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Dr. Luigi Zingales

lines on the record: 71
first: 2024-03-07
most recent: 2024-03-07
sittings or episodes: 1
sources: podcast

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“This is the delicate issue. I think that there should be more transparency in some dimension. But the question is, you know, at the board level, you won't take confidentiality because on the business strategy side, you want to take confidentiality. However, when it comes to things that can jeopardize,”
2024-03-07 · Forward Guidance · The Erosion of Institutional Accountability | Dr. Luigi Zingales on Bank Failures, Whistleblowing, and The Fed · IDENTIFIED FROM THE TRANSCRIPT
“very minimum there is a moral responsibility of what you're doing. I'm not a lawyer and depends on the legal system so I'm not gonna venture into the legal responsibilities but at the very minimum it should be a stain in your reputation that you were there you were supposed to monitor and you didn't and I think against these problems activists investors are not particularly very helpful in this dimension”
2024-03-07 · Forward Guidance · The Erosion of Institutional Accountability | Dr. Luigi Zingales on Bank Failures, Whistleblowing, and The Fed · IDENTIFIED FROM THE TRANSCRIPT
“Now, in the old days, that was a Hennell colony and USM layer when you were doing that. But these days A Salia is not a Pennel colony, it's a reward, okay? So I think that there is no accountability. In my own country, in Italy, there was a tragedy of a breach that collapsed and killed 43 people. And this was a breach of a motorway that was clearly undermined for years. And this is funny because this bridge had unexpected life of 50 years and collapsed 51 years after inauguration. So the engineer were perfect in predicting the situation is just the motorway company did not do enough maintenance to keep it up. At the end of the day, the Italian press never mentioned any of the board members as responsible for this.”
2024-03-07 · Forward Guidance · The Erosion of Institutional Accountability | Dr. Luigi Zingales on Bank Failures, Whistleblowing, and The Fed · IDENTIFIED FROM THE TRANSCRIPT
“In America. So at this point, how can you possibly do anything to buy? I think there is really, really problematic. And not only the CEOs don't pay any cost financially or even reputationally, even the board members don't pay any costs financially reputationally. You know, Carolyn Kennedy, the only leading kid of President Kennedy, was on the board of Boeing when many of the terrible decisions were made as a reward she was appointed by Biden ambassador to Australia.”
2024-03-07 · Forward Guidance · The Erosion of Institutional Accountability | Dr. Luigi Zingales on Bank Failures, Whistleblowing, and The Fed · IDENTIFIED FROM THE TRANSCRIPT
“Accurate solution works very well if the problem is that the firm is losing money because activists are very focused. They come in, they replace who is losing money and hopefully things get better and because they have high power incentives, they do act very promptly and they spend resources to fix it. And most of the time Bang and Blackroft go along, especially the companies misperform. What is more problematic is when a company is doing something like Boeing that is under investing in safety and taking a wild gamble. And at the end of the day, not paying for it because you get the bailout because of COVID, you get this, you get that, you basically are the only producer aircraft.”
2024-03-07 · Forward Guidance · The Erosion of Institutional Accountability | Dr. Luigi Zingales on Bank Failures, Whistleblowing, and The Fed · IDENTIFIED FROM THE TRANSCRIPT
“One potential solution posed by so-called activist investors is you get a large hedge fund, they buy maybe one to two percent of the shares. They convince a lot of people to sign away their rights and then they become activists and say, oh, you know, stop the private planes, stop the vacations for all the corporate boards, the C-suites. I think that became famous with Carl Icon. That is one solution. What is your view of that solution? Is that solution of activist investors much more difficult now that so many shares of the public are owned by large passive funds, which are not really in the game of telling companies what to do? Or are there other solutions to fix corporate actions that you think might be better?”
2024-03-07 · Forward Guidance · The Erosion of Institutional Accountability | Dr. Luigi Zingales on Bank Failures, Whistleblowing, and The Fed · IDENTIFIED FROM THE TRANSCRIPT
“Public, so it's even worse than the Soviet Union. Soviet Union was nominally secret, but public. And even if you don't get a majority of the votes, you still stay there. Okay, so if a majority of people with all the votes, then most of the time you are coughing, you stay there anyway. So it's very, very unless you sort of really do not show up number of things. So there are very formal things that if you don't show up nine out of 10 meetings, maybe you're going to lose your job. But this is really kind of being mechanical and very low-end. Most boats tend to be dominated by yes men, because now I'm more diverse than yes people, but has changed the gender, but not necessarily the behavior. And I think that that's problematic.”
