In 18 short, targeted and definitive White Papers – each tracing the core of the problem, the policy alternatives, and a specific course of action – 32 academics, combining a solid understanding of financial economics with the practice of modern finance, suggest solutions, in the public interest, to the central issues of today’s financial crisis.This overview contains the Executive Summaries of these White Papers, to be published in their entirety by John Wiley & Sons in March 2009 and will be posted here at RGE Monitor in the following days.
As 2008 was drawing to a close, we were reflecting on the dramatic and often unprecedented events of the past year in financial markets and the broader economy. Nothing like this had occurred in our lifetimes. In our academic world, few events had as much potential for providing us and our colleagues with a rich source of raw material for good research and teaching for a long time to come. This is the ultimate teachable moment and it is essential to teach it. We were in the middle of a financial and economic hurricane that was certain to leave behind massive financial and economic damage. It will eventually blow over, as all hurricanes do, but it is not too early to begin to think about what changes to the system can mitigate the damage and hopefully make future financial storms less likely.
With one of the largest and best faculties in the world focused on finance, economics, and related disciplines – academics deeply rooted in their respective disciplines and also heavily exposed to the practice of modern financial institutions – we thought that the financial crisis provided a unique opportunity to harness our collective expertise and make a serious contribution to the repair efforts that are getting underway. We convened a small group of interested faculty, the idea caught on, and we decided to execute this project. All faculty members in the relevant disciplines at the Stern School were invited to participate if they had the time and the interest, and 32 colleagues did so (participants are listed at the end of this volume).
Next, key topics related to the crisis and its resolution were identified, and individual teams of authors set to work. As a common format we used the “White Paper.” Each starts by discussing the nature of the problem, where things went wrong and where we are today, what options are available to repair the immediate damage and prevent a recurrence at the least possible cost to financial efficiency and growth, and a recommended course of action with respect to public policy or business conduct. Each White Paper (many of which are substantially more definitive than we initially envisaged) is accompanied by a short, easily accessible Executive Summary. Each White Paper was intensively debated both formally and informally among the group over six weeks or so, although no attempt was made to enforce uniformity of views.
This has been a unique opportunity to bring our cumulative expertise to bear on an overarching set of issues that will affect the national and global financial landscape going forward. We know that the repair process in the months and years to come will be highly politicized, and that special interests of all kinds will work hard to affect the outcomes. We also know that some of those entrusted with the repair have also been responsible for some of the damage. So we present here a set of views that are at once informed, carefully considered and debated, independent and focused exclusively on the public interest.
Thomas F. Cooley, Dean and Ingo Walter, Vice Dean – New York, December 2008