Richard Herring - Faculty Research in Knowledge@Wharton

Unfreezing Securitization: Restoring the Market's Confidence in Itself

Wed, 05 Aug 2009 16:41:52 EST

According to Wharton finance professor Richard J. Herring, more than half of the lending to households over the last five to six years "has come from the securitization market, not from banks' balance sheets." For that reason, Herring and Allen Levinson, founder and principal of Credit Risk Advisors, say that the Obama administration's efforts to resuscitate the ailing economy should be focused not only on restoring bank lending, but also on enabling "the flow of securitizations." This can be accomplished through the establishment of a private-sector oversight committee that "reflects the full range of stakeholders in the securitization process" -- a market-based solution costing taxpayers nothing, they argue.

Obama's Regulatory Plan: Too Hot, Too Cold, or Just Right?

Wed, 24 Jun 2009 16:27:19 EST

Five months into his administration, President Barack Obama on June 17 unveiled his complex, sweeping financial proposals to create a "21^st century regulatory framework" for the U.S. The proposed regulations give the Federal Reserve more power to watch over Wall Street and also create a new agency to curb abuses by mortgage and credit card lenders. Wharton professors and other experts say that while the new framework does not hamper financial innovation, it is also "too timid" and fails to address serious problems.

The New Role of Risk Management: Rebuilding the Model

Wed, 24 Jun 2009 16:27:19 EST

Risk managers armed with the most sophisticated quantitative tools available did not foresee the biggest development in a generation -- the systematic breakdown and global contagion of financial markets. In an interview with Knowledge@Wharton, John Drzik, president and CEO of the Oliver Wyman Group, Richard J. Herring, a finance professor at Wharton, and Francis X. Diebold, a Wharton professor of economics, finance and statistics, discussed how to build a more informed risk management model. All three took part in the recent Wharton Financial Institutions Center and Oliver Wyman Institute 12th Annual Financial Risk Roundtable 2009.

Reforming the Ratings Agencies: Will the U.S. Follow Europe's Tougher Rules?

Wed, 27 May 2009 17:04:13 EST

New restrictions proposed for ratings agencies -- including Moody's, Fitch and Standard & Poor's -- could have unintended consequences, warn experts in the United States. Europe, however, has clamped down on the agencies, whose stamps of approval on a broad spectrum of subprime mortgage securities helped pave the way to the credit crash of 2007 and the continuing global recession.

Deflation Fears: Could Falling Prices Let the Air Out of a Recovery?

Wed, 13 May 2009 16:53:27 EST

Experts are far from unanimous on the question, with some arguing that deflation could be widespread, while others insist an economic rebound and government stimulus efforts make deflation less likely. Some fear that a stimulus-driven recovery could trigger the opposite: inflation.

Why Economists Failed to Predict the Financial Crisis

Wed, 13 May 2009 16:53:27 EST

A sense that they failed to see the financial crisis brewing has led to soul searching among many economists. While some did warn that home prices were forming a bubble, others confess to a widespread failure to predict the damage the bubble would cause when it burst. Some economists are harsher, arguing that a free-market bias in the profession, coupled with outmoded and simplistic analytical tools, blinded many of their colleagues to the danger. A recent paper from a conference of economists calls for changes in the way they are trained.

Attached at the Wallet: The Delicate Financial Relationship between the U.S. and China

Wed, 29 Apr 2009 14:19:24 EST

The financial relationship between China and the U.S. is beginning to look like an unhealthy co-dependency. China holds so much of its foreign reserves in dollar-based assets that it is now vulnerable to shifts in the U.S. economy. And the U.S. has allowed China to purchase so much of its debt that it is now beholden to Chinese interests. Experts disagree, however, about the real motives for China's continuing investments, and whether it would ever sell them off.

Re-thinking Risk Management: Why the Mindset Matters More Than the Model

Wed, 15 Apr 2009 15:21:37 EST

This year, companies like Unilever, Union Pacific and Visteon are reluctant to make predictions about their financial performance in the months ahead. The problem, according to the companies, is not that they don't want to present a gloomy picture; it is that they just don't know how the economy will perform. Risk management models have been criticized for failing spectacularly to predict or prepare firms for the crisis now shaking the world. According to experts from Wharton and elsewhere, the trouble lies less in the models than in the decisions that get made based on them.

