It was announced this morning that JP Morgan is going to take over First Republic, following its seizure over the weekend by the Federal Deposit Insurance Corp. NBC News has more:
The Federal Deposit Insurance Corp. announced simultaneously Monday morning that it had seized the bank and that JPMorgan Chase, the largest bank in America, would be purchasing substantially all of the bank’s assets and deposits.
A spokesperson for the Treasury Department sought to reassure the markets and the public after First Republic, with $229.1 billion in total assets at the time of closure, eclipsed Silicon Valley Bank ($209 billion at the time of closure) to become the second-largest bank failure in American history.
First Republic becomes the third U.S. bank to go under in the past two months, the first being Silicon Valley Bank and the second being Signature Bank. Is this another case of ’Get Woke, Go Broke’? Many commentators blamed the collapse of SVB on the fact that its directors seemed more focused on burnishing their woke credentials than managing existential risks, singling out the head of Financial Risk Management at SVB’s U.K. branch, Jay Ersapah, who acted as the Chief Risk Officer for SVB in Europe, Africa, and the Middle East. She launched initiatives such as the company’s first month-long Pride campaign and published a blog emphasising mental health awareness for LGBTQ+ youth.
Can the same be said of First Republic? Unlike SVB, First Republic did have a Chief Risk Officer in the U.S. – Stephanie Bontemps. On First Republic’s website it says of her: “Taking a strategic and tactical approach to Environmental, Social, and Governance expectations is a top priority including assessing the impact of climate change and related risk management.”
She wasn’t the only senior employee of the bank to prioritise ESG. In 2021, it became the first large U.S. bank to stop lending to the fossil fuels industry, proclaiming it has become ‘carbon neutral’ that same year. Last month, the Washington Examiner published a good piece setting out how an obsession with ESG had prompted senior executives and board members of SVP, Signature and First Republic to focus on ‘climate risk’ at the expense of other, more prosaic risks to banks, such as making sure your assets cover your liabilities.
Even Credit Suisse, the most systemically important bank to fail thus far, believed in “sustainable finance for a better world” and did its part to direct capital toward the achievement of the United Nations’ Sustainable Development Goals for 2030. The Swiss bank also actively promoted its transgender “allyship” by having a high-profile, non-binary, gender-fluid section head within its Global Markets Technology group.
In response, the hashtag “GoWokeGoBroke” has gone viral over the last month. But sustainability activists have been quick to argue that ESG was not the direct cause of any of the recent bank collapses. Technically speaking, this is a valid point. Rising interest rates, hot deposits, and faulty asset-liability management doomed Silicon Valley, Signature, and First Republic, whereas Credit Suisse was a slow-motion, scandal-ridden management train wreck for years.
Nonetheless, the recent spate of bank failures may still spell the end for ESG on Wall Street since, in all of the above cases, a corporate focus on ESG was more than just a distraction and time-sink for executives and employees. It was symptomatic of more deep-seated fundamental operating problems with these financial institutions, and clearly a comorbidity of weak management.
Touting one’s sustainable finance credentials now correlates with bad ‘G’ governance under the ESG system’s own rubric. It raises a red flag for analysts to perform enhanced due diligence around any financial firms that fully embrace ESG. Shareholder activists scoping out poorly run corporate targets and hedge funds looking for short candidates should probably start including a pro-ESG filter in their initial screening criteria.
Worth reading in full.
While it’s true that rising interest rates were a more direct cause of the failure of all three banks, that, in turn, is because central banks, such as the Federal Reserve and the Bank of England, have been distracted from their goal of managing interest rates by various political objectives, such as putting incentives in place to encourage financial institutions to invest in various green initiatives. The folly of thinking central banks should be extending their role in this way was the focus of a recent piece in Forbes by Tilak Doshi.
With British inflation clocking in at 10.1 percent, or over five times the level targeted by the Bank of England, criticisms of the central bank’s remit to support “net zero” climate goals have been coming in thick and fast, as Bloomberg reported on Tuesday. The article was headlined: “Scrap Bank of England’s Climate Mandate, Balls and Osborne say.”
One of the key architects of UK central bank independence, Ed Balls – an adviser to former Chancellor of the Exchequer Gordon Brown when the Labour Party made the bank independent in 1997 – said it “doesn’t make any sense” to give the BOE a role for which it has no tools. “It concerns me, the idea that you start to throw into the mix objectives which aren’t really affected sensibly by the instrument the bank has – which is interest rates.” Bloomberg also reported that Paul Tucker, a former BOE deputy governor, and John Vickers, a former BOE chief economist, suggested that net zero has been a distraction.
