Yale SOM Resources on the Current Financial Disruptions

Recent events in the global financial markets have engendered extensive discussion at the Yale School of Management. Yale SOM faculty, students, and alumni have both debated the causes of the turmoil in the markets and proposed potential remedies.

We will update this page with links to additional information as it becomes available.

Creative Destruction: An interview with Dick Foster
The December 2008 issue of the McKinsey Quarterly features an interview with Dick Foster, a senior faculty fellow at SOM, examining how the financial crisis is another cycle of creative destruction. Foster’s application of creative destruction, an idea initially proposed by economist Joseph Schumpeter, calls for companies to change at the pace and scale of the capital markets, without losing control of ongoing operations. Read the story.

The Big Bang of Bailouts – A Commentary by Professor Jeffrey E. Garten
In the December 22 cover story of Newsweek International, Professor Jeffrey E. Garten writes that world leaders have spent trillions on confused, inadequate rescue plans. They need to spend more – about $4 trillion more - to restore confidence. Read the story.

Financial Disaster Recovery – A Commentary by Ira Millstein and George Vojta
In the December 2008/January 2009 issue of Directorship, Ira M. Millstein and George Vojta write that failures in corporate governance and risk management have damaged trust in financial institutions and their advisors, and it will not be restored through regulation alone. Millstein, the senior associate dean for corporate governance at SOM, and Vojta, chairman of the advisory board of SOM’s Millstein Center for Corporate Governance and Performance and chairman and CEO of Westchester Group LLC, outline a private sector agenda for restoring faith and accountability. Read the story.

To Build Confidence, Aim for Full Employment - A Commentary by Robert J. Shiller
In an "Economic View" column published in the New York Times, Professor Robert J. Shiller argues that firm economic targets, including a commitment to providing a job for everyone who is willing to work, are needed to restore Americans’ confidence. Read the story.

Millstein Center Report: Open Board-Shareowner Communication Can Help Restore Trust
Corporations have an opportunity to begin restoring trust and confidence lost in the financial crisis by instituting the cutting-edge governance practice of direct dialogue between directors and investors. Sliding stock market value and executive pay controversies are creating fresh implications for boards, shareholders, Congress, and the incoming Obama administration. A new policy briefing by the Millstein Center for Corporate Governance and Performance at the Yale School of Management finds dialogue can enhance board authority, especially during crises, as well as boost shareowners’ trust in their quest for optimal performance. Read “Talking Governance: Board-Shareowner Communications on Executive Compensation,” co-authored by Stephen Davis, senior fellow at the Millstein Center, and Stephen Alogna, senior manager of Deloitte & Touche LLP Corporate Governance Services and visiting research fellow at the Center.

Private Equity Veteran Addresses State of the Industry in Millstein Center Talk
Russell Carson, co-founder and general partner of Welsh, Carson, Anderson & Stowe, one of the country’s largest private investment firms, described the challenges facing private equity. Read the story.

An Obligation To Relevance - A Commentary by Dean Sharon Oster
Yale SOM Dean Sharon M. Oster was one of five business school deans asked to contribute an essay to a special report by Forbes.com devoted to how business schools are responding to the global economic crisis. Read the story.

Forward Thinker - A Commentary by Professor Roger Ibbotson Explains the Crisis and What’s Ahead
In a Wealth Manager magazine cover story, Professor Roger Ibbotson explains how the financial crisis developed and outlines the opportunities ahead for investors. Read the story.

Economic Crisis Could Push Reform in China - A Commentary by Professor Zhiwu Chen
Economic crisis can be a time of opportunity, particularly if political leaders are savvy enough to use the down period to introduce needed reforms. In YaleGlobal, Zhiwu Chen, Professor of Finance, offers a blueprint for China that focuses on diffusing the nation’s wealth effect by boosting domestic consumption and promoting private ownership. Read the story.

Stop the Bail Outs Now - A Commentary by Professor Jeffrey E. Garten
In the November 10, 2008, issue of Newsweek magazine, Jeffrey E. Garten, the Juan Trippe Professor in the Practice of International Trade, Finance, and Business, argues that governments around the world need to stop pouring money into failing industries.  Read the story.

Challenging the Crowd in Whispers, Not Shouts - A Commentary by Professor Robert J. Shiller
In an "Economic View" column published in the New York Times, Professor Robert J. Shiller argues that groupthink kept economic experts from sounding the alarm on the financial crisis. Read the story.