Hope, Greed and Fear: The Psychology behind the Financial Crisis

Wed, 15 Apr 2009 15:21:37 EST

Emotion not only helped lead America into the current economic crisis but may also be helping to keep it there. At a recent conference called, "Crisis of Confidence: The Recession and the Economy of Fear," sponsored by the University of Pennsylvania's Department of Psychiatry and the Psychoanalytic Center of Philadelphia, an interdisciplinary panel explored the psychology behind today's economy.

After Dodging Many Bullets, Hedge Funds Are Back in Regulators' Sights

Wed, 18 Mar 2009 16:34:51 EST

The hedge fund industry's long history of avoiding tougher regulation may be coming to an end, as the Obama administration and Congress look for ways to avoid another financial meltdown. Although it is not clear that hedge funds actually played much of a role in the current crisis, the industry's sagging performance, combined with investors' and regulators' heightened demand for transparency, will likely cause big changes in the way these secretive investment pools operate, according to several Wharton faculty members.

Has the Time Come to Nationalize Struggling Banks? Yes, but Carefully

Wed, 18 Feb 2009 17:51:20 EST

After a generation of increasingly relaxed regulation of the financial services sector, the very concept seems stunning: Nationalization of banks in Europe and the United States. But with many global banks still teetering on the brink of insolvency -- even after rescue efforts that have included multi-billion dollar infusions of capital and other forms of assistance -- a different view is emerging. A growing number of economists -- including, most recently, Alan Greenspan -- now argues that temporary government takeovers of the most deeply troubled institutions may be the only remaining solution.

Economists to Obama: Get the Government out of the Banking Business

Wed, 21 Jan 2009 16:32:55 EST

On the eve of Barack Obama's inauguration as president of the United States, Wharton finance professor Richard J. Herring discussed with Knowledge@Wharton some of the advice offered to the new chief executive by the Shadow Financial Regulatory Committee, a group of economists, former regulators and lawyers, of which Herring is a co-chair. Among the recommendations: As quickly as possible, unwind federal investments that helped keep U.S. banks afloat. Herring also assessed the deepening woes at Citigroup, which this week named board member Richard Parsons as its new chairman, a move intended to provide stronger leadership at the troubled bank.

Do the SEC's New Rating Agency Rules Have Any Bite?

Wed, 10 Dec 2008 17:25:28 EST

When the Securities and Exchange Commission approved tighter regulations for credit rating agencies on December 3, the new rules were applauded by the agencies -- whose positive reviews of subprime securitizations contributed to the credit crisis. But reform advocates were disappointed. The changes fell far short of remedies initially proposed by the SEC in June and endorsed by the Financial Economists Roundtable, a group of top economists that includes several Wharton professors. By omitting two critical elements of the June proposal, the SEC pulled the teeth that would have made regulations effective, according to the FER.

The G-20 Economic Summit: More Symbolic than Substantive?

Wed, 12 Nov 2008 15:45:28 EST

It seems sensible: Bring leaders of the 20 largest economies together to discuss a coordinated plan for dealing with the world financial crisis. But the upcoming G-20 Economic Summit in Washington, D.C., has some commentators wondering what can be accomplished with so little preparation time, while others express concern about the formation of any new regulations when the causes of the crisis are still not thoroughly understood. Wharton faculty and other experts discuss some potential outcomes of the November 15 gathering.

Wharton Faculty Debate the Impact of the Financial Crisis

Wed, 17 Sep 2008 22:19:21 EST

In a roundtable discussion on the fallout from a week of turmoil on Wall Street, Wharton professors Richard Herring, Susan Wachter and Franklin Allen discussed the ripple effect of the crisis across U.S. and global markets. They also speculated on the AIG bailout, which was announced shortly after this video was recorded on September 16.

Will the Levee Break? An Ocean of Bad Debt Rises despite Fed Rescues

Wed, 17 Sep 2008 20:25:57 EST

The rescues, bankruptcies and dizzying write-downs for Fannie Mae, Freddie Mac, Lehman Brothers, Merrill Lynch, AIG and other giants of international finance signal a reckoning for Wall Street wizards who engineered the ongoing credit crisis with opaque securities based on risky subprime home loans and the assumption that housing prices would never decline, according to a panel of Wharton professors. The flood of bad debt, they add, won't subside anytime soon.

After the Bailout: How Can the Fed Clean Up the Fannie and Freddie Mess?

