10/12/2008 - As the U.S. financial crisis has unfolded in recent weeks, Kellogg School faculty members have presented their insights and analysis to help the public understand the roots of the problem and offer a framework for solutions.
Through numerous media appearances, Kellogg finance professors, including Deborah Lucas, Robert McDonald
, Kathleen Hagerty
, Paola Sapienza
, Robert Korajczyk
, David Stowell
and others have addressed questions surrounding the crisis and the government’s response, including the $700 billion capital infusion plan approved by Congress on Oct. 3.
In addition, Kellogg School professors and senior alumni investment and banking practitioners have conducted in-depth panel discussions to explain the causes, consequences and potential solutions to what is being termed America’s most serious financial crisis in decades.
Kellogg School faculty have been front and center in the discourse surrounding the current economic situation. Below is a listing of media highlights.
October 7, 2008
Glen Vasel Professor of Finance Mitchell Petersen comments on how the FDIC’s proposed increase may affect banks and consumers.
Wall Street Journal
For Investors, Dealing With a Loss of Control
October 7, 2008
From the article: How does the feeling of being overwhelmed affect investors? Research conducted by psychologists Jennifer Whitson of the University of Texas and Adam Galinsky of Northwestern University shows how it changes our perceptions. In one of their experiments, people were first rattled by a computer that gave them unpredictable feedback on their performance at a trivial task, stripping them of their sense of control. These people became much more likely to perceive shapes in a swarm of random dots.
“Extension 720 with Milt Rosenberg”
October 6, 2008
Deborah Lucas, the Donald C. Clark / Household International Professor in Consumer Finance Fund, and Robert McDonald, Erwin P. Nemmers Professor of Finance, discuss the financial crisis.
Diario Financiero (Chile)
The crisis in the classroom
October 3, 2008
Harry G. Guthmann Professor of Finance Robert Korajczyk comments on the current economic landscape.
Los Angeles Times
Financial System in Crisis: Tight credit puts state in a corner
October 2, 2008
From the article: Bailout or no bailout? Economists, money managers and others weigh in on the needs and merits of the proposed $700-billion rescue package for the financial system... "I think there are cheaper ways to address this, but we have to do something. If we don't, we risk going into a deep recession. We just have to ask ourselves how much we are willing to pay and whether that cost outweighs the costs of the economy slowing down and people losing their jobs." -- Paola Sapienza, economics professor, Kellogg School of Management, Chicago
U.S. Executives May Draw Don't-Do-This Lessons From Washington
September 30, 2008
From the article: One lesson is to be more careful about casting any one decision as do-or-die, said Deborah Lucas, a finance professor at the Kellogg School of Management at Northwestern University in Evanston, Illinois. That applies to the package that Treasury Secretary Henry Paulson and other administration officials sought from Congress, she said... "The administration officials set themselves up for this when they said, 'Give us a blank check or everything will go to hell,''' said Lucas, former chief economist of the Congressional Budget Office. "Investors took them at their word.''
New York Times
Countless Proposals With a Common Thread: Urgent Action Is Needed
September 29, 2008
From the article: Deborah Lucas, finance professor at the Kellogg School of Management, said government examiners should rapidly examine the books of every major financial institution involved in this crisis, including insurers, pension funds and banks, and determine which are weakest and which can survive. Ms. Lucas said she was glad that the Treasury’s proposal had failed. The core problem now is a crisis of confidence, which can be resolved only with increased transparency, not a government bailout, she said. “I don’t think piecemeal guaranteeing assets is that valuable,” Ms. Lucas said. “They need to do the harder thing, which is to really have a direct discovery process, where they figure out who they’re going to shut down, what it’s going to cost.” Ms. Lucas says she believes that the Federal Reserve and F.D.I.C. are already addressing the crisis, pointing to deals like Citigroup’s takeover of Wachovia on Sunday, which was backstopped by the F.D.I.C. More and similar deals are likely, she said.
Good Morning America (ABC News)
Financial Crisis, Bailout Has Ripples Past Wall Street
September 28, 2008
From the segment: "It is very important when you put together a plan like this that you don't reward those who didn't behave well," said Paola Sapienza, associate professor at the Kellogg School of Management.
In Full Stride as Others Fall
September 27, 2008
From the article: "[J.P. Morgan Chase CEO] Jamie [Dimon] has always been focused on deposits and on creating what he calls a 'fortress balance sheet,' which among other things means carrying a stable supply of cash that doesn't run out the door at the first sign of crisis," said former J.P. Morgan investment banker David Stowell, now a professor at Northwestern University's Kellogg School of Management.
Economists Take Sides
September 26, 2008
Associate Professor of Finance Paola Sapienza who was one of five economists to author a petition asking Congress not to rush into the proposed Wall Street bailout. She is one of two economists interviewed in this news segment.
Tightening of credit strikes nerve among consumers
September 26, 2008
From the article: "If not fixed fairly soon, we may find that individuals and smaller businesses have much higher costs for borrowing — or in the worst case are unable to borrow at all," said David Stowell, finance professor at Northwestern University's Kellogg School of Management.
Treasury's Paulson is 'The Hammer' behind the bailout
September 23, 2008
From the article: [Treasury Secretary Henry] Paulson successfully led Goldman's transition to a publicly traded company. He also took a personal hand in Goldman's recruiting, ensuring that Northwestern University's Kellogg School of Management, where he long served on an advisory board, sent many of its top graduates to the investment bank. "The man really cares about excellence," says Dipak Jain, the school's dean.
September 22, 2008
Clinical Professor of Finance David Stowell discusses the financial crisis.
Los Angeles Times
The free market's not always the fair and honest market
September 21, 2008
From the article: "There's been a massive market failure here," said Kathleen Hagerty, a finance professor at Northwestern University's Kellogg School of Management. She said a government bailout of distressed companies was understandable under the circumstances. But the upshot needs to be tighter regulation of the marketplace. "If the government is going to be the one left holding the bag, then it needs to be able to tell people what to do," Hagerty said.