What does the future hold for the world of finance? Simon Johnson will provide the keynote speech for the Federal Reserve Bank of Atlanta’s 2019 Financial Markets Conference, “Mapping the Financial Frontier: What Does The Next Decade Hold?” on Sunday, May 19 at 7 p.m. Tune in below to view the speech live:
Simon Johnson is the Ronald A. Kurtz (1954) Professor of Entrepreneurship at the MIT Sloan School of Management, where he is also head of the Global Economics and Management group and chair of the Sloan Fellows MBA Program Committee.
Freddie Kerrest, MBA ‘09
Excerpt from MIT Sloan School of Management
Angie Hicks of Angie’s List went from doorsteps to NASDAQ. Mark Zuckerberg turned his dorm room idea into a Silicon Valley corner office. A co-founder “blind date” between Julie Rice and Elizabeth Cutler sparked the cult-like following of Soul Cycle.
Sure, there were challenges (and legal battles) along the way, but happy endings came for these entrepreneurs — which make for easy fairytales to tell in glossy profiles and curated news sites.
Frederic Kerrest, MBA ’09, wants to change that with his newly launched podcast “Zero to IPO.” Read More
MIT Sloan Prof. Deborah Lucas
It has been 10 years since the federal government took emergency actions in response to the financial crisis of 2008. Were those expensive interventions good investments? Or were they just bailouts for wealthy bankers?
Many economists believe that the policies—including the Troubled Asset Relief Program (TARP), the Housing and Economic Recovery Act of 2008, and others—were necessary to avert even greater economic harm. But consensus remains elusive. Some argue that even more aggressive rescue policies were called for. Others claim that more institutions should have been allowed to fail.
Popular perceptions are also mixed. A common narrative is that ordinary taxpayers were forced to pay trillions of dollars to rescue rich bankers. Others cite tallies showing net costs to taxpayers that were modest or even negative, because the money was paid back. Certainly, political distaste for the bailouts influenced key provisions of the Dodd-Frank Act of 2011, which made sweeping changes to the regulatory landscape with the stated intent of forever ending bailouts.
Perhaps the most fundamental question about bailouts is whether and when their benefits justify their costs. This is not an easy question to answer, but accurate cost assessment is also essential to address other questions: Did the likely benefits of the policy justify the expense? Could the benefits have been achieved at a lower cost?
Drawing on existing cost estimates and augmenting those with new calculations, I conclude that the total direct cost on a fair-value basis of crisis-related bailouts in the U.S. was about $498 billion. My analysis imposes the discipline of a fair-value approach, which incorporates the uncertainty about the size of eventual losses at the time assistance was extended and the cost of that risk. By contrast, popular accounts simply add up realized cash flows or tally total risk exposures.
That cost is big enough to raise serious questions about whether taxpayers could have been better protected. At the same time, it is small enough to ask whether Dodd-Frank’s goal of eliminating bailouts entirely justifies the costs it has imposed on financial institutions, and suggests revisiting some of the regulations that were hastily put into place after the crisis.
Paul Michelman, editor-in-chief of MIT Sloan Management Review
MIT Sloan Lecturer Ben Shields
Excerpt from MIT Sloan Management Review
Bill Snyder at Kansas State. Eddie Robinson at Grambling. Mike Krzyzewski at Duke. Gregg Popovich with the Spurs. It’s hard to underestimate the impact these coaches have had on their organizations. But are coaches always an X factor? Just look at the Golden State Warriors. Dominating as they have been under Steve Kerr’s steady guiding hand, they have been every bit as successful — actually statistically even more successful — during Kerr’s two extended absences from the team when Luke Walton and then Mike Brown (not exactly Hall of Fame coaches) took the helm. Which brings us to the question of the day: How much do coaches actually matter? Well, two researchers from the University of Chicago just might have the answer.
Doug Criscitello, Executive Director of MIT’s Center for Finance and Policy
From The Hill
While trust in government around the world has been trending downward for decades, trust in the U.S. government now appears to be in freefall as a host of half-truths and downright lies become entrenched in our political system. Playing fast and loose with the facts has long been a hallmark of politicians, so why be concerned with the counterfactual and scientifically dubious logic flowing from Washington these days?
When the leader of the free world cannot be trusted as an authoritative source of information on critically important topics, the world, already a dangerous place where bad things can and do happen, becomes riskier. Consider what would happen if any of the following were to occur: pandemics, financial crises, natural disasters, nuclear accidents, cyberattacks and/or military conflicts. Economists study the likelihood and impacts of these highly consequential but low probability events, called tail risks. Although unlikely, it’s bad, really bad, when one of these extreme, end-of-the-bell-curve events occurs.