Wed, 17 Sep 2008 20:25:57 EST

The government's refusal to save Lehman Brothers begs a question: Why did it step in only a week earlier to risk up to $200 billion in taxpayer money to shore up mortgage giants Fannie Mae and Freddie Mac? Wharton faculty say the government made the right move -- and offer suggestions for the next step.

Africa's 'Cocoon' Phase: Can Private Investors and Entrepreneurs Transform the Continent?

Wed, 03 Sep 2008 17:03:03 EST

In the past, business in Africa behaved like a "caterpillar" -- uninteresting, slow moving and easy to step on, says Eric Kacou, managing director of OTF Group, a U.S.-based consulting firm focused on emerging economies. Today, the continent is poised for a metamorphosis that requires a "new mindset" relying less on natural resources and more on innovation and private sector growth. At the Wharton Global Alumni Forum in Cape Town, South Africa, Kacou was among the speakers on two panels exploring the potential for new business models and "smart" capital to change Africa's economy.

Credit Crisis Interview: Richard Herring on Mortgage-backed Securities

Fri, 20 Jun 2008 12:29:41 EST

The home price run-up that preceded the credit crisis "is the sort of thing that happens time and again, bubble after bubble," says Wharton finance professor Richard Herring. He is one of seven Wharton professors interviewed by Knowledge@Wharton for this special report.

Subprime Crisis: Did Bernanke Go Too Far, or Did He Not Go Far Enough?

Fri, 20 Jun 2008 12:30:21 EST

To restart the economy, the Federal Reserve created new channels of lending, cut target rates. The prompt and aggressive action was spurred by Chairman Ben Bernanke's research on the Great Depression. How will history judge his strategy?

Subprime Crisis: Could New Rules Avert Another Credit Crisis? Perhaps, but Be Wary

Fri, 20 Jun 2008 12:30:17 EST

An unusual alignment of economic conditions -- and some very careless and risky bets -- triggered the meltdown. Should regulators step in to prevent a repeat? Should the government rescue the wounded? Experts say some new rules may be in order, but the details will be important. A concern: Bailouts may encourage risky behavior.

Coming Soon ... Securitization with a New, Improved (and Perhaps Safer) Face

Wed, 02 Apr 2008 17:52:07 EST

Securitization is often blamed for aggravating -- if not causing -- the subprime mortgage crisis that keeps roiling U.S. real estate and credit markets. By repackaging pools of mortgages into securities that could be resold to investors, the argument goes, securitization permitted unscrupulous underwriters to offer housing loans to poor borrowers and transfer the risk to Wall Street. How, then, will the present credit crisis affect the future of securitization? According to professors from Wharton's finance and real estate departments, securitization will not disappear -- but it is in for radical changes.

Advice to Investors: Sit Tight and Batten Down the Hatches

Wed, 23 Jan 2008 16:49:57 EST

The worldwide collapse of stock prices has many victims -- pension funds, insurance companies, hedge funds, financial services firms. But those are players who, if they are smart, have the wherewithal to withstand a steep sell-off. What about the small investor, the individual who is socking away modest sums for retirement or college costs? Should small investors rush for the sidelines? Or should they view this as a buying opportunity? Knowledge@Wharton asked six experts for advice on investment strategy.

A Closer Look at Sovereign Wealth Funds: Secretive, Powerful, Unregulated and Huge

Wed, 12 Dec 2007 14:42:26 EST

The Abu Dhabi government is buying a 4.9% stake in Citigroup for $7.5 billion. UBS is selling a 10.8% share to the government of Singapore and an unnamed Middle Eastern investor for $11.5 billion. Two Middle Eastern government funds now own a third of the London Stock Exchange. Governments, through investment pools known as sovereign wealth funds, have put tens of billions of dollars into Western financial firms this year. But is foreign ownership -- or, more precisely, foreign government ownership -- really a good thing? Many experts think this mushrooming trend bears watching, especially for any sign that these funds are evolving from pure investment vehicles into tools for exerting political pressure on the "target" countries.

The Subprime Drama Continues, but for How Long?

Wed, 28 Nov 2007 16:03:13 EST

Almost every day, a new twist seems to appear in the subprime crisis drama. This week, the investment arm of the government of Abu Dhabi announced an infusion of $7.5 billion to acquire a 4.9% stake in Citigroup, which has been slammed by enormous losses in the credit market. The announcement came on the heels of a report from Bank of America that the subprime mess is about to get messier as interest rates "reset" -- or rise -- on more than $360 billion worth of adjustable rate subprime mortgages. Has the crisis run its course? Knowledge@Wharton asked that question and several more to Richard Herring, a Wharton finance professor and co-director of the Wharton Financial Institutions Center.

