Myron Scholes
Global Markets Forum

March 13, 2008

Leveraged Losses: Lessons from the Mortgage Market Meltdown

One of the most troubling aspects of the subprime mortgage mess, and its spread to related markets, is that the most disrupted markets are “the ones in which financial intermediaries themselves play a pivotal role,” said Anil Kashyap, Edward Eagle Brown Professor of Economics and Finance. He discussed a report he coauthored for the U.S. Monetary Policy Forum that looked at how the losses that these financial institutions have taken are forcing them to shed risk by selling more assets, driving down prices further in a cycle of deleveraging. This analysis, said Kashyap, implied that financial institutions had still not found a new equilibrium. He warned that they needed to rebuild their capital somehow in order for the cycle to be halted.report titled "Leveraged Losses: Lessons from the Mortgage Market Meltdown."

Coverage

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Speaker Profile

Anil Kashyap is the Edward Eagle Brown Professor of Economics and Finance at Chicago Booth.

Kashyap joined the facutly in 1991 and currently teaches the courses Corporation Finance and Understanding Central Banks. He serves as one of the faculty co-directors of Booth's Initiative on Global Markets and is a co-founder of the U.S. Monetary Policy Forum. Kashyap is also a member of the Bellagio Group of academics and economic officials, a consultant for the Research Department of the Federal Reserve Bank of Chicago, and a research associate at the National Bureau of Economic Research. Under the auspices of the National Bureau, he serves as the co-director of a working group that studies the Japanese economy and he serves on the board of directors of the Bank of Italy's Einaudi Institute of Economics and Finance. Previously he served as a staff economist for the Board of Governors of the Federal Reserve System.

He earned his PhD in economics in 1989 from the Massachusetts Institute of Technology and his bachelor's degree in 1982 in economics and statistics from the University of California at Davis.

Sponsorship

This event is part of the Initiative on Global Markets and is generously sponsored by Myron Scholes.

The Initiative also receives financial support from the Chicago Mercantile Exchange (CME) Group Foundation and our corporate partners: AQR Capital Management, Barclays Bank PLC, John Deere, and Northern Trust Corporation.


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