RPP Seminars on Financial Regulation, 2009-2010

Fall 2011

November 3, 2011
The Economics of Housing Finance Reform
David S. Scharfstein, Edmund Cogswell Converse Professor of Finance and Banking, Harvard Business School
Paper: The Economics of Housing Finance Reform by David S. Scharstein and Adi Sundera
Abstract: This presentation will analyze the two leading types of proposals for reform of the housing finance system: (i) broad-based, explicit, priced government guarantees of mortgage-backed securities (MBS) and (ii) privatization. Both proposals have drawbacks. Properly-priced guarantees would have little effect on mortgage interest rates relative to unguaranteed mortgage credit during normal times, and would expose taxpayers to moral-hazard risk with little benefit. Privatization reduces, but does not eliminate, the government’s exposure to mortgage credit risk. It also leaves the economy and financial system exposed to destabilizing boom and bust cycles in mortgage credit. Based on this analysis, we argue that the main goal of housing finance reform should be financial stability, not the reduction of mortgage interest rates. To this end, we propose that the private market should be the main supplier of mortgage credit, but that it should be carefully regulated. This will require new approaches to regulating mortgage securitization. Moreover, we argue that while government guarantees of MBS have little value in normal times, they can be valuable in periods of significant stress to the financial system, such as in the recent financial crisis.  Thus, we propose the creation of a government-owned corporation that would play the role of “guarantor-of-last-resort” of newly-issued (not legacy) MBS during periods of crisis.
Read the story in HKS News about this seminar

Spring 2010

February 4, 2010
Corporate Governance and Accountability: The Six Essential Tasks

Ben Heineman
Senior Fellow at the Belfer Center for Science and International Affairs
Distinguished Senior Fellow at the Program on the Legal Profession at the Harvard Law School
Abstract: This presentation will discuss the six essential tasks which boards of directors and senior executives must discharge to create sustainable value for the contemporary corporation in a time of economic turmoil. These tasks must balance risk-taking with risk-management and must fuse high performance with high integrity. Only by discharging these tasks with focused energy can corporations regain trust, answer critics of company leadership and set the standards for corporate accountability, now that maximization of short-term shareholder value has been discredited as the proper measure for holding companies to account. Please click for Mr. Heineman's policy brief on this topic published by the Committee for Economic Development, as well as his recent article from Business Week.

February 11, 2010
In Praise of Primitive Finance
Amar Bhide
Visiting Scholar, Mossavar-Rahmani Center for Business and Government
Professor Amar Bhide is the Laurence D. Glaubinger Professor of Business at Columbia University. His book, "The Venturesome Economy: How Innovation Sustains Prosperity in a More Connected World," (Princeton University Press 2008) won the Association of American Publishers' PROSE Award for Professional and Scholarly Excellence in Business, Finance, and Management, and was in the "Best of 2008" lists of the Economist, BusinessWeek and Barrons. The author of "The Origin and Evolution of New Businesses" (Oxford 2000), and "Of Politics and Economic Reality" (Basic Books 1984), Professor Bhide has been studying entrepreneurship for more than twenty years. He has written extensively for the Harvard Business Review and for the Wall Street Journal, The New York Times, and The LA Times. Professor Bhide served on the faculties of Harvard Business School (from 1988 to 2000) and the University of Chicago's Graduate School of Business. A former Senior Engagement Manager at McKinsey & Company and proprietary trader at E.F. Hutton, Professor Bhide served on the staff of the Brady Commission which investigated the 1987 stock market crash. He earned a DBA (1988) and an MBA with high distinction as a Baker Scholar (1979) from Harvard. He received a B.Tech from the Indian Institute of Technology in 1977.