Good, Bad or Ugly --Is It Impossible to Predict What's Ahead for the U.S. Economy?

Wed, 14 Nov 2007 15:21:26 EST

At the end of October, the Federal Reserve gave the financial markets just what they had been asking for: a 0.25% cut in the federal funds rate. But in early November, stocks plunged and the dollar hit a new low. Applause turned into hand-wringing -- then back to applause as the markets rebounded in the middle of the month. Why can't the experts make up their minds? Is the outlook good or bad? According to Wharton faculty, forecasting is particularly hard now because some of the key factors -- such as the credit crunch arising from the subprime mortgage mess, spiking oil prices and the plunging dollar -- have little historical precedent. The result: Finance experts, including the Fed, may not be able to see too far down the road.

'Getting the Models Right': How to Value Hard-to-Price Assets

Wed, 27 Jun 2007 13:13:32 EST

Trying to determine what things are worth is a huge challenge in today's business world, where companies are increasingly being pressed to account for the changing values of complex financial instruments -- from insurance policies to employee stock options to exotic derivatives. Consequently, firms are turning to ever more intricate financial models that attempt to deduce values using an array of indicators, even though such models are complicated and can be easily manipulated. This dilemma was the topic of the Tenth Annual Wharton/Oliver Wyman Institute Risk Roundtable held on May 31-June 1.

Hedge Funds Escape Regulation: Should Investors Be Worried?

Wed, 07 Mar 2007 14:51:20 EST

When the Lilliputians came upon the sleeping Gulliver, they didn't know if he was friendly or hostile, but he was so big it seemed prudent to tie him down. Should the 9,000 hedge funds -- the secretive investment pools controlling $1.4 trillion in assets -- be treated the same way? The President's Working Group on Financial Markets doesn't think so. In a late-February report, the group urged vigilance but concluded that new regulations are not needed. Was this the right decision? Wharton faculty weigh in on the issue.

What's in Your Future(s)? The Merger of the Chicago Exchanges

Wed, 01 Nov 2006 16:20:23 EST

In mid-October, the Chicago Board of Trade agreed to be purchased by the Chicago Mercantile Exchange for about $8 billion, topping a wave of exchange mergers in the U.S. and Europe. Two factors drove the deal: the enormous growth in the use of futures, options and other derivatives to hedge risks and speculate, and the need for economies of scale to compete with exchanges that have grown through mergers. Wharton professors analyze the deal.

How Can Employers Improve Defined Contribution Plans?

Wed, 18 Oct 2006 16:48:45 EST

If 401(k)s and similar plans are the main way Americans invest for retirement, how can employers improve them? By making enrollment automatic, minimizing the use of the employer's stock, expanding the role of annuities and improving employees' financial knowledge, according to a set of recommendations issued by the Financial Economists Roundtable, a group of about 50 prominent economists, including several Wharton faculty members.

Foreign Stocks Are In, and So Is Indexing

Wed, 19 Apr 2006 17:26:19 EST

Foreign stocks are soaring and Americans are pouring money into them. But although overseas equities have captured investors' fancy before, there's a twist this time: More investors are embracing passive, index-style investing, ignoring the long-held belief that active managers can beat indexers by uncovering bargains in inefficient foreign markets. Have conditions really changed enough to make indexing pay off as well in foreign markets as it has in the U.S.? It may be too soon to know for sure. But international equity markets and American investor behavior are clearly evolving, according to Wharton finance professors.

LSE, NYSE, OMX, Nasdaq, Euronext ... Why Stock Exchanges Are Scrambling to Consolidate

Wed, 22 Mar 2006 15:54:43 EST

The Nasdaq Stock Market's offer earlier this month to buy the London Stock Exchange is just the latest step in a long industry-wide evolution that includes consolidation, automation and conversion of privately held exchanges into public ones. Nasdaq is hardly alone in its attempt to expand. Its offer follows an unsuccessful bid for the London exchange by OMX, the Swedish Stock Exchange, in 2000. In recent years, LSE has also rejected bids by Euronext, Deutsche Boerse and Macquarie Bank of Australia. Wharton faculty examine Nasdaq's bid, other possible stock exchange combinations, and the changing role of institutional investors.

