Congress Must Examine First Republic’s Woke Financing and Risk Management Regulation

Regulators today seized the failed First Republic bank and sold its operations to JPMorgan Chase. CEI financial policy expert John Berlau reiterated the need for Congress to find out what regulators were doing in the lead up to two large, recent bank failures – First Republic and Silicon Valley Bank.

Statement by John Berlau, Director of Finance Policy

“The collapse and ‘rescue’ of First Republic Bank raise questions that need to be answered both about the risk management practices of some banks and the policy priorities of California and federal bank regulators.

“Like nearby Silicon Valley Bank, First Republic jumped on and took the wheel of the trendy ESG (environmental, social and governance) bandwagon in vogue with the Biden administration and California politicos. First Republic maintains a ‘Sustainable and Responsible Investing’ page on its website, on which the bank brags that in evaluating companies for financing, its team looks at factors such as ‘carbon emissions policy’, ‘opportunities in clean technology’, ‘board diversification’, and screens for companies’ involvement in “weapons’ and ‘fossil fuels’. Whether regulators may have ignored or overlooked the bank’s risk management practices as a result of its adherence to woke causes is a question that needs to be looked at.

“As CEI maintains in a new coalition letter, Congress must ‘apply the necessary scrutiny of a comprehensive external audit’ to bank regulators’ enforcement of rules on the books. And policymakers should also refrain from punishing prudent banks, already suffering from the fallout of First Republic and SVB failures, with a flood of counterproductive red tape that could exacerbate financial instability.”