2024-03-07 · Forward Guidance · The Erosion of Institutional Accountability | Dr. Luigi Zingales on Bank Failures, Whistleblowing, and The Fed · IDENTIFIED FROM THE TRANSCRIPT
“There is a tension because boards have two functions. One function is to advise the CO in his or her strategy. And the other is to monitor the CO in his or her strategy and decide when the CO has to go. It's a bit like the same situation when you have a PhD student that is your advisee in the dissertation on the one hand you need to encourage him or her and help him. But at the end you also have to judge him or her as a final result. So that's a complicated process. However, I think at the moment US corporate boards, the closest thing to Soviet elections because you have the number of seats equal to the number of people. You have the incumbents reappointed themselves.”
2024-03-07 · Forward Guidance · The Erosion of Institutional Accountability | Dr. Luigi Zingales on Bank Failures, Whistleblowing, and The Fed · IDENTIFIED FROM THE TRANSCRIPT
“And when the stock price drops, then people get upset and there is a dynamic that is interesting. But in the Fed, you don't see the stock price dropping. And so you meet like an external trigger. That's the reason why I think that the systemic exception trigger that when you invoke it, the head of the search go, I think is a very good idea.”
2024-03-07 · Forward Guidance · The Erosion of Institutional Accountability | Dr. Luigi Zingales on Bank Failures, Whistleblowing, and The Fed · IDENTIFIED FROM THE TRANSCRIPT
“And he was gone the next week. It didn't last day long. So I think that there is a need of public accountability, especially for people that manage so much money and have so much impact in millions of people. And I think that board of directors tend to be a bit slow to the game. They tend to be very coopted. I think that I'm actually working with a colleague trying to figure out what can we do to make boards more accountable because they're not accountable. But it seems that the Fed has done wars. Because at least what happens in a company is when you do something really bad, the stock price drop.”
2024-03-07 · Forward Guidance · The Erosion of Institutional Accountability | Dr. Luigi Zingales on Bank Failures, Whistleblowing, and The Fed · IDENTIFIED FROM THE TRANSCRIPT
“I think the accountability is limited even in the private sector because CEOs tend to protect themselves, blame other people most of the time settle paying with our money. In a sense, all the big settlement that banks pay, they pay with shareholders money, which is our 41k money. And then yours at...”
2024-03-07 · Forward Guidance · The Erosion of Institutional Accountability | Dr. Luigi Zingales on Bank Failures, Whistleblowing, and The Fed · IDENTIFIED FROM THE TRANSCRIPT
“How does accountability at the Federal Reserve compare to accountability to the private sector, whether it's private sector banks and bank boards or other companies that are publicly traded in the private sector?”
2024-03-07 · Forward Guidance · The Erosion of Institutional Accountability | Dr. Luigi Zingales on Bank Failures, Whistleblowing, and The Fed · IDENTIFIED FROM THE TRANSCRIPT
“Because Powell appointed an internal commission, but surprise, surprise, the internal commission blamed the only person who had left the fed, which is sort of just a coincidence that the only person to be blamed is the one who just left the fed.”
2024-03-07 · Forward Guidance · The Erosion of Institutional Accountability | Dr. Luigi Zingales on Bank Failures, Whistleblowing, and The Fed · IDENTIFIED FROM THE TRANSCRIPT
“My intonation at the end of the day should be the top because the back stops there, right? You can always delegate responsibility and claim, et cetera. But I think it's cheap to say for somebody below, you are paid to actually oversee what's done. Maybe somebody else should do a sign as well, but I think that if you were to legislate this, if this is a decision exposed, I think that what I would try to have is exactly an independent commission to determine who was responsible, a bit like the commission after the challenger, where they try to figure out what was wrong. And I think that that commission was very useful to figure out the problems even inside NASA. So that's the reason why I think we should have had an external community.”
2024-03-07 · Forward Guidance · The Erosion of Institutional Accountability | Dr. Luigi Zingales on Bank Failures, Whistleblowing, and The Fed · IDENTIFIED FROM THE TRANSCRIPT
“After all, the systemic exception means you screw up, right? It's so big and it's not a small mistake. We all make small mistakes. But gee, if you invoke the systemic perception, means that the entire system is at risk. And you are in charge of the entire system, how could you possibly bulk a systemic exception without resanning? In the sense, in the old days, they were committing karakiri, but I don't want to go that far. In the old days, they were committing what? In the old days, they used to do kayakiri to be so brutal. I just think that they should simply resign in order to invoke a systemic exception. There must be a sacrificial land that say, I stood up, we need to get the systemic exception. And I guarantee you that regulators will be more attentive after that.”