Mr. Balls was speaking at the House of Lords’ economic affairs committee inquiry into the independence of the BOE on Tuesday. At the meeting, ex-Conservative Chancellor George Osborne agreed with Balls. Both were of the view that climate goals should be stripped from the Bank of England’s remit to remove any distractions from its focus on inflation and financial stability. Failing to prevent double-digit inflation, critics argue that the bank should not distracted by such policy “baubles”.
Worth reading in full.
Obviously, it’s possible to exaggerate the role of wokery pokery in bringing down these banks. But their failure, as well as the recent failures of the Fed and the Bank of England, will surely prompt a rethink about ESG. Bankers should forget about sustaining the planet and focus on sustaining the banking industry.
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ESG is a contrived subject that belongs firmly within the Sociology field and therefore should be added to the curriculums of those places of “learning” within the tertiary sector that feel the need to peddle this crap.
If your business is dealing with interest rates, or making cars, or building homes or whatever then ESG is none of your workload and would certainly eat in to expensive management time whilst providing sweet F A in return for god knows what cost.
Those companies that feel the need to jump on the ESG bandwagon are simply proclaiming that they are badly managed. In these cases “go woke, go broke,” is just reward for management incompetence.
ESG, another disease of the age. A virus which kills poorly businesses.
You gotta laugh.
Curricula – but apart from that,yes.
Indeed. My apologies.
No need to apologise, huxleypiggles:
https://www.grammar-monster.com/plurals/plural_of_curriculum.htm
‘The plural of “curriculum” is “curricula” or “curriculums.”’
‘Both “curricula” and “curriculums” are accepted plurals of “curriculum.”’
The noun “curriculum” has a Latin root, which is the derivation of the plural “curricula.” “Curriculums” (which adheres to the standard rules for forming plurals) is also an accepted plural.’
I prefer “curriculums”. Some people don’t care which is used:
https://www.independent.co.uk/arts-entertainment/dr-wordsmith-makes-a-house-call-at-the-tower-of-babel-1099283.html
Wordsmith writes: When it comes to the behaviour of foreign plurals in English, there are two schools of thought. One maintains that you should stick to foreign rules – that the plural of “poltergeist” is “poltergeister” and the plural of “curriculum vitae” is “curricula vitae”. And the other – the Jack Straw school of thought, perhaps – thinks that immigrant words should obey English rules while they are here, and that the plural of “stadium” should be “stadiums” and not “stadia”.
Dear Dr Wordsmith, And which school of thought do you belong to?
Dr Wordsmith writes: I belong to a third school, the A-Plague-On-Both- Your-Schools School, whose motto is: I couldn’t give a monkey’s.’
Many thanks. I too prefer the proper use of words, punctuation and grammar and in this instance I should have used “curricula” but as usual I was posting in haste (
).
On the topic of laughing, I did enjoy this mini clip. Let’s hope they’re verbalizing the general consensus, haha..
https://www.thelondoneconomic.com/news/celtic-fans-sing-you-can-shove-your-coronation-up-your-a-347611/
That’s wonderful. Thanks Mogs.
Consolidation of a diverse banking market into a select few big players. Guess it will make CBDC’s easier to roll out.
Here in the UK we have seen similar consolidation with the energy market with a reversion to more or less the same old ‘big six’.
Net Zero appears to be concentrating the power and the wealth away from smaller players and into the hands of the elites.
“Net Zero appears to be concentrating the power and the wealth away from smaller players and into the hands of the elites.”
So for the Davos Deviants it’s all coming together nicely.
BlackRock does not permit anything that does not support ESG and DIE – they pull the strings
Well, it sure didn’t help.
But that bank now folded so quickly because the Feds signalled through their ridiculous SVB actions that your deposits are only safe with JPM and some other too big too fail banks and that at a ridiculous 100% regardless of deposit size: a bailout of the ultra-rich.
That’s why large deposits now flee regional banks and go the the biggies.
And the biggies then get to pick them up for free, as is custom for a fascist large company oligarchy.
The Bear, Stearns&co. takeunder actually served as the blueprint for these steals and the ones to come.
I doubt they have the self-awareness to understand, but highly paid executives charged with managing woke programs should probably be feeling nervous right about now.
Took most of my savings out of the bank and bought some property. Savings are just numbers on a spreadsheet and can be devalued at the whim of the market. I don’t want to be a victim of contagion and offered 60p in the pound. Like with the hoax pandemic, I don’t trust the authorities