The big talking point of the week was the collapse of Silicon Valley Bank, with a couple of hundred billion in assets evaporating overnight and blowing away on the morning wind.
I ought really to be more interested in this than I actually am. I only became a rootless bohemian 22 years ago. Prior to that I was a middle-class shlub, with a salaried job at a respectable firm—an investment bank, in fact.
I wasn’t a hot-shot trader, more’s the pity. I was a back-office worker bee, a cube jockey designing and writing software for the bank’s Credit and Risk Management Department.
To this elderly Credit and Risk Management geek, the SVB collapse looks like a serious failure of Risk Management. It wouldn’t have happened if I’d been cutting their code.
There’s some knotty stuff in Risk Management computing—check out the Black-Scholes model for option pricing, if you’re confident with your calculus.
That doesn’t seem to have been in play with SVB, though. What happened here was just basic banking.
Basic banking: A bank is a safe place to stash your money; but a bank doesn’t just take your money in tens and twenties and lock it up in a vault, it uses your money. It spends your money to buy stuff.
One variety of stuff banks particularly like to buy is bonds. The First Law of bond trading: When interest rates go up, bond prices go down, and vice versa.
The Risk Management team at SVB seem not to have known the First Law. Actual Silicon Valley tech companies, when they were swilling in money, gave scads of it to SVB for safe-keeping. SVB used that cash to buy heaps of long-maturity U.S. Treasury bonds with coupons pegged to the very low interest rates that prevailed until recently.
Then the Fed jacked up interest rates in hopes of pushing down inflation. The First Law kicked in. Those heaps of Treasuries were now worth way less than SVB paid for them.
If the tech firms wanted to withdraw their deposits—which they did, facing business losses themselves—SVB had to sell off the bonds at deep discounts. The cash they got wasn’t enough to cover the withdrawal slips; and the amounts involved were way over the FDIC insurance limits. [Crashing sound.]
So as I said: a failure of Risk Management. Just a gross failure of competence.
So who was in charge of SVB’s Risk Management?
Until a few weeks ago the answer was: nobody. SVB didn’t actually have a head of Risk Management for the last eight months of 2022 [Silicon Valley Bank had no official chief risk officer ahead of collapse but employed DEI executive, by Andrew Miller, Fox Business, March 17, 2023]. A lady named Laura Izurieta had held the title but she stepped down in April last year, I don’t know why. Then for eight months, through to January 4th … nobody.
At that point, SVB finally hired in a head of Risk Management, a lady name of Kim Olson, to work out of the New York office.
In the press release that announced her hiring, Ms. Olson declared that
SVB has an impressive track record of sound growth and remaining true to its strategy of serving the innovation economy. I am excited to lead SVB’s outstanding risk management team and continue to build SVB’s risk management framework and capabilities in this important next chapter of the firm’s trajectory. [SVB Hires Kim Olson as Chief Risk Officer, SVB Financial Group, January 4, 2023]
You don’t say?
But if SVB didn’t have a head of Risk Management for those eight months, they did of course have a Chief Diversity, Equity & Inclusion Officer, a lady named Angela Morris Lovelace. Some positions are too important to be left unstaffed.
And they did have lower-rank executives working on Risk Management. Here’s one of them: Jay Ersapah, Head of Financial Risk Management for the bank’s U.K. branch.
That forename “Jay” is a bit misleading; Jay Ersapah is in fact a female. Well, sort of. She tells us that she identifies as a queer woman of color and is passionate about promoting LGBTQ awareness.
As well as running Risk Management for SVB’s U.K. branch, Ms. Ersapah also served as the company’s European LGBTQIA+ Employee Resource Group co-chair.
As for the “woman of color” thing: I can’t locate the origin of the name “Ersapah,” but it sounds Indian, she looks Indian, and she was born in Birmingham, England, which is now populated mainly by Indians, although I think there may still be a few white English people hiding in odd corners of the city. So Indian’s the way to bet.
From the New York Post, March 14th:
Jay Ersapah, the boss of financial risk management at SVB’s U.K. branch, launched initiatives such as the company’s first month-long Pride campaign and a new blog emphasizing mental health awareness for LGBTQ+ youth.
[ While Silicon Valley Bank collapsed, top executive pushed ‘woke’ programs]
That’s nice; but wouldn’t Ms. Ersapah’s energies have been better employed in, you know, Risk Management?
SVB was, after all, at serious risk…as we now all know.
The head of risk management at Silicon Valley Bank (UK) was busy with Pride Month, and mental health for LGBTQ+ youth. I guess that why she didn't notice billions in deposits going out the door. https://t.co/YyHKtRm2Zn
— Jim Rickards (@JamesGRickards) March 12, 2023
Are you forming some kind of a picture here? I’ve identified four SVB executives, three in Risk Management and one managing the bank’s Diversity, Equity & Inclusion Office. All four are women, two white and two nonwhite. One is sexually eccentric, two are married to men, and Ms. Izurieta’s orientation is not known, not to me at any rate.
All right: Women can of course be competent in Risk Management—I’ve known a couple. And sure: Four is not an impressive sample size. Still, are you getting a hint—a glimpse of a shadow of a hint—that Diversity, Equity, and Inclusion is driving out competence?
My employer for those fifteen years I was coding away for Credit and Risk Management became Credit Suisse. I say “became” because when I joined the firm in 1985 they were First Boston Corporation. They partnered with Credit Suisse in 1988 and became Credit Suisse First Boston; then, after I’d left, just Credit Suisse.
I’m telling you this because it keys to the theme of DEI taking over from competence in investment bank hiring. Poster boy here: Pips Bunce.
The head of global markets at Credit Suisse is a mentally ill "gender fluid" man who sometimes believes he wakes up as a woman. pic.twitter.com/J7QPpNjJiU
— Jordan Schachtel @ dossier.today (@JordanSchachtel) March 16, 2023
I have already microaggressed by saying “poster boy.” Pips Bunce is Head of Global Markets Technology Core Engineering Strategic Programs at Credit Suisse, and he’s gender fluid.
That apparently means that he is either male or female depending on how he feels when he wakes up in the morning. Some days he’s a guy, and dresses like a guy in suit and tie; other days he’s a gal, in a dress and a rather fetching blonde wig.
That’s gotten him into trouble with some identity purists. They say that’s not what “gender fluid” means, it’s just, to quote one of them “living out your deep fantasies and legitimizing them socially with a fancy title.”
I can’t rule on the precise point of theology here. This identitarian stuff makes my eyes glaze over. The banking industry at any rate takes Mr. Bunce’s gender fluidity seriously: the Bank of London has nominated him—her, whatever—as the “inspirational role model of the year.”
He/She has been nominated as the "inspirational role model of the year" by the Bank of London pic.twitter.com/Vg21T7CUaJ
— Jordan Schachtel @ dossier.today (@JordanSchachtel) March 16, 2023
I am, however, going to join the ranks of people wondering on Twitter whether Credit Suisse having a senior executive who doesn’t know what sex he is may somehow be connected with the fact that Credit Suisse’s share price has dived off a cliff.
[Adapted from the latest Radio Derb, now available exclusively on VDARE.com]
John Derbyshire [email him] writes an incredible amount on all sorts of subjects for all kinds of outlets. (This no longer includes National Review, whose editors had some kind of tantrum and fired him.) He is the author of We Are Doomed: Reclaiming Conservative Pessimism and several other books. He has had two books published by VDARE.com com: FROM THE DISSIDENT RIGHT (also available in Kindle) and FROM THE DISSIDENT RIGHT II: ESSAYS 2013.