital and the ability to grow is a good thing for this economy.
The smart money knows that and the people who really want to see this country and this economy continue to thrive understand that. Expanding those opportunities like in JP Morgan’s case, SVB looked like it was doing the same. Everything I’ve read looks like the bank was expanding opportunities but nothing I’ve read said that the expansion of opportunities have anything to do with this collapse.
Suggesting these conservative-called “woke” initiatives do more harm than good ignores the reason these initiatives are so important. There are a number of Black business owners who I think have been traditionally left out. Otherwise, we wouldn’t have these attempts on expanding opportunities for access to capital.
On the question of systemic racism within the banking system, I’ll start with the fact that everyone who works in a bank today is human. We have certain algorithms that we used over the years to try and take bias out of the process of who a bank can make a loan to by having computers make the decision. There are going to be biases in there whether it’s human biases or technology biases based on the input of the data. To say that it doesn’t exist is having blindfolds on.
Have we done better? Well, that’s up for debate. I don’t know that we’d have this conversation continually if we weren’t doing as much as we could. Does racial bias exist? Sure it exists because you’ve got human factors at play. Is it something that I think is pervasive in the system? I can’t speak to that because I don’t know what’s in anyone’s heart. All I know is their actions.
Unfortunately this country is at a nexus. I’ve never seen us so divided before and quite frankly, I don’t know why part of it has to do with the wealth gap. We’ve got to make sure that everyone believes they have an opportunity.
If there’s a danger of these Black owned businesses and entrepreneurs failing because they were dependent upon the capitalization of their business from SVB, it’s not just one bank’s problem. It’s the system’s responsibility to ensure that their access to opportunity expands and continues.