Republican state attorneys general rebuked senior financial authorities on Tuesday over the role that left-wing regulatory priorities allegedly played in the recent collapse of Silicon Valley Bank.
The financial institution imploded earlier this month as depositors rushed to withdraw their funds and the company suffered heavy losses from the liquidation of a long-term bond portfolio. The Federal Deposit Insurance Corporation now directs holdings maintained by Silicon Valley Bank, which California state regulators closed on March 10, as well as Signature Bank in New York, which was closed on March 12.
Sixteen state attorneys general contended in a letter addressed to Federal Reserve Chair Jerome Powell, Treasury Secretary Janet Yellen, and other senior officials that recent emphasis on purported climate-related financial risks from regulators distracted from the focus on risk management that Silicon Valley Bank and other companies should have maintained.
“To put it bluntly, the administration’s zealotry in fighting climate change by unwisely and illegally attempting to convert federal financial regulators into environmental activists is inextricably intertwined with these bank failures and the fallout from them,” said the letter, which was provided to The Daily Wire. “Your warping of the financial regulatory system undermines both the safe and sound operation of financial institutions and the public’s faith in the fairness and efficacy of the regulatory regime.”
The Federal Reserve has recently introduced programs meant to evaluate perceived climate-related financial risks. Policymakers unveiled an initiative with six of the nation’s largest banks last year to examine various risk scenarios posed by rising worldwide temperatures, although officials said no “capital consequences” would emerge from the exercise.
Policymakers also announced an initiative with the Treasury Department meant to consider the private sector’s approach to climate risk. President Joe Biden signed an executive order at the beginning of his tenure asking all agencies to examine the apparent problem.
“Your forays into environmental regulation undermine faith in financial regulation as a general matter, as they create the perception that the regulatory apparatus is more concerned with political issues than ensuring the integrity of the financial system,” the attorneys general continued. “You should publicly direct banks to pursue profitability, liquidity, and prudent risk management, and note that declining to serve customers for failing to comply with unrealistic climate initiatives like achieving net zero by 2050 is a threat to the financial system.”
Among the signatories of the document were Texas Attorney General Ken Paxton, Ohio Attorney General Dave Yost, and Kentucky Attorney General Daniel Cameron. Utah Attorney General Sean Reyes said in a statement provided to The Daily Wire that the failure of Silicon Valley Bank is a “warning sign that the administration’s environmental activism in its financial regulation not only ignores real financial risk but increases it.”
Republican state officials have condemned asset management companies and the Biden administration in recent months for advancing the environmental, social, and corporate governance movement, also known as ESG. Skeptics of the investment approach note that companies devoted to the movement advance specific left-wing political and social causes, such as decreasing carbon emissions or diversifying company leadership with respect to race or sex, in a manner that compromises or distracts from profitability.
Silicon Valley Bank indeed faced backlash in the wake of its collapse for an apparent emphasis on diversity, equity, and inclusion. The firm neglected to fill its senior risk management role for most of last year while the executive in charge of risk management in Europe, Africa, and the Middle East described herself as a “queer person of color from a working-class background” and organized LGBTQ initiatives such as a month-long pride campaign.
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