February 26, 2010
Too Big to Save? How to Fix the U.S. Financial System
Robert Pozen
Senior Lecturer of Business Administration, Harvard Business School
Abstract: Mortgage defaults, together with excessive debt and weak regulation, ultimately led to the financial crisis in the United States. But how did a steep drop in U.S. housing prices result in a severe financial crisis throughout the world? What did the U.S. government do right and what did it do wrong in responding to the crisis? And perhaps most importantly, what actions should be taken in the future to resolve the financial crisis and help prevent others from happening? Come hear Robert Pozen discuss his new book, "Too Big to Save?", in which he discusses his answers to these key questions and presents his vision for reparing the U.S. financial system. Please click for reviews of Mr. Pozen's book from Reuters, The Financial Times and Forbes.

March 4, 2010
Canada's Response to the Crisis and Financial System Stability Going Forward
Mark Carney, Governor of the Bank of Canada.
Born in Fort Smith, Northwest Territories, Mr. Carney received a bachelor's degree in economics from Harvard University in 1988. He received a master's degree in economics in 1993, and a doctorate in economics in 1995, both from Oxford University. Prior to joining the public service, Mr. Carney had a thirteen-year career with Goldman Sachs in its London, Tokyo, New York, and Toronto offices. His progressively senior positions included Co-Head of Sovereign Risk; Executive Director, Emerging Debt Capital Markets; and Managing Director, Investment Banking. Mr. Carney was Deputy Governor of the Bank of Canada from August 2003 until his appointment as Senior Associate Deputy Minister of Finance in November 2004. In addition to his domestic responsibilities in the Department of Finance, he also served as Canada's Finance Deputy at the G-7, the G-20, and the Financial Stability Forum.

March 9, 2010
Transitions in the U.S. and Global Economies
David Rubenstein
Co-Founder and Managing Director of The Carlyle Group
David M. Rubenstein is a Co-Founder and Managing Director of The Carlyle Group, one of the world's largest private equity firms. Prior to co-founding Carlyle, Mr. Rubenstein practiced law in New York and Washington, DC, and served for four years, beginning at the age of 27, as the Deputy Domestic Policy Assistant to President Carter. Mr. Rubenstein is a 1970 magna cum laude, Phi Beta Kappa graduate of Duke University, and a l973 graduate of the University of Chicago Law School, where he served as an Editor of the Law Review. Mr. Rubenstein is now a trustee of Duke University and the University of Chicago, as well as being a trustee of Johns Hopkins University, in his hometown of Baltimore, Maryland. In his other non-profit activities, Mr. Rubenstein serves as President of the Washington Economic Club, Vice-Chairman of Lincoln Center for Performing Arts (where he chairs its Redevelopment Campaign), and a member of the Board of Trustees of the Kennedy Center for Performing Arts, the Council on Foreign Relations, Sloan Kettering Memorial Hospital, Johns Hopkins Medicine, the Institute for Advance Study, and the Smithsonian's American History and Natural History Museums. In his philanthropic efforts, Mr. Rubenstein has been particularly involved with the Terry Sanford Institute of Public Policy at Duke University, the Kennedy School of Government at Harvard University, the Childrens Hospital at Johns Hopkins, the Council on Foreign Relations, The Smithsonian Institution, and the on-going programs at the Lincoln and Kennedy Centers. In 2007, Mr. Rubenstein was awarded membership in the Horatio Alger Society for his business and philanthropic achievements.

April 7, 2010
Fiscal Days of Reckoning
Eugene Steuerle, Richard B. Fisher Chair and Institute Fellow at the Urban Institute
Abstract: In his address, Eugene Steuerle will show how long-term budget issues, often associated with the gap between growing entitlement spending and low supporting revenues, have now merged with short-term issues arising in part from the need to unwind from recession-level deficits.  He will examine the decline in fiscal democracy, as each major political party increasingly tries to control the future—leaving zero or negative give or slack in the budget for new programs, new needs, or the demands of tomorrow’s voters.  Health reform, whatever its other positive or negative features, does little to change this overall trajectory.  And he will argue that the net “bipartisan” result has been a budget for a declining nation, with emphasis on consumption over saving and work, and within the social welfare budget, adequacy over investment and opportunity.