2024-03-07 · Forward Guidance · The Erosion of Institutional Accountability | Dr. Luigi Zingales on Bank Failures, Whistleblowing, and The Fed · IDENTIFIED FROM THE TRANSCRIPT
“Is more problematic because I don't think it's just a power problem, is an internal problem in the Fed, is that nobody is responsible for what went wrong. In a sense, enormous situation when there is a major screw up, you would like to have somebody that takes responsibility. In fact, I was at the country the other day and came to my mind a brilliant idea, which is, if I may say so, is that in order to invoke the systemic exception, because you know Secretary Yellen, after the failure of SVB, decided to invoke a systemic exception and basically protect all the deposits. And I would like to introduce a norm that says that in order to invoke the systemic exception, somebody needs to lose his job. Like maybe the hand of the Fed.”
2024-03-07 · Forward Guidance · The Erosion of Institutional Accountability | Dr. Luigi Zingales on Bank Failures, Whistleblowing, and The Fed · IDENTIFIED FROM THE TRANSCRIPT
“Absolute. In a sense, I think that now it's becoming historical at this point, but the Fed was late to the game with the interest rates. And, you know, I'm Italian and Italians tend to be cynical. There was a former Italian prime minister saying, when you think the worst about a person, you commit a scene, but you're right. And so we tend to always think there was. And my observation is that Powell started to talk about raising interest rates only after he was re-nominated by President Biden and especially after was reappointed by the Senate. So he first wanted to get the job renewed and then he decided, so that was a six or seven months of delay that was pretty costly for the system. So that's error number one. But I think that the error number two, which to be understandable.”
2024-03-07 · Forward Guidance · The Erosion of Institutional Accountability | Dr. Luigi Zingales on Bank Failures, Whistleblowing, and The Fed · IDENTIFIED FROM THE TRANSCRIPT
“A lot of people focus on two powers of the Federal Reserve interest rates and then the balance sheet. I guess there's also its role in bank regulation. So that would be your critique of the Fed in this second instance.”
2024-03-07 · Forward Guidance · The Erosion of Institutional Accountability | Dr. Luigi Zingales on Bank Failures, Whistleblowing, and The Fed · IDENTIFIED FROM THE TRANSCRIPT
“Actually, the banks were reporting in footnote how much money they were losing. So you didn't even need to make complicated calculation. You needed to read the footnote and the complete inability or willingness to intervene, I think, is problematic, especially after we had a major financial reform in 2010, precisely to avoid the problems between contract and 2008. So in 2008, we had a major financial crisis. The Fed said, oh, the reason why we had the crisis is because we did not have enough power. So give us all the power. And Dodd-Frank gave all the power and they failed.”
2024-03-07 · Forward Guidance · The Erosion of Institutional Accountability | Dr. Luigi Zingales on Bank Failures, Whistleblowing, and The Fed · IDENTIFIED FROM THE TRANSCRIPT
“Actually, the second time was not to raise it too fast, he's not to pay attention to the collateral damage of what it was doing because the Fed not only responsible to peek into the swave, so responsible for the soundness of the banking sector. SVB and the other banks that went after it failed in the most traditional form in they basically were too invested long when interest rate went up and lost enough money. This is interest rate risk is the most benign form of risk that banks are exposed to the first thing that you learn in any banking class is beware of interest rate risk. So it's not like some complicated derivative that was just being invented and nobody knew what it was was in plain size.”
2024-03-07 · Forward Guidance · The Erosion of Institutional Accountability | Dr. Luigi Zingales on Bank Failures, Whistleblowing, and The Fed · IDENTIFIED FROM THE TRANSCRIPT
“I'm glad to hear that Professor a little under a year ago, you called for a commission to investigate the Federal Reserve and make sure everything was going on, given you said that the Fed had failed twice, one being too late with inflation, the other in raising rates too fast and causing the banking tremor of last spring. Tell us what motivated you to call for that commission”
2024-03-07 · Forward Guidance · The Erosion of Institutional Accountability | Dr. Luigi Zingales on Bank Failures, Whistleblowing, and The Fed · IDENTIFIED FROM THE TRANSCRIPT