Myron Scholes Global Markets Forum
October and November 2008
The Credit Crisis: A Lecture Series
When the financial turmoil reached crisis proportions in the autumn of 2008, the IGM responded with a special series of Chicago Booth faculty lectures as part of its Myron Scholes Global Markets Forum. Held in Hyde Park and attracting overflow audiences, the five-part series examined the run-up phase of the crisis - during which U.S. mortgage lending was expanded and financial firms got themselves into trouble; the policy efforts taken to deal with the crisis; perspectives on where the economy and financial system were headed; and advice on what was required to fix the problem. Two of the lectures, by Amir Sufi and Amit Seru, explained their IGM-funded research on the causes of the crisis. Douglas Diamond’s lecture provided a framework for examining the role played by short-term debt in all financial crises. Anil Kashyap, an IGM co-director, discussed the U.S. policy response and drew parallels to Japan’s financial troubles and long stagnation. In the final session, John Cochrane, Steven Kaplan, and Raghuram Rajan offered their views on what to expect in the aftermath of the crisis and on the reforms needed.
The Consequences of Mortgage Credit Expansion: Subprime Lending and the Mortgage Default Crisis
Amir Sufi, Associate Professor of Finance
To open the credit crisis series, Amir Sufi analyzed the expansion of subprime mortgage lending in the United States between 2002 and 2005, and its contribution to the crisis.
The Current Financial Crisis, Other Recent Crises, and the Role of Short-term Debt
Douglas Diamond, Merton H. Miller Distinguished Service Professor of Finance
An expert on financial intermediation and liquidity, Diamond discussed the role of short-term debt in the banking system and how that role relates to the origins - and potential solutions - of the current crisis.
Securitization, Screening, and Failure of Default Models to Predict Default
Amit Seru, Assistant Professor of Finance
Seru described how the spread of securitization led to changed incentives in the mortgage industry, altering the relationship between a loan bundle’s outward characteristics and its underlying risks.
Will The U.S. Bank ReCapitalization Work? Lessons from Japan
Anil K Kashyap, Edward Eagle Brown Professor of Economics and Finance
Having studied Japan’s financial crisis and long economic stagnation in detail, Anil Kashyap shed light on the U.S. problem by comparing U.S. policy responses to the current crisis with those previously tried in Japan.
A Faculty Panel on "What the Effects Will Be and What Should be Done"
John Cochrane, AQR Capital Management Professor of Finance
Steven Kaplan, Neubauer Family Professor of Entrepreneurship and Finance
Raghuram Rajan, Eric J. Gleacher Distinguished Service Professor of Finance
Three faculty members wrapped up the Myron Scholes Forum credit crisis series by assessing the outlook and discussing what should be done next.
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) Trust and our corporate partners: AQR Capital Management, Barclays Bank PLC, John Deere, and Northern Trust Corporation.