"India and the global financial crisis" - A Commentary by Professor Robert J. Shiller
In an essay published in the Economic Times of India, Professor Robert J. Shiller looks at how the disruptions in the financial markets are affecting India and argues that deep behavioral causes lie at the root of recent events. Read the story.

Q4 Magazine and Website Provide Viewpoints on Recent Events
The recently published Q4 magazine contains discussions around the question "What's the new capital up to?", including a look at how the securitization of subprime mortgages caused widespread havoc in the financial markets. The Q4 website provides further resources for understanding what's happening in the markets, including an interview with accounting professor Rick Antle about how mark-to-market accounting has influenced the unfolding events, a commentary co-authored by Shyam Sunder in 2007 that foresaw problems in the accounting profession, and an excerpt from Robert J. Shiller's new book, The Subprime Solution: How Today's Global Financial Crisis Happened, and What to Do about It, that traces the development of the housing bubble.

Yale SOM Faculty Panel: "The Crisis in the Financial Markets and its Impact"
Professors Gary Gorton and Andrew Metrick, and Faculty Fellows, Richard Foster and Mark Manson took part in a panel discussion on October 7 to discuss with the SOM community the unfolding of the financial crisis. The event was moderated by deputy dean Stanley Garstka. View the discussion online.

An Insider's View
Boon Sim '92, who heads Credit Suisse's Americas Mergers and Acquisitions Group, returned to campus on September 23 to break down the current market turmoil and explain what is needed to get beyond it. Watch the lecture.

Yale School of Management Cosponsors NYC Roundtable Discussion on the Financial Crisis - Full Video Now Available
The Yale School of Management, in partnership with the Wall Street Journal and CNBC, organized a roundtable discussion in New York on September 23 that brought together business leaders and scholars from top universities. View the full roundtable discussion and video clips of the participants.

The Trickle-Up Bailout - A Commentary by Professors Jonathan G.S. Koppell and William N. Goetzmann
Writing in the Washington Post, Professors Jonathan G.S. Koppell and William N. Goetzmann argue that paying off all delinquent mortgages would address the underlying cause of the financial crisis, help homeowners, and revive the markets. Read the article.

Global Authority Can Fill Financial Vacuum - A Commentary by Professor Jeffrey E. Garten
Writing in the Financial Times, Jeffrey E. Garten argues that, given the borderless nature of financial markets, we need a “Global Monetary Authority” to oversee the international system. He recognizes the political challenges to creating such a system but suggests that the fallout from the current crisis may make progress more likely. Read the article.

Discussing What's Happening on Wall Street in Class
Around SOM, students and faculty have been diving into the rapidly evolving Wall Street crisis, whether debating the causes and possible solutions during class, or listening to guest speakers. On September 18, Leon Metzger's class on hedge funds threw out the lesson plan to talk about current events. Read the article.

A Root of the Financial Crisis
In a preview article from Q4 magazine, Yale SOM professors Frank J. Fabozzi, William N. Goetzmann, and Gary B. Gorton discuss how a dip in house prices spawned chaos in the financial system. Read the article.

A Failure Tax - A Commentary by Professor Jonathan GS Koppell
In a New York Times op-ed, Professor Jonathan Koppell argues that investment banks and other companies should pay for "too big to fail" insurance. Read the article.

Herbert M. Allison on an Earlier Bailout
Herbert M. Allison, a member of Yale SOM’s Board of Advisors and a graduate of Yale College, took on a major role in the response to the current crisis when he was named CEO of Fannie Mae in the wake of the government’s takeover of the mortgage giant. Earlier in his career, while the president of Merrill Lynch, Allison played a crucial part in the bailout of Long-Term Capital Management, an action taken by the private sector to avert a potential crisis in the financial markets. Allison discussed that financial rescue with Yale SOM’s Q1 magazine. 

Professor Robert Shiller Writes about the Subprime Market in New Book
In his new book The Subprime Solution: How Today’s Global Financial Crisis Happened and What to Do about It (Princeton University Press), Robert J. Shiller argues that the core problem of the subprime crisis is that we as a society do not understand, or know how to deal with, speculative bubbles. He writes that, in the long-term, solving the subprime crisis requires developing stronger risk-management institutions that will inhibit the growth of bubbles and help insulate society against them when they do develop. Read the first chapter of the book online.