Sunday, September 21, 2008

What a week this has been... 2 storied Investment banks no longer exist as they once did; the market made wild swings all week in what can only be described as erratic behavior; the government decides to bail out public companies in a $700 billion aid package, further pushing the US national debt from $10.6 to 11.3 trillion. According to one of the sources I had come across that amounts to roughly $82,000 of national debt per US tax payer.

Wow.

So my only thought around this is the moral hazard this creates. Yes, I do agree that some sort of bailout package is much needed especially for a company like AIG that insures everything from lives and cars to oil rigs. I mean the last thing you would want is your insurance company to go under when you need them the most... but here's my point, isn't this setting some sort of precedent about risk taking by public companies? I mean to me it suggests that if I was a CEO I can take on a little more risk than I should because if things get really bad, the government has my back.

Amidst this turmoil it has been great to have a class at the Johnson School titled "Financial Markets and Institutions" taught by Prof. Maureen O'Hara. The class and Professor have been held in high regard by students and was recommended to me when I was considering the Johnson School, but only now that I actually am in the class do I realize how great it is. It is completely applicable to the current situation and the best part is, given the situation over the last few weeks, Prof. O'Hara has tailored the class by dedicating the first 40 minutes of each session just to discuss the current events and her views on why they are taking place and the side effects to be expected.

I was told second year was going to be an amazing experience but given the events of the recent weeks its been fascinating to note that while history is being written, I have a chance to think about it and learn from different and unique perspectives thanks to my Professors at the Johnson School.