Politicians generally don't like looking silly. And yet a whole bunch of Republican politicians reacted to the collapse of Silicon Valley Bank by raging about "woke" banking" in ways that made them appear ridiculous to anyone actually concerned about the danger to the banking system and the economy.
No doubt Republicans such as Florida Gov. Ron DeSantis and House of Representatives Oversight Chair James Comer know that blaming SVB's downfall on identity politics will play well in conservative media, a crucial audience. (We also shouldn't discount the possibility that some Republican politicians believe the nonsense they're saying, given the lack of policy expertise within the party.)
But talking about corporations' imagined woke fixations also helps to paper over the real conflict within the party that the banking scare threatens to reignite.
Republicans are increasingly split between traditional conservatives who back deregulation of banks and other industries and populists who blame their frustrations on institutions of all kinds. Populist rhetoric, extolling ordinary folks and bashing corporate America, has been popular with a segment of the party for a while now. At the same time -- and often from the very same politicians -- an anti-regulation mantra continues to be the party's standard answer to many questions about how to best run the economy.
The conflict reflects divergent underlying interests among different groups within the Republican coalition -- on the one hand the small and large business interests that have lined up behind Republicans for more than a century, and on the other the white working-class voters who have shifted to the GOP, first in the South and then elsewhere, over the last several decades. Finding policies, or even slogans, that fit both groups isn't easy, and the more policy concerns center on economics, the harder it becomes to reconcile the conflict.
All this preceded Donald Trump as the Republicans' leader. Recall that House Republicans revolted against a Republican administration at the peak of the financial crisis in 2008, forcing President George W. Bush to scramble for votes from Democrats to pass a key measure to stabilize the economy. Traditional Republicans had no problem bailing out big corporations, and in fact tended to believe that supporting business was actually the best policy for all Americans. But most voters didn't buy that -- and a lot of Republicans in 2008 sided with those voters.
Trump, in typical fashion, simply took both sides. He amped up populist corporate-bashing rhetoric, but he also talked up deregulating business at least as much as free-market booster Ronald Reagan had decades earlier. And it wasn't just talk; a weakening of Dodd-Frank banking regulations was one of the few real legislative accomplishments when Trump presided over two years of unified Republican government in 2017-2018.
Directing attention away from the fissure within the party and toward the culture war is apt to be successful as long as there is a Democratic president who does the real work of preventing a full-fledged banking crisis.
But Republicans aren't going to be able to ignore the conflict forever. The split goes far beyond the merits of deregulation. The GOP is divided over immigration, aid to Ukraine and myriad other issues. Republicans seeking the party's nomination for president will face pressure to reveal where they stand. And should a Republican win the White House, she or he will discover that populist grandstanding is of little use once the fire is at their heels.
Bloomberg