April 7, 2010
A Panel Discussion sponsored by M-RCBG, the Sovereign Wealth Fund Caucus, Business and Government PIC, the Republican Caucus, the Venture Capital and Private Equity PIC, the International Trade and Finance PIC, and KSSG
Foreign Investment in the United States: The Present Climate
Nova Daly, Former Deputy Assistant Secretary, Investment Security & Policy, U.S. Department of the Treasury, Office of International Affairs
Neal Orringer, Senior Professional Staff at the U.S. Senate Banking Committee
Nancy L. McLernon, President & CEO of The Organization for International Investment

April 29, 2010
Lessons to be Learned From the Financial Crisis: What Went Wrong and Where Should We Go From Here?
Harvey Goldschmid
Dwight Professor of Law, Columbia University
VIDEO from Prof. Goldschmid's talk
Harvey Goldschmid has served as the Dwight Professor of Law at Columbia University since 1984, and was an Assistant Professor (1970-71), an Associate Professor (1971-73), and a Professor of Law (1973-84) at Columbia. From 2002-05, Professor Goldschmid served as a Commissioner of the United States Securities and Exchange Commission, and in 1998-99, he was the SEC's General Counsel (chief legal officer); from January 1 to July 15, 2000, he was Special Senior Advisor to SEC Chairman Arthur Levitt. In 1997-98, Professor Goldschmid was a consultant on antitrust policy to the Federal Trade Commission, and in 1995-96, was a member of the FTC's Task Force on High Tech/Innovation Issues. He now serves as Chair of the Board of Directors of the Greenwall Foundation, as a Public Governor and Chair of the Regulatory Policy Committee of the Financial Industry Regulatory Authority, as a Director of the National Center on Philanthropy and the Law, as a Director of Transparency International-USA, and on the Governing Board of the Center for Audit Quality. Click here for more on Professor Goldschmid's background.

Fall 2010

October 7, 2010
Promises Kept? Consequences of Re-Regulating the Financial Services Industry
Donald Marron
Chairman and Chief Executive Officer, Lightyear Capital
Abstract: The near collapse of the U.S. financial system in September 2008 led Congress to enact the most comprehensive financial reform legislation since the Great Depression.  The goal of “The Dodd-Frank Wall Street Reform and Consumer Protection Act” was to reorganize financial regulators and to reform the regulation of financial markets and financial institutions. This seminar will address key areas of the Act and explore the unintended consequences that may result.

October 13, 2010
Financial Bubbles, Housing Troubles and Policy Fixes
Daniel Mudd
CEO, Fortress Investment Group LLC
Former CEO, Fannie Mae

October 20, 2010
A Business and Government Special Event - The Robert R. Glauber Lecture
Ending Too Big to Fail: The FDIC and Financial Reform
Sheila Bair
Chairman of the Federal Deposit Insurance Corporation (FDIC)

November 15, 2010
Special event presented by the Shorenstein Center on the Press, Politics and Public Policy. Co-sponsored by M-RCBG
A Conversation about the Economy: Where Do We Go from Here?

Douglas Shorenstein, Deputy Chairman of the Federal Reserve Bank of San Francisco; Chairman and CEO of Shorenstein Properties LLC and T. Gary Rogers, Chairman of the Board of the Federal Reserve Bank of San Francisco; former Chairman and CEO of Dreyer’s Grand Ice Cream, Inc.; former Chairman of the Board of Levi Strauss & Co.

December 1, 2010
Regulatory Response to the Financial Crisis - A European Perspective
Jörgen Holmquist, Fellow. Weatherhead Center for International Affairs, Harvard University
Director General of Internal Market and Services, European Commission, Brussels
Abstract: The financial crisis hit Europe as hard as it hit the US. Since almost all European financial market legislation is made at the EU level, an intensive activity of addressing the shortcomings of the European regulatory system started. In this seminar, Jörgen Holmquist will discuss the changes and choices that had to be made.

