Fighting Fire with Fire?

The Limits to Knowledge in Financial (Re)Engineering

London, UK - 1st May 2008, 07:46 GMT

Dear ATCA Colleagues

[Please note that the views presented by individual contributors are not necessarily representative of the views of ATCA, which is neutral. ATCA conducts collective Socratic dialogue on global opportunities and threats.]

We are grateful to Prof Joseph Mason, a distinguished ATCA Contributor; Senior Fellow at Wharton School, University of Pennsylvania; Moyse/Louisiana Bankers Association Chair of Banking at the Ourso School of Business, Louisiana State University; and Financial Industry Consultant at Criterion Economics, for his timely submission. He writes:

Dear DK and Colleagues

Re: Fighting Fire with Fire? The Limits to Knowledge in Financial (Re)Engineering

Despite the fact that "creative" subprime lending schemes started the current crisis, a number of key proposals from Capitol Hill, Washington DC, continue to push the idea that more creativity built upon existing failed ideas, can aid borrowers. There are many reasons to be sceptical of the results:

[CONTINUES] [ATCA Membership]

Best wishes

Joseph Mason

Prof Joseph Mason is the Moyse/Louisiana Bankers Association Chair of Banking at the Ourso School of Business, Louisiana State University, a Fellow at the Wharton School, Financial Industry Consultant at Criterion Economics, and a Visiting Scholar at the Federal Deposit Insurance Corporation. Professor Mason teaches in the areas of corporate finance, financial markets and institutions, and risk management and derivatives. Prior to joining Louisiana State University, he was an Associate Professor of Finance at Drexel University's LeBow College of Busin, a Financial Economist with the Office of the Comptroller of the Currency and Adjunct Assistant Professor of Finance at Georgetown University School of Business. His research spans the fields of corporate finance, financial intermediation, financial history, and monetary economics, focusing on issues related to both theory and public policy. He is the recipient of research grants or awards from the National Science Foundation, the Federal Reserve Bank of St Louis, Drexel University, and the University of Illinois. He serves or has served as advisor and consultant to many agencies and firms, including the Federal Deposit Insurance Corporation, the Federal Reserve Bank of Philadelphia, The Conference Board, the G-30, the World Bank Group, and numerous private firms. He is a member of the American Finance Association, the Financial Management Association, the Cliometrics Society, the Economic History Association, Beta Gamma Sigma, and Omicron Delta Epsilon.

Prof Mason has published academic articles in the American Economic Review; Journal of Business; Journal of Money, Credit, and Banking; Journal of Banking and Finance; Pacific-Basin Finance Journal; Journal of Financial Services Research; Research in Banking and Finance; and Explorations in Economic History, and book chapters in Resolution of Financial Distress (World Bank Group, Stijn Claessens, et al, eds); Privatization, Corporate Governance and Transition Economies in East Asia (NBER, Takatoshi Ito and Anne Krueger, eds); and Too-Big-To Fail: Policies and Practices in Government Bailouts (Greenwood Publishing, Benton E Gup ed). Prof Mason's current research projects include investigating the micro and macroeconomic effects of bankruptcy and liquidation procedures; the incidence and cost of systemic risk; and the management of idiosyncratic risks posed by new forms of bank lending, asset-backed securities, collateralised debt obligations (CDOs) and securitization. His work has been cited or published in the New York Times, Washington Times, the Economist, Wall Street Journal, Associated Press, Reuters, Bloomberg, KnightRidder Syndicate, MarketWatch-Dow Jones Newswire, MIST News, Financial Times, Barrons, Business Week, die Zeit, Investment Dealers Digest, American Banker, BNA's Banking News, Realty Times, Toronto Globe & Mail, the Philadelphia Business Review, and on CNBC, NBC Nightly News. He has made numerous live appearances on CNBC, Bloomberg Television, Comcast CN8 News, WBBM Radio Chicago, WHYY Public Radio Philadelphia, and WWDB Talk Radio Philadelphia.