America COMMENTARY P


Fed Fails at Every Turn 10%


BY LUIGI ZINGALES


resident joe biden reas- sured the public that those responsible for the failures of Silicon Valley Bank and


Signature Bank earlier this year will be held accountable. For Biden’s promise to be more than


rhetoric, his administration must take a proactive role. The normal mecha- nisms of accountability are broken. In the 2008–09 Financial Crisis, this


did not happen. No CEO, board member, auditor, or


regulator went to jail. Aside from a few CEOs, nobody even paid a fi ne out of his own pocket. Firing the CEOs of Silicon Valley


Bank and Signature Bank, especially if these do not involve a claw-back of bonuses and trading profi ts made with inside information, would be insuffi - cient because it does not satisfy the


public thirst for justice or create the right incentives to avoid similar crises in the future. Resilient institutions


cannot be brought down by the failure of just one individual, even the CEO. In fact, banks have a number of important gatekeepers. The failure of these


Number of Americans who have confidence in banking


system. SOURCE: AP-NORC Center for Public Aff airs Research. March 2023.


banks suggests that all these gatekeepers failed together. If we want to restore trust in the sys-


tem, we need to understand why. Only an authoritative presidential commis- sion can do so. The fi rst gatekeepers to be investigated


should be the boards which are respon- sible for ensuring that bank risks are prop- erly managed. They were not. In June 2019, Delaware’s supreme


You’ll Pay for Debacle T


he debacle triggered by the implosion of Silicon Valley


Bank was breathtaking by any measure. Federal of icials created one-


third of a trillion dollars to give to banks in the days that followed to keep the U.S. banking system


Only a Presidential Commission can save us from the next bank collapse.


court held that the board members of Blue Bell Creameries should be personally liable for loss- es the company suff ered following a deadly liste- ria outbreak because they did not create a board- level process to oversee mission-critical risks for the company. Why should the same


not happen to bank board members when the bank they supervise fails to adopt such basic risk-management techniques as hedging interest-rate risk?


The second should be the auditors.


On February 24, KPMG signed the audit report of Silicon Valley Bank. On March 1, it signed the audit report for Signature Bank.


Continued on page 16 Stephen Moore, a senior


afloat following SVB’s collapse. It was the second-largest bank failure in U.S. history. Despite President Joe


Biden’s insistence that taxpayers wouldn’t pay for the massive bailout, the backlash came fast and furious.


economic adviser to former President Donald Trump, told Newsmax the statement that regular bank customers won’t pay for the bailout indirectly through higher bank fees is “a lie.” “Who do you think pays for that? Depositors and investors,


too. So, of course, taxpayers are going to pay for this.” Dennis Kelleher, CEO of the


Better Markets advocacy group who advised Senate Democrats during the 2008 financial crisis, characterized as “inexplicable” the Federal Reserve’s failure to head off the crisis.


— David A. Patten MAY 2023 | NEWSMAX 15


LIGHTSPRING/SHUTTERSTOCK


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