The Merrill Lynch-BlackRock Deal Signals Major Shift in Financial Services

Wed, 08 Mar 2006 16:27:20 EST

When Merrill Lynch decided this month to sell its asset-management operation to BlackRock -- a money manager serving wealthy investors and institutions, and best known for its conservative focus on bonds and risk-management products -- analysts and investors cheered, bidding up the shares of both companies. By acquiring Merrill's $539 billion mutual fund family, BlackRock will quickly broaden its stock-fund offerings and its appeal to retail customers. Merrill, by acquiring just under 50% of BlackRock, will do well if BlackRock can strengthen the performance and appeal of Merrill's disappointing fund operation. But the cheering involves some wishful thinking as well. Merrill hopes to finesse its way out of its disappointing decision to embrace one of the late-1990s hottest fads: the financial supermarket. And BlackRock has to hope that investors don't come to see it as a de-facto Merrill subsidiary, inheriting Merrill's problems without adding value of its own to the asset-management business.

Linking up a Hedge Fund, a Revolution and the Fall of the Berlin Wall

Wed, 16 Nov 2005 16:31:00 EST

The collapse of Long-Term Capital Management, The Orange Revolution in Ukraine, and the unification of East and West Germany all caught corporate executives by surprise and revealed the links between global change and business opportunity, according to members of the board of governors of the Joseph H. Lauder Institute of Management and International Studies at Wharton. In the future, China, India and Eastern Europe are likely to play major roles in the development of international business, they said during a recent panel discussion titled, Understanding Global Linkages: Lessons from Recent Events.

The Ballooning Credit Derivatives Market: Easing Risk or Making It Worse?

Wed, 02 Nov 2005 16:31:57 EST

In the past few years, credit derivatives have helped the financial markets weather storms like the bankruptcies of Enron, WorldCom and Parmalat as well as Argentina's debt default. Along the way they have grown into a multi-trillion dollar market with hedge funds, insurance companies and pension funds looking for ways to take on risk in hope of earning higher investment yields. But do these exotic products help to mitigate the shock from corporate crises, as their proponents claim? Or do they pump new, poorly understood risk into the financial markets?

Euros, Dollars, Sukuks and Yuans: Uncertainty Reigns in Global Financial Markets

Wed, 27 Jul 2005 12:01:43 EST

At the start of the Wharton Global Alumni Forum's panel on regional financial markets, moderator Richard J. Herring noted that discussing this topic from a regional perspective -- vis-a-vis Europe, Africa and the Middle East -- may appear to be "an anomaly since financial markets are probably more thoroughly globalized than any other sector of the economy. But recent events are having a particularly strong impact on regional financial markets," he said. Herring was joined on his panel by Robert E. Diamond, chairman of Barclays Global Investors, Peter Garber, chief strategist of Deutsche Bank Global Market Research, Richard Moore, head of global rates and currencies in the global fixed income division of Citigroup, and Abdulrazzak Mohammed Elkhraijy, head of Islamic banking at the National Commercial Bank of Saudi Arabia.

In the Wake of the Latest 'No' Votes, Will Economic Growth in Europe Be a Go?

Wed, 29 Jun 2005 16:12:24 EST

The reasons why voters in France and the Netherlands rejected the European Constitution a few weeks ago were many. But two overarching themes of the referendums were discontent and fear: discontent with politicians' inability to revitalize the lagging economies of many EU countries, and fear of what the future may hold for people accustomed to secure jobs and generous benefits. Scholars at Wharton and at universities in Europe say that the 25-member EU must institute free-market, Anglo-Saxon-style reforms to reinvigorate the economies; in particular, they point to labor laws that make it difficult to hire and fire people. But some also say that Europe can achieve higher growth rates without completely abandoning the social welfare policies that have been in place since World War II.

Revaluing the Yuan: Where Politics and Economics Collide

Mon, 25 Jul 2005 16:23:22 EST

As the Bush administration continues to pressure China to allow the yuan to rise against the dollar in order to stave off protectionist legislation in the U.S. Senate, Chinese officials continue to reply that they will not be coerced into taking action by a foreign government meddling in a matter of national sovereignty. Faculty members at Wharton and other China-watchers predict that China will eventually revalue the yuan, probably this year, because it is in China's own long-term interest to do so. These experts also note that the United States, by trying to force the issue in a vociferous, public manner, is possibly delaying the revaluation. In addition, they say, revaluing the yuan will not revitalize industries that have been battered by the movement of certain jobs to China, where labor and production costs are cheap.

