Welcome to the Boardroom Governance Podcast. I’m your host, Evan Epstein. In this episode, I talk with Dan Siciliano, the Vice-Chair of the Federal Home Loan Bank of San Francisco, the Chair of the Silicon Valley Directors’ Exchange and the co-founder and CEO of Nikkl, a new fintech company that provides capital to unicorn employees. Dan and I were colleagues at Stanford Law School where we led the Stanford Rock Center. We have taught corporate governance together for over a decade not only in the U.S. but all over the world including in Hong Kong, Europe and Latin America. This is Dan’s second appearance in my podcast, and in this episode, we talk about the current banking crisis including the Fed’s SVB report, the situation with First Republic, the regional banking crisis, mandated risk-management experts for bank boards and executive compensation incentives for banking executives. We also address whether short sellers in banks should be curtailed in these market conditions, the impact of this banking crisis for Silicon Valley and California, plus the future impact of U.S. fiscal policy and the national debt as it keeps ballooning to over $31 trillion. If you like this show, please consider subscribing, leaving a review or sharing this podcast on social media. You can find all the show notes on the website boardroom-governance.com and please feel free to subscribe to the Boardroom Governance Newsletter at evanepstein.substack.com
0:00 -- Intro.
1:41 -- Start of interview.
2:58 -- On current market conditions. Impact of interest rate hikes by the Federal Reserve, particularly on banks.
3:35 -- The gap between news coverage, what people think is happening and what actually is happening on the ground. The example of First Republic.
15:37-- How 'bank runs' have changed. The Meme Run. "A meme is a first impression decision-making instrument."
18:43 -- The media/general confusion over regulatory/supervisory agencies overseeing banks. FDIC and the Federal Reserve.
20:50 -- On the Federal Reserve's Report on SVB (April 28, 2023). "Capital buffers are a universal antibiotic for all of these problems [but they are costly and represent a trade-off]." The role of the board in considering risks.
32:48-- Should risk-management experts for risk-management committees of bank board be mandated? "Sometimes engaged, informed and thoughtful (but non-expert) directors ask the best questions."
40:25 -- On executive compensation and incentives of bank executives (in light of the SVB Report). "The lack of a clawback (in this case) for a risk management failure is amiss."
45:56 -- On whether short sellers in banks should be curtailed in these market conditions.
52:04 -- On the fate (and crisis) of regional banks. "Regional banks are the heart and soul of the American banking system." "I don't think that it's a good thing that big banks get any bigger."
57:34 -- On JP Morgan's acquisition of First Republic.
1:00:24 -- How Silicon Valley will be impacted with the loss of SVB and First Republic. The "Industry Vertical Contagion": failure of banks that serve particular industries. "I don't think there is enough appreciation yet on how catastrophic it would have been to let depositors in the tech industry get wiped out or receive significant hair cuts [on SVB's failure]." "I'm glad that the Fed did the call that they did."
1:07:59 -- Banking alternatives given low interest rates paid by banks to depositors. "It's an existential question for the entire industry." "Central bank digital currencies will really move the needle." [The Brazilian Central Bank created Pix, the Brazilian IP scheme that enables its users — people, companies and governmental entities — to send or receive payment transfers in few seconds at any time, including non-business days.]
1:13:26 -- The future impact of U.S. fiscal policy and the national debt as it has surpassed $31 trillion (US Debt Ratio to GDP is currently at ~120%)
Dan Siciliano is the Vice-Chair of the Federal Home Loan Bank of San Francisco, the Chair of the Silicon Valley Directors’ Exchange and the co-founder and CEO of Nikkl, a company that provides capital to unicorn employees.
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Music/Soundtrack (found via Free Music Archive): Seeing The Future by Dexter Britain is licensed under a Attribution-Noncommercial-Share Alike 3.0 United States License