The first gatekeepers to be investigated are the boards of SVB and Signature Bank, which are responsible for ensuring that bank risks are properly managed. They were not. In June 2019, Delaware’s supreme court held that the board members of Blue Bell Creameries should be personally liable for losses the company suffered following a deadly listeria 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 gatekeeper to be investigated 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. By law, auditors must state whether they have any doubt about a company’s ability to survive over the next year. In both cases, KPMG expressed no doubts. Within two weeks, both banks failed. If auditors are unable to detect fraud or risk, what are they paid for?

The last and most important gatekeeper to be investigated is the Fed.