The French Connection: Will a 'No' Vote from France Cause Europe to Fall Apart?

Wed, 18 May 2005 15:30:26 EST

'Oui' or 'Non'? That's the question French voters will face on May 29 in a referendum on a constitution that would encompass the 25 countries of the European Union. Recent opinion polls indicating weakened support for the constitution have French President Jacques Chirac and other members of the EU elite worried, with some sounding alarms that a 'No' vote would spell disaster for Europe. But according to Wharton faculty and observers in Europe, rejection of the constitution would not derail the integration process entirely -- things are too far along for that -- and would have minimal impact on financial markets and how business is conducted.

Investors in the Middle East Will Find that Reforms, While Slow, Are Coming

Wed, 01 Jun 2005 16:46:18 EST

The Middle East region can, in several respects, claim a number of advantages over other areas. It has substantial financial assets, a strong resource base, 300 million people who share a common language and tradition, a history of entrepreneurship that goes back thousands of years, and a strategic location between the East and West, according to Wharton finance professor Richard Herring. "But it also has substantial problems," added Herring, who was the moderator of a panel session entitled "Regional Capital Markets and Investment Opportunities" at the recent Wharton Global Family Alliance conference in Dubai. Herring and conference participants discussed recent developments in the Middle East.

The Next Four Years with George Bush

Wed, 17 Nov 2004 17:06:33 EST

President George W. Bush's re-election lifts a degree of uncertainty from business and the economy that could drive market rallies and stimulate growth. Eventually, however, a second Bush term that continues to fund tax cuts along with wars in Iraq and Afghanistan could ultimately weigh down the U.S. economy, according to Wharton faculty.

Global Players See Great Opportunity for Retail Banking in Emerging Economies

Wed, 22 Sep 2004 14:17:34 EST

As emerging economies in Eastern Europe, Latin America and Asia continue to mature, financial firms - including Citigroup, General Electric and major European banks - are stepping up efforts to bring retail banking services to developing nations. These firms, watching the erosion of U.S. and European banking profit margins, are increasingly willing to face the risks of setting up retail operations, such as checking and savings accounts and credit cards, in new markets. If successful, these initiatives can provide a foot in the door for future growth, according to Wharton faculty and banking executives.

Whither Global Inequality? Reviving an Old Debate

Wed, 30 Jun 2004 11:55:47 EST

Almost everybody accepts that something should be done to reduce global inequality but few can agree on what. Is government intervention the solution or an obstacle? Does globalization drive further inequality or ease it? What is the proper role of multilateral agencies such as the World Bank or the International Monetary Fund? A panel of academics and business executives discussed these questions at the Global Business Forum organized by the Lauder Institute Alumni Association. Another panel asked whether a single global brand is better than several local brands. The speakers' answer: A resounding "it depends."

Islamic Banking Comes of Age - But What's Next?

Wed, 10 Mar 2004 16:03:36 EST

Islamic banking has come a long way in the last 25 years. It has gone from almost nothing to an industry with assets of hundreds of billions of dollars and half of the consumer market and 10% of the assets under management in countries such as Malaysia. Yet, it has still not emerged as a truly revolutionary force in the financial world. Whether it can make that leap is a question for every Islamic banker.

Insurance Industry Conference Looks at Terrorism, Drug Coverage, Malpractice Insurance and M&As

Wed, 28 Jan 2004 13:48:21 EST

The role of government in supplementing the private insurance industry and the industry’s response to terrorism were recurrent themes at the seventh annual conference of Wharton’s Financial Institutions Center and the Brookings Institution held earlier this month in Washington, D.C. The conference, titled “Public Policy Issues Confronting the Insurance Industry,” included discussion of such topics as mergers and acquisitions in the European insurance industry, insurers’ and legislators' response to the Sept. 11, 2001, terrorist attacks, Medicare prescription drug benefits and medical malpractice insurance.

What's Ahead for 2004

Tue, 20 Jan 2004 11:08:42 EST

After a slow and confusing economic recovery, 2004 will be a year of solid improvement building on positive news, including the capture of Saddam Hussein, at the close of 2003. New technology and changing public policy, as the

United States

faces another presidential election, will also shape the business world in the coming year, predict Wharton faculty, who were interviewed by Knowledge@Wharton on five key sectors: the economy, the banking industry, airlines, telecommunications and health care.