Spring 2009

February 5, 2009
Capital' and 'Leverage' for Financial Institutions, with Lessons from the S&L Debacle for the Current Debacle
Lawrence J. White
Arthur E. Imperatore Professor of Economics, Leonard N. Stern School of Business, New York University
Abstract: 'Capital' and 'leverage' are terms that are used frequently in discussing the causes and solutions for the current financial debacle. Some simple accounting examples will illustrate these concepts and how they relate to the underlying problems of asymmetric information -- adverse selection and moral hazard -- that every lender (and financial regulator) faces. The experience of the S&L debacle of two decades ago will then be used to draw lessons for dealing with the current debacle.

February 12, 2009
The Governance Failure and the Crisis of Capitalism
Ben Heineman
Senior Distinguished Fellow, Program on the Legal Profession, Harvard Law School; &
Senior Fellow, Belfer Center for Science and International Affairs, Harvard Kennedy School
Abstract: Although mistakes by regulators, rating agencies, consumers and the business media contributed, the primary cause of the financial melt-down was bad business decision making by boards of directors and business leaders. This melt-down has led to a crisis of capitalism where trust in business decision-making is lost, but the new balance between public controls and private self-determination is unclear. What happened? What can be done? Click here for related Bloomberg & Business Week articles by Ben Heineman.

March 5, 2009
Legal and Economic Issues in Litigation Arising from the Credit Crisis
Allen Ferrell
Professor of Law, Harvard Law School
Abstract: This seminar explores the economic and legal causes and consequences of the 2007-2008 credit crisis, whether the difficulties might have been foreseen, and some of the main legal issues that will play an important role in the extensive litigation that is underway. The seminar also discusses three principles that will likely prove central in the resolution of the securities class-action litigation: (1) "no fraud by hindsight"; (2) "truth on the market"; and (3) "loss causation." The background paper can be downloaded here.

March 12, 2009
The Persistent Elusiveness of Accountable Global Governance
Jonathan Koppell
Associate Professor of Politics and Management, &
Director of the Millstein Center for Corporate Governance and Performance
Yale School of Management
Abstract: The devastating worldwide effects of the financial crisis make it clear that economic calamity is no more confined by national borders than health epidemics, environmental disasters, or criminal trafficking. Despite this realization, efforts to create global regimes to address such transnational ills have been frustrated by the seeming inability of interested parties to construct workable global institutions. And, to make matters worse, the organizations which have been effective are congenitally plagued by charges of undemocraticness and lack of accountability. This talk, based on a forthcoming book World Rule: The Politics of Global Governance (University of Chicago Press, under contract), offers the novel argument the failures of accountability are a function of the very compromises necessary to build meaningful global regimes. Based on an empirical study of twenty-five global rulemaking organizations, this conclusion applies to a wide variety of institutions, including both intergovernmental and non-governmental bodies. From an in-depth analysis of the structure and processes adopted by global governance organizations, lessons are taken regarding the mechanisms for balancing the pragmatic demands of maintaining authority with the expectations of normative legitimacy.
Click here for a pdf of the slides used in Jonathan Koppell's presentation.

March 19, 2009
Making Sense of the Subprime Crisis
Paul Willen
Senior Economist and Policy Advisor, Federal Reserve Bank of Boston
Abstract: Paul Willen, senior economist of the Federal Reserve Bank of Boston, will discuss two recent papers. The first, Making Sense of the Subprime Crisis, explores the question of whether market participants could have or should have anticipated the large increase in foreclosures that occurred in 2007 and 2008. The second, Subprime Mortgages, Foreclosures, and Urban Neighborhoods, analyzes the impact of the subprime crisis on urban neighborhoods in Massachusetts.
Click here for the slides from Paul Willen's presentation.

March 20, 2009
Ponzi Schemes: Why Madoff Will Not Be the Last
Mark Fagan
Senior Fellow, Mossavar-Rahmani Center for Business & Government
Abstract: Who was the namesake for financial scams? What can we learn from Ponzi and the dozens of con artists that followed him? Please join MR-CBG Senior Fellow Mark Fagan for a description of the character traits and behavior of con artists and their “investors” as well as the architecture and life cycle of their schemes. We will discuss strategies for preventing, or at least mitigating, the risk of future schemes.

