Expert to discuss financial institution crisis

October 6 2008

Edward J. Kane, the James F. Cleary Chair in Finance at the Carroll School of Management at Boston College, will discuss the financial institution crisis of 2007-2008 during a special presentation at Indiana State University.

Kane will present "Ethical Failures in Regulating and Supervising the Pursuit of Safety-Net Subsidies" at 5 p.m. Tuesday, Oct. 14 at the College of Business 11th floor conference room on the ISU campus. A reception will take place at 4:30 p.m. and the presentation will be followed by a discussion.

The talk will explain the financial-institution crisis as a breakdown of the incentives of regulators, supervisors, managers and investors to perform adequate due diligence on securitized investments. As experience has shown repeatedly, government credit-allocation schemes generate incentive conflicts that undermine the quality of bank supervising and eventually lead to banking crisis.

Kane's analysis will explain how, in 2007-2008, technological change and regulatory competition encouraged incentive-conflicted supervisors to outsource much of their due discipline to credit-rating firms and encouraged institutions to leverage and securitize their loans in ways that obscured credit risks on poorly underwritten loans so that supervisors and credit-rating firms would not see these risks until it was too late. That taxpayers are being asked to pay the bill for this mess is a scandal to the highest order, Kane asserts.

Kane received his PhD from Massachusetts Institute of Technology. He currently consults for the World Bank and serves as a Senior Fellow in the FDIC's Center for Financial Research and Networks Financial Institute.

The presentation is sponsored by Networks Financial Institute at Indiana State University.

The event is free, but reservations are requested. Contact Marlene English at menglish2@isugw.indstate.edu or 812-237-2011, or register online at www.networksfinancialinstitute.org. Reservations should be made by Oct. 10.

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Edward J. Kane will present "Ethical Failures in Regulating and Supervising the Pursuit of Safety-Net Subsidies" at 5 p.m. Tuesday, Oct. 14 at the College of Business 11th floor conference room on the ISU campus

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