Four Harvard professors—and one Pulitzer-winning reporter—addressed the financial meltdown at the Institute of Politics last night, in the third major panel at the University on the current economic situation. [SEE CORRECTION BELOW]
The discussion, entitled “Financial Crisis: How did we get here? What’s next,” focused on the bailout proposal currently faced by Congress and the possible measures to ensure greater future market stability.
Calling the current economic downturn the “worst financial crisis since the Great Depression,” Jeffrey A. Frankel, a Kennedy School professor in capital formation and growth, warned against a potential long-term depression, such as the one that Japan experienced in the 1990s.
A former advisor to President Clinton, Frankel also said that the high rate of mortgage defaults was caused in part by the wish of every American to own a house, a desire which both political parties encouraged.
The discussion, which opened up later to questions, focused more on policy than the two previous forums at Harvard Business School and at Sanders Theater.
Economics professor Edward Glaeser, an expert in urban economics, found a potential bright spot in the current crisis. He suggested that the decline in housing prices—a market in which he does not “think we’re close to the bottom”—has made home ownership more affordable.
Offering a perspective outside the ivory tower, Diana Henriques, a New York Times financial investigative reporter, blamed the current crisis on “the failure on the part of leaders and communicators...to educate Main Street about the importance of credit markets.”
Henriques also implicated her own profession in the crisis, saying, “The media in general has been less effective in its educational mission.”
Robert R. Glauber, a visiting professor at Harvard Law School, explained that he was in favor of the current bailout package, because it would be “a rescue of individual, normal people, me and you, as much as a rescue of Wall Street.”
The former Chairman and CEO of NASD, which regulates the securities industry, Glauber said the bailout would “unfreeze the system” by having the government buy the “toxic” securities, thus restoring liquidity to the market.
Ajita Talwalker, a student at the Kennedy School of Government, said that having Harvard professors explain the financial crisis was helpful because the discussion provided an education for all in the audience.
“The biggest disconnect is that people out there don’t understand the impact on their daily lives,” she said.
The Oct. 3 story, "IOP Panel Debates Economic Turmoil," reported that The New York Times reporter on the panel, Diana B. Henriques, is a Pulitzer Prize winner. In fact, she has never won the prize, but has been a finalist.