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Bottom Line – Comprehending the cataclysm

The Johnson School community shared perspectives on the causes and implications of the financial crisis as events unfolded this fall.

ON CAMPUS:

The Credit Crisis 18 Months On . . . and On?*

SEPTEMBER 5, 2008 Maureen O'Hara, Robert W. Purcell Professor of Management and professor of finance, spoke about the credit crisis at the Johnson School's Recruiters symposium. In a clear, concise, one-half hour presentation, O'Hara gave an overview of where we are now in the ongoing credit crunch, what to expect next, and rounded up projections of what the final costs will be: "With the current cost totaling more than $500 billion, how much more is there to write off? Business Week estimates another $200 billion in the upcoming third quarter. The IMF estimates total losses of $975 billion when it is all over. And JP Morgan Chase estimates a final bill of $2 trillion." She goes on to discuss the fallout's impact on unemployment and inflation, and concludes her talk with a caution that "we still have a long way to go," but also offers a few bright spots: "We've seen some unexpected growth — we grew 3.3 percent in the second quarter of 2008; in the fourth quarter of 2007 we saw negative growth. We're seeing increased export growth. And the U.S. dollar is stronger."

Market Chaos Unraveled*

professors (left to right) Professors Maureen O'Hara, Bob Jarrow, and Doug Stayman.

SEPTEMBER 24, 2008 Professors Bob Jarrow and Maureen O'Hara and Senior Lecturer Rich Marin presented their interpretation of the current, unprecedented turmoil in the financial markets in a panel discussion moderated by Associate Dean Doug Stayman. Addressing a standing-room-only crowd in Sage Hall B09, plus an overflow audience in B08 via video, Jarrow set the stage by discussing the framework that led up to the crisis, O'Hara explained what's happening with credit markets and liquidity, and Marin addressed Wall Street as a model — what's broken and what's not.

The Financial Crisis: Implications for Washington, Wall Street, and Main Street*

professors (left to right) Luis-Francois de Lencquesaing, president of the Cornell International Affairs Review, Senior Lecturer Bob Andolina, and Professors David Easley and Elizabeth Sanders.

OCTOBER 1, 2008 The Cornell International Affairs Review sponsored an interdisciplinary discussion of the current financial crisis featuring Bob Andolina, MBA '86, visiting senior lecturer of finance at the Johnson School and former managing director at Lehman Brothers; David Easley, Henry Scarborough Professor of Social Sciences, Cornell University Department of Economics; and Professor Elizabeth Sanders, Cornell University Department of Government. Andolina, who spoke first, framed the market environment that led up to the crisis, citing the low interest rates and angst about risk-taking that characterized the markets in 2001. Noting that the Bush administration has not done a good job of explaining the $700 billion bailout bill, Easley set out to clarify "why we need to do it," and to explain how the paralyzing effect that illiquidity and loss of confidence has had on Wall Street will affect everyone on Main Street. Sanders covered the financial crisis from a political perspective, providing an overview of the financial regulatory system created during the New Deal and dismantled beginning with President Reagan's administration in the 1980s.

Business@Cornell launches with live webcast: Market Crisis Unraveled, From Wall Street to Main Street*

OCTOBER 23, 2008 Three faculty experts shared their perspectives on issues of real estate finance, the market's reactions to the bailout, and the effect on our economy at the first in a series of live webcasts offered by Business@Cornell, a partnership between the Johnson School, the School of Hotel Administration, and the Applied Economics and Management Program at Cornell University. The presentation was moderated by Associate Dean Doug Stayman and featured Johnson School faculty members Ori Heffetz, assistant professor of economics, whose interests lie in the social and cultural aspects of economic behavior, and Bob Andolina, visiting senior lecturer of finance. Daniel Quan, a professor of financial management at Cornell's School of Hotel Administration, whose areas of expertise include real estate finance, mortgage markets, and auction markets, rounded out the panel.

OFF CAMPUS:

FAS 157 in the Current Economic Environment

wallstreet

OCTOBER 24, 2008 The Johnson Private Equity Society and PricewaterhouseCoopers LLP co-sponsored an afternoon of presentations about U.S. Financial Accounting Standards Board Rule 157, a fair-value standard that went into effect in November 2007 and that has generated a lot of attention in the financial markets media. Robert J. Swieringa, a Johnson School accounting professor and former FASB member, explained why FAS 157 was created in his presentation, "It's all your fault." In a presentation titled "Where do we go from here?" Price-waterhouseCoopers partner Belanne Ungarelli discussed accounting and reporting implications of FAS 157 and the current proposed FASB Staff Position (FSP) on determining fair value in an inactive market. Joe Bartlett, a partner with Sullivan & Worcester LLP, spoke on "FAS 157 — Fair value following the Emergency Stabilization Act."

Parker Series: Asset Management Revisited

Jeffrey P. Parker '65, MEng '66, MBA '70, managing director, Parker Family Limited Partnership, served as moderator for the two Fall 2008 Parker Series events:

The Perfect Storm: How a Bear Market, Mortgage Meltdown, and Energy Woes are Impacting the Economy

SEPTEMBER 10, 2008 More than 50 alumni and friends attended this event in Washington, D.C., to hear a panel of experts discuss the economic challenges facing our country and the world, and the implications of disciplined investing approaches for individual portfolios in weathering these tough times. Speakers included Sanjeev Bhojraj, associate professor of accounting and faculty director of the Parker Center for Investment Research at the Johnson School, Rhodric C. Hackman, a partner at Mercator Capital, and Steve Linehan, treasurer of Capital One Financial Corporation.

Managing Through a Tsunami

tsunami

NOVEMBER 12, 2008 In the midst of an imploding financial crisis that has spread throughout the global markets, panelists at this New York City event addressed such questions as: How long will the fallout last and how can investors best deal with the current economic environment? How can private equity thrive in the next few years? Will the markets come back to some sense of normalcy, and if so, when? Does loss of confidence create and inevitable downward spiral? More than 100 alumni and friends attended this discussion featuring panelists Randy Brown '84, MS '85, MBA '86, global head of Deutsche Insurance Asset Management, Mary Meeker, MBA '86, managing director at Morgan Stanley, and Rob Redmond, MBA '80, vice chairman of Barclays Capital and chairman of the financial sponsors investment banking group. Jeffrey P. Parker served as moderator.

*WEB EXTRA: VIDEO AVAILABLE


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