A major player from the Federal Reserve brought insider knowledge on the nation’s financial crisis to about 400 Northwestern students and faculty Monday at the Owen L. Coon Forum.
Donald Kohn, chairman of the Global Financial System Committee, delivered a 45-minute talk “Federal Reserve Policy Challenges.” The event was co-sponsored by Northwestern’s Center for International Economics and Development and Kellogg’s Office of the Dean.
Kohn immediately recognized University President Morton O. Schapiro, a fellow economist, by thanking him for the invitation to speak at NU. Kohn’s speech focused on the challenges with monetary policy and financial stability, which he stressed was his own opinion, not that of colleagues on the Federal Open Market Committee. Improved monetary policy after the 1970s contributed significantly to the complacency among investors in taking economic risks, which could result in a drop in housing prices or a major economic downturn.
“To some extent, we were the victims of our own success,” he said.
Kohn said the initial “extreme panicky conditions” of the past two years resulted in a mass movement toward liquidity, once viewed as the safest option. Now, the market is returning to longer-term investments with riskier assets.
Kohn spoke as part of the second-annual Kellogg Distinguished Lecture Series because of his firsthand perspective, said Meg Washburn, director of Media Relations for the Kellogg School of Management.
A question-and-answer session followed Kohn’s speech. Attendees asked about a “good asset bubble” versus a “bad asset bubble,” as well as the disconnect between agencies charged with advancing a coherent federal policy.
Chris Coleman, a first-year student in Kellogg’s MBA program, asked about this sense of disconnect between federal agencies. Kohn said the problem improved somewhat since fall of 2008.
“There was very good communication among regulators,” he said, “and they’re all pulling in the same direction.”
Coleman said he was impressed by Kohn’s willingness to address the policy specifics in his answer to each question, and that he didn’t avoid any questions.
Prof. Robert J. Gordon encouraged his undergraduate economic students to attend Kohn’s lecture, and said he thought about two-thirds of the audience were from his class.
“It would be helpful in writing their essay questions on the final exam,” he said. “They also got some real-world experience in learning what the people at the Fed think.”
Gordon added he thought the talk was one of the most monumental during his time at NU.Economics Prof. Lawrence Christiano joined the effort to bring Kohn. He said he liked that the speech included general theory, instead of relying solely on facts and figures the average student would not understand.
“You might have thought some fancy big-shot like this would just sort of not say anything,” he said. “That’s not what happened.”
Gordon said he will be reviewing parts of the speech in class to highlight the significance of Kohn’s perspective.
“To be that close to one of the four people who helped to save not just the United States – but the world – from the biggest financial crisis since the Great Depression is pretty exciting,” he said.[email protected]
