House Speaker Kevin McCarthy’s (R-CA) plan to blame President Joe Biden’s economic policies for the Friday collapse of Silicon Valley Bank has hit a snag.
McCarthy wants the Republican message to be that Biden’s spending triggered a rise in inflation, and the Federal Reserve’s subsequent interest rate increases wiped out the bank. But his members have instead been claiming that the bank failed because it was too “woke,” a charge so ludicrous that a caucus leader reportedly urged them to “stop tweeting / going on tv if they don’t understand” the situation.
But McCarthy’s dilemma won’t be as easy to solve as that: It stems from the fact that GOP members of Congress are downstream from the same right-wing misinformation and infotainment apparatus as the party’s base. And that system has spent the Biden administration forcing every policy issue, no matter how complex, through its culture war lens.
SVB failed for banal finance reasons, as Bloomberg’s Matt Levine has detailed. It had a customer base of venture capitalists and the start-ups they fund. Those customers generally don’t require short-term, variable-rate business loans, so SVB instead invested their deposits in long-term, fixed-rate bonds without sufficiently hedging its risk. As interest rates rose, those bonds lost value. Some SVB depositors feared the bank’s finances had become too weak and withdrew their funds; since venture capitalists are panicky and move in a herd, the result was an old-fashioned bank run, and on Friday, regulators took over SVB, saying it lacked liquidity and had become insolvent.
But as the bank collapsed, the right-wing media concocted a very different story that fit neatly into their culture war narratives. In their telling, SVB failed because it was too “woke” and had excessively focused on diversity, equity, and inclusion efforts. Digital media outlets, online influencers, right-wing podcasters, powerful Fox hosts, and columnists at the staid Wall Street Journal all converged on the same talking points.
Republican politicians echoed this theme as it spread through the right-wing press, parroting the message that they perceived was popular among their political base. And not just random backbenchers — over the weekend, Rep. James Comer (R-KY), who leads the party’s investigations as chair of the House Oversight committee, went on Fox News to decry SVB as “one of the most woke banks,” while likely presidential candidate and Florida Gov. Ron DeSantis argued on the same show that its leaders had been “so concerned with DEI and politics” that it “really diverted from them focusing on their core mission.”
McCarthy had lost control of the GOP message to propagandists who produce political takes that are optimized for ratings and clicks, and now he is desperately trying to get it back.
This isn’t the first time the right has blamed bank failures on excessive support for people of color. In 2008, it became commonplace to blame the financial crisis on the Community Reinvestment Act. As Fox’s Laura Ingraham put it at the time, that law, which was enacted in 1977, “pushed all these institutions to lend to minority communities, many were very risky loans.”
That argument was wrong — only a small percentage of subprime mortgages were issued by depository institutions under the CRA — and it scapegoated borrowers rather than the predatory lenders who in many cases deceived them or the bankers who profited handsomely by selling those subprime mortgages packaged in complicated financial products, even though it dramatically increased their institutions’ risk.
But the CRA charge was at least vaguely related to actual federal economic policies. That reflected the sizable portion of right-wing media attention paid during the Obama administration to developing talking points in favor of deregulation and other conservative economic priorities like cutting taxes, particularly for wealthy Americans and corporations, and slashing the social safety net.
The right’s priorities have shifted since then to increasingly favor the empty calories of the culture war. President Donald Trump signed legislation deregulating banks like SVB, just as he signed into law a huge regressive tax cut and pushed to kick people off health insurance by dismantling Obamacare. But he was largely uninterested in broad areas of federal policy, instead reflexively viewing issues through his own personal grievances. The right-wing press, and the GOP, adjusted to match his focuses.
By the time Biden took office, the right’s policy debate muscles had atrophied. Biden offered a far-reaching economic agenda, but in early 2021, Fox’s coverage instead revolved around the “woke mob” supposedly targeting Mr. Potato Head and Dr. Seuss. Even when the network’s influential commentators discussed Biden proposals like his $1.9 trillion economic stimulus bill, they fixated on the 0.06% of the total supposedly wasted on “social justice stuff.” The rest of the right-wing popular press followed Fox’s lead.
The shift by Republican propagandists has been bad for the party’s electoral prospects. As Fox’s hosts trained their audience to fixate on their own bizarre grievances, Republican politicians followed along. But it turns out that normal people don’t care about the same things as millionaire TV hosts like Tucker Carlson — in the 2022 midterms, Fox-friendly candidates who pushed the network’s obsessions were trounced, helping Democrats retain the U.S. Senate and several governorships while keeping the House closely divided.
To date, McCarthy has shown little interest in creating daylight between his members and the right’s infotainers — he’s fresh off of giving Carlson’s team exclusive access to January 6 security footage so the Fox host could generate revisionist propaganda. And now the House leader is reaping the fruits of his party’s right-wing media grievance addiction.