ECONOMIC POLICY
July 2009
"How Do We Know This is Not Another Great Depression? Lessons for Policymakers from the 1930s"
Policy Memo
By Jeffrey Frankel, James W. Harpel Professor of Capital Formation and Growth
The current economic crisis is fundamentally different from those we have experienced in recent past. The proximate causes of previous recessions (1980-2 and 1990-91) were increases in interest rates in response to inflation. This time around, however, low interest rates and loose monetary policy during the period 2003-2005 had contributed to a bubble in asset prices, rather than to inflation. This – coupled with an underestimation of risk in our financial system, failures of corporate governance, and excessive debt by both households and government – caused the crisis of 2007-09.
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July 22, 2009
"Anti-Corruption Rhetoric - and Reality"
Op-Ed, The Atlantic Monthly
By Ben Heineman, Senior Fellow, Belfer Center for Science and International Affairs
"The pervasive problem, however, is that anti-corruption rhetoric exceeds commitment and accomplishment on all fronts. Corruption is deeply entrenched because it is based on lust for money and for power."
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July 20, 2009
"The Talented Mr. Blankfein"
Op-Ed, On Leadership at washingtonpost.com
By Ben Heineman, Senior Fellow, Belfer Center for Science and International Affairs
As stock prices and short-term profits rise for financial institutions, will business leaders follow their words of caution and humility uttered mere months ago? Or, despite near-death experiences, is the past now past and are the "good times," with all their flaws, about to roll again?
July 2009
"The Governance Crisis: First, Let’s Redefine the CEO Role"
Policy Memo
By Ben Heineman, Senior Fellow, Belfer Center for Science and International Affairs
The witch's brew of high leverage, poor risk management, creation of toxic assets and poor business judgments-all made more poisonous by excessive short-term executive pay-are unprecedented failures of financial sector directors and CEOs. The result: credibility has eroded, trust has dissolved and financial re-regulation seems inevitable.
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June 28, 2009
"The Fed must reassure markets on inflation"
Op-Ed, Financial Times
By Martin Feldstein, George F. Baker Professor of Economics at Harvard University
"The simplest explanation for the higher 10-year rate is that many investors now expect inflation to rise. Although economic weakness and excess capacity are keeping current inflation low, the explosive rise of bank reserves created by Fed policy provides fuel for future inflation. The prospective decline of the dollar is also a potential source of inflation."
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June 28, 2009
"Regulating banks calls for attack on inertia"
Op-Ed, Financial Times
By Sir John Gieve, Former Senior Fellow, Belfer Center for Science and International Affairs, Harvard Kennedy School
"Of course, banks have had a terrible shock. They do not need telling that subprime mortgages can damage their health. They know that their risk management systems prepared them only for showers, not hurricanes. If they show signs of forgetfulness, at least for the next few years, their investors will remind them."
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June 16, 2009
"Moral Hazard and the Crisis"
Op-Ed, Wall Street Journal
By Paul Volcker, International Council Member, Belfer Center for Science and International Affairs
We can, and we should, take steps to limit the need and possibility of official "bailouts." One approach would be to set clear policy limits to access to the "official safety net." Deposit insurance and central bank liquidity facilities are properly confined to deposit-taking institutions. It is, after all, those institutions that remain the backbone of the financial system. They provide basic essential services, meeting the needs of households, businesses and other institutions for credit, for a safe and liquid repository for their funds, and for both everyday and complex payment services.
AP Photo
June 15, 2009
"A New Financial Foundation"
Op-Ed, Washington Post
By Lawrence Summers, Charles W. Eliot University Professor (on leave) and Timothy Geithner
In developing its proposals, the administration has focused on five key problems in our existing regulatory regime -- problems that, we believe, played a direct role in producing or magnifying the current crisis.
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June 14, 2009
"Preventing another collapse"
Op-Ed, Boston Globe
By Sir John Gieve, Former Senior Fellow, Belfer Center for Science and International Affairs, Harvard Kennedy School
"There are four key areas in which the change has to go beyond the incremental: discipline on the biggest firms, using capital requirements to dampen the economic cycle, international cooperation, and institutional change."
iStock
June 9, 2009
"Going Beyond MBA Oaths"
Op-Ed, Harvard Business Review
By Ben Heineman, Senior Fellow, Belfer Center for Science and International Affairs
"Siemens had a strongly worded code against bribery. It just lacked principles, practices and, ultimately, a culture to make that code a reality."
