Lessons from the Financial Crisis

Understanding the global financial crisis.

New Directions for Managing Risk and the Global Financial System

What caused the financial crisis? Some experts believe it was the result of a perfect storm in U.S. financial markets brought on by a combination of bad banking regulations, lax oversight of mortgage brokers, and reckless Wall Street practices. Others contend that the crisis is symptomatic of longer-run shifts in global economic growth patterns, which show a strong increase of wealth creation in developing countries while developed countries stagnate in the 21st century. During this session led by Professor Antoinette Schoar, financial experts shared their insights into the causes of the financial crisis and the steps that companies and government organizations could take to better manage risk and the global financial system going forward.

When asked about their views for what caused the financial crisis, Bennett W. Golub responded that there was mass confusion in people’s minds between cash and the value of a security. “Many people think they’re identical and they’re not.”

Added Chi-Won Yoon: “This is a global crisis. We need a global framework to solve it. Right now there is a fog of regulatory uncertainty around the world.”  Having said that, he believes that integration within the global financial markets will continue, but that “we may need to go through a process of harmonizing regulation.”

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