BU Now » economic downturn

Goldman executives questioned

Dick Taffe — Thu, 01 Jul 2010 21:05:43 +0000

The Congressionally appointed Financial Crisis Inquiry Commission exploring the 2008 crash questioned executives from Goldman Sachs, the world’s most profitable bank, about how much it makes trading derivatives — those complex financial bets that helped bring down the economy. Goldman Chief Financial Officer David Viniar said they had no way of determining its derivatives data separately from trading in cash securities. But Mark Williams, a former Federal Reserve bank examiner who teaches finance in the School of Management and is author of “Uncontrolled Risk” about the fall of Lehman Brothers, says he doesn’t buy it.

“For Goldman’s CFO to go before the Financial Crisis Inquiry Commission and claim he doesn’t know what Goldman makes in derivatives trading is the equivalent of a major league pitcher not knowing his ERA. Such a claim is shocking given how lucrative and central derivatives trading is to Goldman’s core business model.”

Contact Mark Williams, 617-358-2789, williams@bu.edu

G-20 nations pledge to deal with debt

Dick Taffe — Mon, 28 Jun 2010 22:43:09 +0000

The Group of 20 industrialized nations wrapped up their meeting in Toronto promising to have their government deficits by 2013 and “stabilize” debt loads by 2016, signaling to domestic political audiences and international markets that they’re serious about reducing stimulus spending. But economics Professor Laurence Kotlikoff, author of “Jimmy Stewart is Dead” about the future of the banking industry, says the G-20 missed the mark by not focusing on the critical future problems of paying pensions and health care benefits.

“Had the G-20 agreed to do long-term fiscal gap accounting and to develop policies that eliminated those fiscal gaps, it would have done something real. What’s it’s really done is agreed to delay making the critical policy changes needed to avoid insolvency.”

Contact Laurence Kotlikoff, 617-353-4002, kotlikoff@bu.edu

Financial regulatory bill agreed on

Dick Taffe — Fri, 25 Jun 2010 20:45:40 +0000

House and Senate conferees finally worked out a compromise bill aimed at reshaping financial regulations to avoid another Crash of ’08, with a final vote set for next week and President Obama expected to sign it by July 4th. As expected: many winners and losers. One controversial provision gives the SEC authority to require stockbrokers to protect their clients’ interest when recommending investments, potentially subjecting brokers to the same fiduciary duty as financial advisers. Law Professor Tamar Frankel, author of “Trust and Honesty: America’s Business Culture at a Crossroad” and authority on securities law, says it’s about time.

“It offers a chance and a challenge for the SEC to become the leader that it used to be from the 1940s until about 1980. It is a chance to bring about a far more reliable financial system and to refocus on productivity rather than betting.”

Contact Tamar Frankel, 617-353-3773, tfrankel@bu.edu