Articles 1 to 10 of 51
Enough. Period.
John C. Bogle, founder of the Vanguard Mutual Fund Group and President of its Bogle Financial Markets Research Center, has been warning us for decades about the danger of short-term thinking and greed as motivator in the U.S. financial sector. In his new bestseller "Enough.," Bogle's thesis is that our nation has been engaged in decades of unchecked financial excess, for which we are now suffering: excess in investment company fees; excess in financial speculation masquerading as diversification and innovation; excess in the salaries of top executives; excess in salesmanship; and most importantly, excess in the role played by the financial industry in our national economy and national life.
Swimming Naked: Rethinking Risk Management After the Crisis
Warren Buffet said: "When the economic tide goes out, you find out who is swimming naked." The financial upheaval of the last two years has revealed a number of inadequately clad investors. Just as every crisis prompts soul-searching about assumptions and standard procedures, banks and other financial institutions are taking a serious look now at how they measure, price and monitor risk in the capital markets.
Junk Bonds, Subprime and the Pepper Crises: Investor Behavior Follows Pattern
In his classic book on economic history, Charles Kindleberger argued that asset bubbles follow a predictable pattern. A new opportunity or technology sparks investor euphoria. Asset prices quickly rise to an unsustainable level. Then suddenly, people stop buying, and panic ensues. The more people who leave, the faster values plummet. So it is with real estate and subprime mortgages today, and so it was with junk bonds a generation ago.
The Cost of Capital: Goldman Sachs' Extreme Makeover
In September 2008, the financial storms that had battered global markets since spring began to threaten the legendary investment bank Goldman Sachs. The 139-year-old financial titan had seen its stock plummet nearly 50 percent in a matter of weeks. Three other big investment banks had either gone bankrupt or been shuffled off to larger firms in rushed sales, and many Wall Street observers wondered if Goldman would be next. But nine months later, Goldman is very much back from the brink. Its stock price has rebounded, recovering nearly 50 percent in the first four months of 2009. On June 17, it repaid a $10 billion emergency capital infusion the U.S. government had provided at the height of the crisis. And with several of its biggest competitors gone, Goldman Sachs is again a dominant player in global finance. Goldman's experience in the financial crisis of 2008 demonstrates how calculations and strategies surrounding the cost of capital are critical to a firm's success, according to L. Wendell Licon, W. P. Carey clinical assistant professor of finance.
The Economic Minute: Mark-to-Market Accounting
The Financial Accounting Standards Board (FASB) recently came out with new rules governing "mark-to-market accounting." Entities employing mark-to-market adjust the value of financial assets up or down, according to fair market value. The practice has been the subject of controversy during the current financial crisis. In this edition of The Economic Minute, John Sizer, a partner at Deloitte & Touche, tells Economic Club of Phoenix members that mark-to-market is not the problem. "It is my personal opinion that the new FASB positions are helpful, that accounting standards are not the underlying cause of the write-down of financial assets but rather reflect the underlying problem with those assets," Sizer said. "Mark-to-market is not perfect, it requires significant professional judgment, but I believe it is the most accurate and reasonable portrayal of a company's financial condition."
The Economic Minute: The Changing State of Banking
Hope Berman Levin, the regional president for U.S. Bank in Arizona, recently touched on some of the rapid-fire changes that are happening in banking, during a talk at the W. P. Carey School's 26th Annual Dean's Council of 100 Executive of the Year Luncheon. Levin commented on new policies at the FDIC, interest rates, bank failures and the future of the industry. The Economic Minute, presented at Economic Club of Phoenix luncheons, brings you the insights of the school's economists and the business leaders who are members of the Economic Club of Phoenix and the Dean's Council of 100.
Podcast: Markets Await Detail of Rescue, Stimulus Plans
Treasury Secretary Timothy Geithner announced the Obama administration's plan to rescue financial markets yesterday. The plan was long on promise and short on details, however, which sent markets spinning. Later in the day, the Federal Reserve stated it was ready to add $100 billion the TALF program, a move designed to increase consumer lending and invigorate the mortgage market. And, the Senate enacted its own version of the stimulus bill. Finance Professor and banking expert Herbert Kaufman sat down with Knowledge@W. P. Carey to discuss the events, starting with his reaction to Secretary Geithner's speech.
Tom McCabe: Asia Positioned for Post-Recovery Strength
The pain of the newly-declared recession knows no boundaries, and the Asian economies are not immune, but that region is positioned to rebound faster than the U.S. and come out stronger than before, according to Tom McCabe, managing director of Standard Chartered Bank PLC. Speaking from the perspective of more than a decade in the banking industry in Asia, McCabe told an audience of executives in Phoenix that Asia will be the world's engine of growth in the next 50 years, driven by India and China.
The Devil's in the Details of the Financial Market Crisis, and He's Wearing a Green Eyeshade
In the last month, financial markets came as close to collapsing as they have since the Great Depression, and the root of their woes was frozen credit markets. The crisis sparked several weeks of furious and futile improvisation by U.S. regulators and lawmakers. By early this week, the proposal -- nicknamed the Paulson plan after Treasury Secretary Hank Paulson -- appeared to be bringing relief, said financial experts at the W. P. Carey School of Business and in the investment business. Even so, only time will tell whether Paulson's plan can solve the underlying problems, the experts said. As always, the devil's in the details, and this time around, he's wearing a green eyeshade.
Grappling with a Global Confidence Crisis
It's been called a crisis of confidence. It started with bad real estate loans and highly leveraged bets on those loans. Now it has frozen credit markets. Banks aren't lending to each other. Businesses can't get the short-term loans they need to finance day-to-day operations. If it stays this difficult to access credit, the financial crisis threatens to become a real economic one. And it's global. Welcome to what Thomas Friedman calls the "flat" new world.
