Zicklin School of Business finance Professor Linda Allen comments on why Silicon Valley Bank and Signature Bank failed and whether the Feds were right to rescue the depositors.

The interview was conducted by Bonnie Eissner, director of communications at the CUNY Graduate Center.

“Silicon Valley Bank was brought down, Allen said, by old-fashioned interest rate risk.

“It’s the oldest risk in the book,” she said. “This is the easy stuff, we’ve been dealing with this for decades, we know exactly what to do. It’s not rocket science anymore…”

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Bank failures and bailouts have been an ongoing issue in the financial sector, with significant impacts on the economy and society as a whole. To gain a deeper understanding of these phenomena, I had the opportunity to speak with Zicklin Prof. Linda Allen and Bonnie Eissner of the CUNY Grad Center.

Prof. Linda Allen is a renowned expert in banking and financial regulation, with a wealth of knowledge on the causes and consequences of bank failures. She shared her insights on the factors that contribute to bank failures, such as poor risk management practices, lax regulatory oversight, and economic downturns. According to Prof. Allen, the failure of a single bank can have far-reaching implications, leading to a domino effect that can destabilize the entire financial system.

Bonnie Eissner, on the other hand, provided valuable insights into the role of government bailouts in mitigating the effects of bank failures. Bailouts are a controversial topic, with critics arguing that they reward irresponsible behavior and create moral hazard. However, Eissner pointed out that in times of financial crisis, bailouts can be necessary to prevent systemic collapse and protect depositors and creditors. She emphasized the importance of striking a balance between accountability and systemic stability when considering government intervention in the banking sector.

Both Prof. Allen and Eissner highlighted the need for robust regulatory frameworks and effective risk management practices to prevent future bank failures. They stressed the importance of transparency, accountability, and strong governance in maintaining a stable and resilient financial system.

In conclusion, bank failures and bailouts are complex issues that have profound implications for the economy and society. By learning from experts like Prof. Linda Allen and Bonnie Eissner, we can gain a deeper understanding of the causes and consequences of these phenomena, and work towards building a more stable and sustainable financial system.