Financial regulation: first topic for students in DC

The formal programming of the immersion course in Washington DC began at the Brookings Institution on May 23. Ian Dubin, Associate Director of Brookings Executive Education, the partnership of the Brookings Institution and Olin Business School, welcomed and introduced us to the long history between the Brookings Institution and Washington University. Philanthropist Robert S. Brookings, the founder of Brookings Institution, was also president of the WashU Board of Trustees from 1895 to 1928. Besides devoting his time, Mr. Brookings also gave his fortune, and later his personal estate, to revitalize the university. It immediately reminded us of Brookings Hall and the Brookings Quadrangle back on campus in St. Louis.

The first guest speaker of the day was a correspondent for The New York Times and an author. He briefed us on the political situation in Washington D.C. under the current administration; he saw it as an interesting time in current American politics, especially because one party controlled the the White House, the Senate, and the House of Representatives at the same time. The Trump administration is seeking a wide range of changes in tax policy, health care policy, and global trade. The speaker also discussed the vital role that automation will play in the US manufacturing industry, offering us another way to think about the future of manufacturing in the US. Later, the Q&A session also covered topics such as over regulation/deregulation, the tax cut, and budget cuts.

Next, we learned from an individual with an impressive resume in academia, high levels of government, and financial institutions. She first gave us a brief introduction to the role of the Council of Economic Advisers (CEA), which is to provide academic views and economic insight on current micro economic and macroeconomic trends to the White House. She then shared with us more insights about serving as an economist with the CEA on a daily basis. Primarily, her role had four responsibilities: consulting on policy process to get certain legislation to pass Congress, advising the President by briefing and writing memos of pros and cons of relevant issues, updating the President on recent research, and providing external reports on certain economic events. She felt honored that their work was highly valued by the President since he incorporated their thoughts into his thinking. Overall, her speech was inspiring and insightful.

After lunch, our next speaker was a fellow in Economic Studies at the Brookings Institution, where he focuses on financial regulation and technology, macroeconomics, and infrastructure finance and policy. Today’s speech was focused on the Dodd-Frank Act, which he has worked on significantly. The act promotes financial stability, accountability, and transparency in the financial systems. He then discussed Dodd-Frank’s significant impacts on the financial regulatory environment, and the balance between economics of scopes and scale and the added costs brought by the Act. Also, he mentioned the fact that the current administration is attempting to roll back certain components of the Dodd-Frank Act and the rationale behind it.

Our speaker then introduced the history of American financial regulations, ranging from Glass-Steagall Act (1933), Community Reinvestment Act (1977), Sarbanes-Oxley Act Section 404 (2002), to the Volcker Rule (2010). During the Q&A session, he answered one of the student’s questions and talked a little about the geographical distribution of the US population and its regional features.

With the evolution of the influence of the Federal Reserve on financial markets and the implications of the Federal Reserve’s actions on the US economy currently being significant, our final speaker was perhaps the best person to provide insight on the institution. She has a significant history with the Federal Reserve, and continues to monitor it closely. With the U.S. economy in its 8th year of recovery, monetary policy having clearly been effective in the recovery process, is currently not particularly controversial. However, it is expected that over the next 12 months, the Federal Reserve may look to make a couple of small increases in short-term interest rates and attempt to reduce the large size of the Fed’s balance sheet, which is primarily due to the quantitative easing during the Global Financial Crisis (2008).

In a forward-looking view on the U.S. economy, our speaker held a positive view on where things are currently heading. However, she highlighted four significant challenges the country faces moving to the future: the aging workforce, climate change, looming federal debt, and income inequality. She also shared how the Clinton administration was able to generate a fiscal surplus, primarily due to the complementary work done by monetary and fiscal policy.

To conclude her speech, she addressed the causes leading into the Global Financial Crisis and the lessons they had learned or probably should have learned from the Asian Financial Crisis (1997). With the four speakers of the day providing us with insight on a diverse set of topics, we left Brookings for the day only to look forward to what awaits us the next day.

Guest Bloggers: Xin Hu, Krishna Chaitanya Mutya, Hanyi Zhou, Bingjie (Zoe) Zou (GMF 2017)

This is a series of blogs chronicling the experiences of 42 Global Master of Finance (GMF) dual degree students during their two week immersion course in New York and Washington, DC. Each blog will be written by a small subset of students during their experience. Names of speakers and presenters at firms are anonymous at the request of the firms and course organizers.

Photo: President Obama signs the Dodd-Frank Act in 2010.

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