Panel of Experts to Discuss Financial and Mortgage Crisis

Media Contact: Cynthia Jackson

254-710-7628 (office)

254-749-4055 (cell)

Cynthia_Jackson@baylor.edu

PANEL OF EXPERTS TO DISCUSS

FINANCIAL AND MORTGAGE CRISIS

WACO, Texas – Five professors from Baylor University’s Hankamer School of Business will provide perspectives and advice about the current financial and mortgage crisis facing the United States. The panel discussion will take place on Friday, October 9, from 3:30 to 5:00 pm in Kayser Auditorium.

“Several faculty felt that we could offer students some valuable perspective and analysis on the current economic situation,” said Dr. Tisha Emerson, associate professor and associate chair of the Economics department. Emerson is coordinating the event. “This will be an opportunity for them to hear analysis from the experts and get answers to their questions.”

Panelists include experts in various aspects of economics, finance, accounting and insurance. Each will speak to a different aspect of the crisis and then answer questions from the audience.

Dr. Gia Chevis, assistant professor of Accounting, will discuss “mark-to-market” accounting procedures. Mark-to-market accounting became widely adopted as a practice in the 1980s and 1990s and impacts how an asset’s value is calculated. Mark-to-market is a practice specifically addressed within the bailout legislation recently passed by Congress.

Dr. James Garven, professor of Finance and Insurance and holder of the Frank S. Groner Memorial Chair in Finance, will focus on moral hazard related to bailouts. He will discuss some obvious examples of the risk of unintended consequences, including Fannie Mae and Freddie Mac.

Dr. Kent Gilbreath, professor of Economics and the holder of the E.M. and Thelma Stevens Chair of Private Enterprise and Entrepreneurship, wrote presciently of the economic crisis more than a year ago. He will discuss the origins and causes of the crisis and its impact on the economy.

Dr. William Reichenstein, professor of Finance and holder of the Pat and Thomas R. Powers Chair of Investment Management, will provide commentary about what investors should do now and how the crisis might affect investor portfolios and savings plans.

Dr. David VanHoose, professor of Economics and holder of the Herman W. Lay Chair of Private Enterprise, will talk about the “blame game.” Does any one person, group or decision bear responsibility for the crisis?

The event is free and open to all Baylor students, regardless of major.

For more information, contact Dr. Tisha Emerson, Tisha_Nakao@baylor.edu, 710-4180.

About Baylor Business

The Hankamer School of Business holds to a visionary standard of excellence whereby integrity stands shoulder to shoulder with analytic and strategic strengths to build leaders, not simply careers. BusinessWeek ranks the program in 36th place. U.S.News & World Report ranks the undergraduate business program in 58th place. Baylor’s Entrepreneurship program is ranked 14th by U.S.News and its Accounting program is ranked 24th by Public Accounting Report. Visit www.baylor.edu/business for more information.

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Prediction Markets Update (October 5, 2008)

The 2008.PRES.OBAMA Intrade contract now trades at 64.2, whereas the 2008.PRES.McCAIN Intrade contract is currently trading at 35.0 (compared with 67.9 and 32.0 respectively as reported on yesterday’s update).

The state-by-state contracts continue to imply that Mr. Obama holds a 298-185 “lead” over Mr. McCain (based upon my cutoff price point of 55 for allocating Electoral College votes). The “swing” states remain Florida (27 Electoral College votes), Virginia (13 Electoral College Votes), and North Carolina (15 Electoral College votes).

FiveThirtyEight.com currently gives Mr. Obama a 339.7 to 198.3 advantage over Mr. McCain.

Addendum: October 5, 2008 Electoral College Vote allocation

Barack Obama (298): California (55), Colorado (9), Connecticut (7), Delaware (3), District of Columbia (3), Hawaii (4), Illinois (21), Iowa (7), Maine (4), Maryland (10), Massachusetts (12), Michigan (17), Minnesota (10), Nevada (5), New Hampshire (4), New Jersey (15), New Mexico (5), New York (31), Ohio (20), Oregon (7), Pennsylvania (21), Rhode Island (4), Vermont (3), Washington (11), and Wisconsin (10)

John McCain (185): Alabama (9), Alaska (3), Arizona (10), Arkansas (6), Georgia (15), Idaho (4), Indiana (11), Kansas (6), Kentucky (8), Louisiana (9), Mississippi (6), Missouri (11), Montana (3), Nebraska (5), North Dakota (3), Oklahoma (7), South Carolina (8), South Dakota (3), Tennessee (11), Texas (34), Utah (5), West Virginia (5), and Wyoming (3)

Prediction Markets Update (October 4, 2008)

The 2008.PRES.OBAMA Intrade contract now trades at 67.9 , whereas the 2008.PRES.McCAIN Intrade contract is currently trading at 32.0 (compared with 68.3 and 32.9 respectively as reported on yesterday’s update).