Bank of America and FleetBoston: Dud Deal?

Wed, 03 Dec 2003 14:56:54 EST

Bank of America's acquisition of FleetBoston for $48 billion in stock was the third largest banking merger in history and will create a mega-bank that will span the country. But though bank executives promise economies of scale and cross-selling opportunities, investors aren't impressed. Bank of America shares have fallen and failed to recover. Wharton faculty point out that Bank of America's CEO, Kenneth D. Lewis, would have been cheered if he had acquired FleetBoston for $11 billion less.

The Euro's March to ... Where?

Wed, 24 Sep 2003 00:00:00 EST

Viewed in isolation, the recent decision by Swedish voters to reject adoption of the euro as their currency could be judged a small matter. It was one vote in one moment in time by one country with a relatively small economy, and its outcome was not unexpected. Still, the vote has reverberated throughout Europe because it says a lot about the ongoing tensions in the continent�s decades-long, often wrenching, march toward integration. According to experts at Wharton and at universities in Europe, the vote says as much about politics as economics.

Collapse in Cancun: The World Trade Agenda Gets Sidetracked

Wed, 24 Sep 2003 00:00:00 EST

If you took delegates from 146 countries � ranging from the poorest agricultural regions in Africa to the most affluent nations of Europe � and asked them to negotiate a trade agreement that would satisfy everyone, what are the chances they would succeed? Very slim, as the collapse of the world trade talks in Cancun earlier this month proved. Huge fault lines appeared between two general camps: The developing countries, who contended that the richer nations� agricultural subsidies are an unfair trading advantage, and the more advanced nations who sought new global rules that would help protect their economic interests. So what happened and where do we go from here?

The Perils of Hedge Fund Regulation

Wed, 26 Feb 2003 00:00:00 EST

To many investors, hedge funds seem like an oasis of positive returns in the current desert-like environment of poor returns. Whether this is true is debatable. But two trends have made the regulation of hedge funds � which so far have been very lightly regulated � a hot topic. One is the increasing availability of hedge fund products to a broader audience than before. The other is the barrage of news reports focused on hedge fund fraud and blowups, which directly or indirectly raise the question: Should hedge funds be regulated? Wharton faculty share their views.

Business Implications of the U.S.-Europe Rift

Sun, 09 Feb 2003 00:00:00 EST

The diplomatic rift over war with Iraq has reverberated throughout the United States, the United Kingdom, France, Germany and the rest of what only recently has come to be known as Old and New Europe. But more is at stake than politics and diplomacy. At issue, too, are business and trade relations between the United States and Europe, according to faculty members at Wharton and INSEAD, the French business school. The impact of the Iraq issue on commerce, they note, may be serious as ordinary consumers and corporate strategic planners alike begin to make decisions based on the friction that has affected the worldwide political climate.

Institutional Investors as a Force for Change

Wed, 23 Oct 2002 00:00:00 EST

Institutional investors who hold clients� money for retirement or other long-term goals could be a powerful force in developing corporate governance policies to benefit shareholders over time. But these investors have been hesitant to take a proactive role, executives from several large investment firms said during a panel on �The Role of Institutional Investors.�

Operational Risk Poses Challenges to Financial Institutions and Regulators

Wed, 03 Jul 2002 00:00:00 EST

In the aftermath of September 11�s terrorist atrocities, it will surprise few people to learn that operational risk has been a hot topic of debate among financial institutions and regulators. Unlike risks of borrowers defaulting on debt or markets collapsing, operational risk management deals with internal system failures (such as a rogue trader) or external events (such as terrorist attacks). A conference organized by Wharton�s Financial Institutions Center and Oliver, Wyman & Co. recently explored current controversies in assessing and managing operational risk.

How Wealthy Nations Can Avoid a Looming Retirement Crisis

Wed, 05 Jun 2002 00:00:00 EST

The rapid aging of the world's industrialized nations poses problems for consumer and capital markets, including the risk that individual and government retirement plans will come up short over the next two decades. But the retirement boom will also have implications for the developing world. The global aging problem and the prospect for globally-based solutions were outlined several weeks ago during a conference sponsored by Wharton�s Pension Research Council and The Financial Institutions Center.

The Future of the Euro-Dollar Relationship Depends a Lot on the U.S.

