Business faculty examine global financial crisis
It's the $64,000 question (although you'd need a few more zeros than the old game show of that name used): How did we get into this staggering financial mess? Befitting the complexity of the global meltdown, there is no single answer to that query. For that reason, UW-Parkside business students received four answers covering many aspects of the financial crisis during a spring semester Department of Business forum.
UW-Parkside Business Professors Robert Fok, Annie Li, Rizvana Zameeruddin, and Sue Norton each covered aspects of the crisis corresponding with their areas of expertise.
Professor Fok asked the rhetorical question "How bad is the economy?" With the U.S. in its sixteenth month of recession, with unemployment and foreclosure rates on the rise, the stock market shrinking, and giant American corporations failing at an alarming rate, that's a question most business people and economist would like to avoid answering. And, Fok said, there is no lack of people and institutions to blame.
Assessing blame can be done by throwing a wet blanket over just about anyone who has anything to do with the economy. Fok cited irresponsible risk taking by subprime lenders, borrowers living far beyond their means, government policies that encouraged both the former and the latter, complex financial products like credit default swaps and securitization products, and rating agencies that underestimated risk and lacked accountability.
Professor Li cited accounting practices as a contributing factor in the crisis, saying the rule called "mark-to-market" accounting exacerbated the crisis. Explaining mark-to-market, also called the "fair value method," Professor Li described it as a requirement that financial institutions report their assets and investments at market value, that is, the price they could sell these assets for immediately. A drop in home values when these buildings are the security for loans helped start the economy's downward spiral and Li pointed to economist Brian Wesbury's assertion that 70 percent of the real crisis the economy faces is caused by mark-to-market accounting in an illiquid market.
Despite the chorus of mark-to-market critics, Li pointed to a report by Reuters saying the Securities and Exchange Commission (SEC) won't suspend the mark-to-market rule. She suggested students call or write their congressmen to demand that mark-to-market rule be suspended.
Professor Zameeruddin looked at the legalities of the financial crisis and what lessons legislators and legal authorities could learn so that a sequel to the Collapse of 2008-2009 can be avoided. Among her suggestions was a legal framework with strong regulatory features, a legal "safety net" using government guarantees to boost investors' confidence, corporate restructuring, and strong political leadership with close communication and coordination with global trading partners.
Among the "Lessons for the Future" Professor Zameeruddin shared with students was "effective risk management by banks." She also advocated regulatory and supervisory autonomy.
These are not the best of times to be looking for a job or to be in the Human Resources field but Professor Sue Norton offered students ideas on getting employed and/or staying employed. She advised students to learn other people's jobs and to brush aside the fear of taking leadership roles as ways to stay employed.
She also offered a number of "do's and don'ts" for people seeking work or looking to change jobs. Do, she said, network, volunteer, upgrade skills, and stay optimistic; don't treat unemployment as a vacation, she said, and don't forget to take care of body and soul.
The two sessions, called "Integration Forums," were held in the Student Center Ballroom, each drawing a sizable student audience.