Experts discuss global economic crisis
JOHN HOPKINS April 9th, 2009
The College of Wooster recently hosted a half-day forum on the global economic crisis. Among those offering their insights were Donald Kohn, vice chairman of the Federal Reserve and a 1964 graduate of the College; William Longbrake, retired vice chairman of Washington Mutual and former CFO of the FDIC, also a Wooster alumnus; and Pulitzer Prize winning journalist and author James Stewart. You can read more or listen to audio files of the event here.
An amazingly good program and a credit to the school to have such alums and to get them to come and spent this amount of time and depth. Would it have been even better if students had been allowed to ask questions directly?
While the speakers talked about policy changes that they would recommend, many involving the right kind and amount of increased regulation of financial sector practices, there were only a few allusions to the political problems in accomplishing this. In fact the financial industry was able to use its political power to resist all attempts to regulate lending and marketing conduct until the meltdown was underway in the marketplace, and it continues to try to resist legal and regulatory changes. Government is now picking up the pieces from the meltdown but was unable to do much to affect the marketplace at the time. How would the panelists recommend that this situation be changed?
Mr. Longbreak was chief financial officer of a company that was actively practicing in the marketplace described by the panel, and is also astutely aware of the long and short term issues that caused the resulting problems to happen. I would be interested in hearing how companies made their decisions, what sort of dynamics went on internally, whether the ideas discussed today made their way into the process and how they were dealt with, and how people dealt with risk of the unknown in a situation where it turned out that expected rules of economics did not work as expected. What would he recommend to students who might someday find themselves in such situations?
Mr. Longbreak was also involved in designing the Administration’s programs to fix “toxic” mortgages. I would like to have heard about thoughts and policy choices underlying this program, how many mortgages should be fixed and in what way, and how much replacing toxic mortgages with more sound ones is expected to affect the burden of these mortgages on the financial system.
It also struck me that the panelists seemed very removed from the suffering that so many people experience when recessions do their work of creative destruction and purging of excesses. Shouldn’t we have a better safety net for those people, making sure that it does not suffer from the countercyclical qualities described in other contexts? What is the best way to create one?
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