March 30, 2009
Special Event, Co-Sponsored by Taubman Center for State and Local Government, the Rappaport Institute for Greater Boston, and M-RCBG
Making Hard Choices in Troubling Times: How Massachusetts is Addressing its Fiscal Crisis
Leslie Kirwan
Massachusetts Secretary of Administration and Finance
Commentary by State Representative Charles Murphy, Chair of the House Ways and Means Committee and Peter Zimmerman, Senior Associate Dean and Lecturer in Public Policy, Harvard Kennedy School
Abstract: Because the deep and unprecedented national recession, Massachusetts has had to close an approximately $6 billion gap beween available revenues and projected spending for the current and upcoming fiscal year. This task is especially difficult because the economic downturn forces many individuals and families to rely more than ever on the safety net provided by state programs. Moreover, the economic uncertainty that characterizes the current financial downturn makes it especially hard to accurately project how much money will be available to address these pressing needs.

April 2, 2009
The Impact of the Financial Crisis on the Business-Government Relationship
David Rubenstein
Co-Founder and Managing Director of the Carlyle Group; Former Deputy Assistant to President Carter for Domestic Policy; Member of the Visiting Committee of the Harvard Kennedy School

April 2, 2009
Maximizing State Assets during a Fiscal Crisis
Alan Trager
Adjunct Lecturer in Public Policy, Harvard Kennedy School;
Commissioner, New York State Commission on Asset Maximization
Abstract: How does a financial crisis affect how a State seeks to maximize the financial and operational performance of its assets using the techniques of public-private partnerships (PPP)? New York State is the world’s twelfth largest economy, and is at the epicenter of the US financial crisis. Its major institutions, both public and private, are confronting a fiscal and social crisis. The State is rich in assets but does not have the structure, authority or resources to configure its assets in ways that could help address its problems. This seminar will explore how the New York State Commission on Asset Maximization has approached its mission and how its plans for the future may offer solutions for New York and other major states.

April 7, 2009
The Panic of '08 - What Happened? What's Next?
Glenn Hutchins
Co-Founder and Co-Chief Executive of Silver Lake; Board of Directors, Nasdaq; Harvard Management Company, Director
Abstract: A veteran technology investor, Glenn Hutchins argues that the failure of Lehman Brothers was the catalytic event that caused "The Panic of '08" and converted a garden-variety recession into a full-blown crisis.  He traces the root causes of the crisis to establish that everyone played a role --mortgage lenders, home-owners, bankers and consumers, chief executives and politicians, the mighty Fed and the lowly rating agencies. He explores the implications of the crisis for the US economy and for the US role in the world.  Looking ahead, Hutchins argues that entrepreneurship and advances in technology will help lead us out of our current problems.

April 9, 2009
The Financial Crisis: How Did We Get Here and How Will Regulation Change?
Robert Glauber
Adjunct Lecturer in Public Policy, Harvard Kennedy School
Visiting Professor, Harvard Law School
Abstract: The U.S. is in the middle of the worst financial crisis since the 1930s.  Congress undoubtedly will, and should, restructure financial regulation in dramatic ways.  But it is important that this restructuring proceed from a good understanding of what are the purposes of financial regulation and where the current regulatory structure failed.

April 22, 2009
Financial Bubbles: Letting the Air Out Before they Burst

Mark Fagan
Senior Fellow, Mossavar-Rahmani Center for Business & Government
Abstract: The recent implosion of the stock and real estate markets has raised questions about the origin and management of financial/asset bubbles. Financial bubbles are not new. From tulips to stocks to real estate, asset bubbles have grown and burst for centuries. Why have we not learned from our past? Are future bubbles inevitable? Please join a discussion of the nature of financial bubbles and an exploration of two unlikely possible solutions – operations management and the power of the individual.