The state-by-state contracts now imply that Mr. Obama holds a 298-185 “lead” over Mr. McCain (based upon my cutoff price point of 55 for allocating Electoral College votes). Since yesterday, Florida (27 Electoral College votes) and Virginia (13 Electoral College Votes) have moved back into “swing” state status with North Carolina (15 Electoral College votes).

FiveThirtyEight.com currently gives Mr. Obama a 333.2 to 204.8 advantage over Mr. McCain.

Addendum: October 4, 2008 Electoral College Vote allocation

Barack Obama (298): California (55), Colorado (9), Connecticut (7), Delaware (3), District of Columbia (3), Hawaii (4), Illinois (21), Iowa (7), Maine (4), Maryland (10), Massachusetts (12), Michigan (17), Minnesota (10), Nevada (5), New Hampshire (4), New Jersey (15), New Mexico (5), New York (31), Ohio (20), Oregon (7), Pennsylvania (21), Rhode Island (4), Vermont (3), Washington (11), and Wisconsin (10)

John McCain (185): Alabama (9), Alaska (3), Arizona (10), Arkansas (6), Georgia (15), Idaho (4), Indiana (11), Kansas (6), Kentucky (8), Louisiana (9), Mississippi (6), Missouri (11), Montana (3), Nebraska (5), North Dakota (3), Oklahoma (7), South Carolina (8), South Dakota (3), Tennessee (11), Texas (34), Utah (5), West Virginia (5), and Wyoming (3)

Prediction Markets Update (October 3, 2008)

The 2008.PRES.OBAMA Intrade contract now trades at 68.3, whereas the 2008.PRES.McCAIN Intrade contract is currently trading at 32.9 (compared with 67.4 and 32.6 respectively as reported on yesterday’s update).

The state-by-state contracts now imply that Mr. Obama holds a 338-185 “lead” over Mr. McCain (based upon my cutoff price point of 55 for allocating Electoral College votes). Since yesterday, Florida (27 Electoral College votes) has moved back into Obama’s column. At this point, the only “swing” state currently left is North Carolina (15 Electoral College votes).

FiveThirtyEight.com currently gives Mr. Obama a 333.2 to 204.8 advantage over Mr. McCain.

Addendum: October 3, 2008 Electoral College Vote allocation

Barack Obama (338): California (55), Colorado (9), Connecticut (7), Delaware (3), District of Columbia (3), Florida (27), Hawaii (4), Illinois (21), Iowa (7), Maine (4), Maryland (10), Massachusetts (12), Michigan (17), Minnesota (10), Nevada (5), New Hampshire (4), New Jersey (15), New Mexico (5), New York (31), Ohio (20), Oregon (7), Pennsylvania (21), Rhode Island (4), Vermont (3), Virginia (13), Washington (11), and Wisconsin (10)

John McCain (185): Alabama (9), Alaska (3), Arizona (10), Arkansas (6), Georgia (15), Idaho (4), Indiana (11), Kansas (6), Kentucky (8), Louisiana (9), Mississippi (6), Missouri (11), Montana (3), Nebraska (5), North Dakota (3), Oklahoma (7), South Carolina (8), South Dakota (3), Tennessee (11), Texas (34), Utah (5), West Virginia (5), and Wyoming (3)

A very interesting market statistic…

I just checked on the weekly return series on the SP500 dating back to January 1950, and I found that in the 3,065 weeks in this series, the % change in the S&P 500 during the course of this week (-9.4% from last Friday through today) is the fourth worst on record. The only weeks that were worse during this period were the week of the crash of ’87 (-12.2% net, inclusive of the more than 20% decline on “Black Monday (October 19)), the week leading up to 9/11 (-11.05%), and the first week of April 2000 (-10.54%).

Prediction Markets Update (October 2, 2008)

The 2008.PRES.OBAMA Intrade contract now trades at 67.4, whereas the 2008.PRES.McCAIN Intrade contract is currently trading at 32.6 (compared with 64.3 and 35 respectively as reported on yesterday’s update), so in terms of the overall contracts, the odds favor Obama by a 2:1 margin.

The state-by-state contracts now imply that Mr. Obama holds a 311-185 “lead” over Mr. McCain (based upon my cutoff price point of 55 for allocating Electoral College votes). Since yesterday, Florida (27 Electoral College votes) has moved from Obama’s column back into the “swing” state category, but has been replaced by Nevada (5 Electoral College votes) and Ohio (20 Electoral College votes). Besides Florida, the other “swing” state currently is North Carolina (15 Electoral College votes).

