2008 Woodie Awards
What the Financial Crisis Means To HBS
"Turmoil on the Street: Fathoming the Financial Crisis" panel discussion featuring Dean Jay Light, University Professor Robert Merton, Professor David Moss, Lecturer Nicolas Retsinas, and Senior Lecturer Clayton Rose
Jack Sallay (OH), Associate Editor
Issue date: 10/6/08 Section: Features
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"I've never seen Burden as full," said Qahir Dhanani (OH). "It goes to show how concerned students are. " A poll of just over 100 students who attended the event found that although many have been following the crisis closely, they still wanted to learn more. They were not disappointed. Each of the blockbuster presenters came to the table with a unique perspective. Mike Zhang (OB) found that each was "very effective in discussing [his] particular area of experience as it relates to the current financial crisis."
Dean Light began the talk by breaking down the complex interrelated issues. As Dhanani described it, "In typical HBS fashion, he effectively reduced the entire crisis we're facing to three letters: LTL. Too much Leverage and too little Transparency resulted in drying up of Liquidity, which in turn resulted in the write-downs and collapse of some of the stalwarts of American finance. That sound bite was useful in explaining what's going on to my mother."
Nicholas Retsinas, Director of Harvard University's Joint Center for Housing Studies, and with deep practical experience in the housing market and government administration, spoke eloquently on the history of the crisis. He didn't mince words about the current situation. "Today we are at a bad place. We estimate that we have one million more homes than we need now." He concluded with the short-term solution of nationalizing the housing market. He then discussed the associated risks and raised the question, "How do you balance between extending credit and making sure that you have safety and soundness?"
Clayton Rose, a former Vice Chairman and COO of J.P. Morgan Chase, spoke next about the crisis from a banking perspective. Rose echoed Dean Light's comments on the problem of illiquidity. On some of the dramatic actions that the Fed and Treasury took the previous week he commented, "We were staring into the face where there was going to be no access to liquid funds - either through your investments, your money market account or through the lending markets." He expects some major changes in investment banking industry as the major banks transform into bank holding companies; He predicts that the return profiles will go down and the cultures of the firms will change dramatically over the next couple of years.
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