April 23, 2009
The Shape of Financial Re-Regulation
James M. Stone
CEO, Plymouth Rock group of property and casualty insurance companies
Former Chairman, Commodity Futures Trading Commission
Abstract: There is more agreement that too little regulation helped contribute to the financial crisis than consensus about what kind of regulation is needed in the future. We do not need an industrial policy that substitutes for the invisible hand, nationalization, or a new ocean of paperwork. We need instead prohibitions on activities by essential institutions that have plainly proven harmful. The needed rules include: tight restrictions on leverage of all sorts, limitations on the use of overly complex derivatives and similar instruments, assurances of cyclical robustness that can not be undermined by short-sighted compensation policies, prohibitions of predatory sales practices in financial products, a tightening of disclosure and transparency standards, and, probably, outright limits on scale in financial institutions. Had a common-sense set of limitations been in place all along, our economy would have manageably absorbed a real estate downturn and millions of American families would have been spared harm. Click here for related Boston Globe opinion piece by James M. Stone.

April 28, 2009
How to Manage Risk when the Government is now your Shareholder
Regina Sullivan

Head of Country Risk and Transition Risk at Bank of America
Jacques Longerstaey
Chief Risk Officer of State Street Global Advisors
Moderated by Tom Healey, Adjunct Lecturer in Public Policy at the Harvard Kennedy School and Director, Goldman Sachs & Co.
Abstract: With the economy in steep decline and the financial sector experiencing record losses, risk management in major financial institutions has taken on significant new dimensions. TARP funding that many institutions have accepted has made government a shareholder as well as a stakeholder. Public and media interest is at an all time high as the Obama Administration and Congress grapple with the labyrinth of issues and consider new or re-regulation of financial entities. Risk managers are adding to their ranks, and are in much more frequent dialogue with government about present challenges and future directions.

Fall 2009

September 24, 2009
Regulation, Financial Innovation, and the Current Economic Crisis
F.M. Scherer
Professor of Public Policy and Corporate Management in the Aetna Chair, Emeritus
Faculty Chair of the Regulatory Policy Program, M-RCBG
Harvard Kennedy School
VIDEO from Prof. Scherer's talk
Abstract: The presentation will analyze changes in the laws and policies affecting the regulation of financial intermediaries, show how those changes facilitated innovations in finance, and show how some of the innovations aggravated the recent economic crisis.  It will then address the more fundamental question:  have recent financial innovations significantly enhanced the ability of the United States to maintain abundant supplies of capital investment and the technological innovations that drive economic prosperity?

September 25, 2009
Regulation of Consumer Financial Products
Daniel Carpenter
Freed Professor of Government, Faculty of Arts & Sciences, Harvard University
Howell Jackson
James S. Reid, Jr. Professor of Law, Harvard Law School
Brigitte Madrian (panel Chair)
Aetna Professor of Public Policy and Corporate Management, Harvard Kennedy School
Jim Segel
Special Counsel to House Financial Services Committee Chair Barney Frank
Peter Tufano
Sylvan C. Coleman Professor of Financial Management, Harvard Business School
Abstract: This panel discussion will evaluate the existing regulation of consumer financial products and the proposed legislation to create a Financial Product Safety Commission. How are consumer financial products like mortgages, credit cards, savings products, and insurance products currently regulated? How well is the current regulatory structure working? What would the proposed Financial Product Safety Commission do, and to what extent would it actually improve regulation of consumer financial products? What is the status of the proposed legislation and what are its prospects for approval? What are some models for thinking about consumer financial products should be regulated.

October 1, 2009
Excessive Salaries on Wall Street: A Focus on Wages and Human Capital
Thomas Philippon
Assistant Professor of Finance
Stern School of Business, New York University
VIDEO from Prof. Philippon's talkl
Abstract: This seminar will review information about wages, education and occupations to shed light on the evolution of the U.S. financial sector over the past century. Financial jobs were relatively skill intensive, complex, and highly paid until the 1930s and after the 1980s, but not in the interim period. We will discuss the determinants of this evolution and show that financial deregulation and corporate activities linked to IPOs and credit risk increase the demand for skills in financial jobs. Computers and information technology play a more limited role. Our analysis will show that wages in finance were excessively high around 1930 and from the mid 1990s until 2006. For the recent period, rents accounted for 30% to 50% of the wage differential between the financial sector and the rest of the private sector.