...Panelists from USC included professor Larry Harris, holder of the Fred V. Keenan Chair in Finance at USC Marshall; professor Richard Green, director of the Lusk Center; and professor Raphael Bostic, director of SPPD's master of real estate development program...
..."We had a high-risk environment where there was a lot of money to be made in a very short amount of time," said Bostic, a former staff economist at the Federal Reserve board of governors. "Even as the risks increased, nobody's behavior changed because people were still making their money.
"I call it 'multi-party greed' because you can't just blame any one party. It comes down to homeowners, homebuyers, brokers, lenders, banks, investors and regulators - they all had a role."...
...Green also noted that the injection of capital should be the main emphasis for the federal rescue strategy.
"There is a provision in the bill that hasn't been remarked on, which allows the Treasury to go about this in a much better way," he said. "It allows the Treasury to buy shares in financial institutions. One of the problems financial institutions are facing right now is a lack of capital, and this forces them to get rid of assets on their balance sheet, which causes the value of the assets to fall, which puts further stress on the capital - creating a downward cycle.
"If the government is going to intervene, buying equity in a preferred position makes more sense than having the government trying to price what securities should be. I think in principle, that could work."...
October 14, 2008