Dr. Richard Berner visited NYU Stern recently to discuss his new post as Director of the US Treasury’s Office of Financial Research (OFR), “the first federal agency devoted to quantifying threats to financial stability.” Berner addressed the NYU Stern community about the OFR’s new role in identifying and addressing key risks in financial systems. The Washington Post highlights Dr. Berner and NYU Stern Professors Robert Engle and Bruce Tuckman’s responses to this newly created federal entity.
“That’s a lot of new instrumentation on the dashboard. Could it be enough to keep the economy on the road and crash-free?
Some of the economists who came to see Berner in New York think it might be. One is Robert Engle, the director of Stern’s Volatility Institute, which in recent years has created sophisticated risk indexes. Engle won a Nobel Prize in 2003 for his work developing computer models to measure financial volatility. He sits on an expert panel that advises Berner’s office. In an interview in his office, Engle said it is possible that regulators have enough information, from newly developed tools, to avoid another crisis — if they can summon the will to follow the numbers and move in time to defuse threats. In other words, the issue might be the driver, not the dashboard.
“Enormous amounts of things we know now that we didn’t know before,” Engle said. “And on top of that — and perhaps more importantly — we’ve become more able to act on what we know.”
Other NYU economists worry the Office of Financial Research is chasing a mirage. Bruce Tuckman, a finance professor fresh off a long career in risk management at big Wall Street firms, said the financial system is so complex that a whole control room of indicators wouldn’t suffice to understand it. “That’s the danger with OFR,” he said. “They spend all this time on getting this data that doesn’t tell them where the risks are.”
Read the entire article on the Washington Post. Below are examples of indexes utilized by the OFR, the first graph on the left from the NYU Stern Volatility Institute.
New Haven, Conn., U.S.A. - Korean venture capitalist Daniel Shin, MSRM Class of 2013, has been named a 2013 Yale World Fellow, announced Yale University President Richard C. Levin.
In an era of bubbles, crashes, tarnished reputations, and outrage over the gulf between the wealthy and the struggling classes, it may seem like the height of insolence to suggest that stock markets hold the key to economic recovery in the United States and Europe. Wasn’t it market misbehavior that got us into this mess in the first place? But, in fact, policymakers would still do well to look to the stock market as an essential indicator of the likely impact of their reforms.
The epic financial crisis of a few years ago inflicted immense damage on the process of financial intermediation, the fabric of the real economy, and the reputation of banks and bankers. Even today, some five years later, little has happened to restore financial firms to their former glory near the top of the reputational food-chain in most countries. For reasons of their own, many boards and managers in the banking industry have little good to say about the taxpayer bailouts and the inevitable regulatory tightening. In the words for former Barclays CEO Bob Diamond, “There was a period of remorse and apology for banks. I think that period is over. Frankly, the biggest issue is how do we put some of the blame game behind us? There’s been apologies and remorse, now we need to build some confidence.”
Justin Lerner, currently enrolled in the NYU Stern MS in Risk Management Program, has been professionally involved with risk management in a variety of roles since 1998. Currently charged with risk and policy at the Federal Reserve Bank of New York, which he joined in 2011, Justin spent 13 years previously at Goldman Sachs, in risk roles ranging from managing derivatives risk on the NYMEX and AMEX exchange floors to dealing with Hedge Funds in prime brokerage and clearing.
The following is an article by NYU Stern Professor of Economics and International Business, Nouriel Roubini.
mplished banking professional, with a blue-chip background. She is currently chief risk officer of KCB Bank in Nairobi, Kenya, having joined the organization in 2004 as divisional director of risk management. Previously, she worked for the First National Bank of Chicago in Nairobi; New York Life Insurance Company in New York; and Barclays Bank in Nairobi. She holds a BA in Economics and French from the University of Nairobi and an MBA from Adelphi University in New York.
The following is a post by NYU Stern Office of Public Affairs:
The following is an Op-Ed written by Lawrence White, NYU Stern Professor of Economics published online on the New York Times Opinion Pages.