Wed, 30 Jan 2002 00:00:00 EST

The euro, according to international finance experts at Wharton, is doing well. Completing the final stage of its three-year launch on January 1, the euro could, in fact, become an alternative to the dollar as a global reserve currency, or even provide a place of refuge if mounting U.S. debt leads to a weaker dollar. A lot depends on the U.S. economy.

Global Securities Markets Present Tough Challenges for Investors and Regulators

Wed, 16 Jan 2002 00:00:00 EST

Securities markets worldwide have been on a roller-coaster ride after the bursting of the dot-com bubble and Enron�s meltdown. Moreover, technology and globalization are breaking down old market structures and creating new virtual ones. How will investors and regulators deal with these challenges? Wharton�s Financial Institutions Center and the Brookings Institution organized a conference last week in Washington D.C. on �The Future of Securities Markets� to discuss these issues and more.

What�s Ahead for 2002?

Wed, 16 Jan 2002 00:00:00 EST

What�s next? Will 2002 be like 2001, with unemployment going up, stock prices going down, the trade balance worsening and tech industries in turmoil? No one knows for sure, of course. But Knowledge@Wharton asked several Wharton professors for their best predictions about issues and trends in four key economic areas: the stock market, employment, international trade and technology.

Argentina: Can It Go From Bad to Worse?

Wed, 16 Jan 2002 00:00:00 EST

If ever the Broadway show tune �Don�t Cry For Me, Argentina� had poignancy, now is the time. The fact is, a lot of people are crying over Argentina, including the country�s bankers, government leaders and middle class, not to mention outside investors. Knowledge@Wharton looks at what went wrong with the Argentine economy and whether a recovery is on the horizon.

Wharton Faculty Wish-list for George W. Bush

Wed, 17 Jan 2001 15:21:20 EST

There is little doubt that President-elect George W. Bush will have to hit the ground running once he is sworn into office on Jan. 20. A convergence of factors � ranging from leftover election rancor to a divided Congress to a newly sluggish economy - means Bush will have an unusually short honeymoon. Knowledge@Wharton asked Wharton faculty members to identify the most important issues � related to their own fields of expertise � that the new administration should address.

European Banks on Shopping Spree in U.S.

Thu, 28 Sep 2000 08:47:15 EST

In the last two months alone, several European financial institutions have announced their interest in acquiring U.S. investment banks and brokerage firms. Why the sudden activity? And what are the chances these acquisitions will succeed? Two Wharton finance professors look at the companies involved and analyze the dynamics of the global underwriting business.

Stock Exchanges in the Market for Partners

Wed, 07 Jun 2000 15:48:03 EST

In Europe, Asia and the United States over the past few months, stock exchanges large and small have either proposed merging, announced alliances or held conversations with prospective partners. Exchanges are seeking, among other things, to increase their capabilities and to fend off increasing pressure from electronic communications networks. Wharton scholars analyze the regulatory, financial and technical issues involved in this scramble for new alliances.

China�s Great Leap Outward

Tue, 21 Mar 2000 17:03:44 EST

However troublesome relations between the U.S. and China have been over the past decade, it�s clear that the trade pact signed last week is heady stuff. By partially clearing the way for China to enter the World Trade Organization (WTO), the U.S. has offered domestic industries their best opportunity ever to tap into a marketplace of 1.25 billion consumers. Should the trade accord be approved � by the U.S. Congress and by major trading partners such as the European Union - the U.S. will benefit from lower tariffs on its exports to China while China will gain new jobs, new technology, new foreign investment and perhaps most important, new respect as a member of the global trading community. Knowledge@Wharton asked five Wharton faculty members to analyze this historic agreement and comment on its implications: Ming-Jer Chen, founding director of Wharton�s Global Chinese Business Initiative; legal studies professor G. Richard Shell; finance professor Richard Herring; operations and information management professor G. Anandalingam; and insurance professor Neil Doherty.

Real Estate Booms and Banking Busts

Wed, 01 Sep 1999 11:37:55 EST

It is a familiar scenario, whether the action occurs in New York, Bangkok or Stockholm: Banks lend heavily to speculative property developers, who bid up real estate prices in an artificial boom. Then boom turns to bust, leaving real estate markets in a shambles and banks awash in non-performing property loans. Is there a way out of this cycle? Richard Herring and Susan Wachter of Wharton examine the issues.