FiveThirtyEight.com currently gives Mr. Obama a 331.2 to 206.8 advantage over Mr. McCain.

Addendum: October 2, 2008 Electoral College Vote allocation

Barack Obama (311): California (55), Colorado (9), Connecticut (7), Delaware (3), District of Columbia (3), Hawaii (4), Illinois (21), Iowa (7), Maine (4), Maryland (10), Massachusetts (12), Michigan (17), Minnesota (10), Nevada (5), New Hampshire (4), New Jersey (15), New Mexico (5), New York (31), Ohio (20), Oregon (7), Pennsylvania (21), Rhode Island (4), Vermont (3), Virginia (13), Washington (11), and Wisconsin (10)

John McCain (185): Alabama (9), Alaska (3), Arizona (10), Arkansas (6), Georgia (15), Idaho (4), Indiana (11), Kansas (6), Kentucky (8), Louisiana (9), Mississippi (6), Missouri (11), Montana (3), Nebraska (5), North Dakota (3), Oklahoma (7), South Carolina (8), South Dakota (3), Tennessee (11), Texas (34), Utah (5), West Virginia (5), and Wyoming (3)

Doom and Gloom

TIME, “Sky High Housing”, 09/12/1977

TIME, “To the Rescue” 11/13/1978

BusinessWeek, “The Death of Equities”, 08/13/1979

TIME, “The Squeeze of ‘79”, 10/22/1979

TIME, “The Computer Moves In”, 01/03/1983

TIME, “That Monster Deficit; America’s Economic Black Hole”, 03/05/1984

TIME, “The Crash”, 11/02/1987

TIME, “Is Government Dead?” 10/23/1989



BusinessWeek, “Is the Party Over?” 04/17/2000

TIME, “Will You Ever Be Able to Retire?” 07/29/2002

Prediction Markets Update (October 1, 2008)

The 2008.PRES.OBAMA Intrade contract now trades at 64.3, whereas the 2008.PRES.McCAIN Intrade contract is currently trading at 35 (compared with 64.3 and 35.7 respectively as reported on yesterday’s update).

The state-by-state contracts now imply that Mr. Obama holds a 313-185 “lead” over Mr. McCain (based upon my cutoff price point of 55 for allocating Electoral College votes). Since yesterday, has “picked up” Virginia (13 Electoral College votes) and Florida (25 Electoral College votes). The current “swing” states include Nevada (5 Electoral College votes), North Carolina (15 Electoral College votes) and Ohio (20 Electoral College votes), with Nevada and Ohio leaning strongly toward Obama (with prices of 55 and 53.5 respectively).

FiveThirtyEight.com currently gives Mr. Obama a 336 to 202 advantage over Mr. McCain.

Addendum: October 1, 2008 Electoral College Vote allocation

Barack Obama (313): California (55), Colorado (9), Connecticut (7), Delaware (3), District of Columbia (3), Florida (27), Hawaii (4), Illinois (21), Iowa (7), Maine (4), Maryland (10), Massachusetts (12), Michigan (17), Minnesota (10), New Hampshire (4)New Jersey (15), New Mexico (5), New York (31), Oregon (7), Pennsylvania (21), Rhode Island (4), Vermont (3), Virginia (13), Washington (11), and Wisconsin (10)

John McCain (185): Alabama (9), Alaska (3), Arizona (10), Arkansas (6), Georgia (15), Idaho (4), Indiana (11), Kansas (6), Kentucky (8), Louisiana (9), Mississippi (6), Missouri (11), Montana (3), Nebraska (5), North Dakota (3), Oklahoma (7), South Carolina (8), South Dakota (3), Tennessee (11), Texas (34), Utah (5), West Virginia (5), and Wyoming (3)

Doubling down…

Today, it appears that the U.S. Senate is doubling down on the bill that the U.S. House of Representatives rejected on Monday. I am sure not how effective or meaningful higher FDIC insurance limits are likely to be; the bill calls for, among other things, raising the upper limit from $100,000 to $250,000 on insured deposits. Clearly, such a policy change weakens incentives for consumers to monitor their banks and also makes it incumbent upon banking regulators to monitor more solvency even more closely. By increasing the upper limit on coverage, this is an indirect way to recapitalize banks in the short run (by effectively enabling them to substitute (contingent) government capital for private capital). However, this also carries with it a serious moral hazard by creating incentives for banks to rely less upon private capital in the longer run.

I couldn’t help but notice from the news reports today that one senator apparently managed to slip in a provision in the “bailout” bill for “mental health parity”, whatever that means. I think it has something to do with mandating more “generous” mental health coverage in the private health insurance markets. What this measure has to do with resolving the credit crisis is beyond me. I can’t help but wonder what other completely unrelated earmarks are being inserted as a way to buy votes.