Weathering the Financial Crisis
James Barth advises everyone from students to states on sound economic policy
“The financial crisis,” writes James Barth, “initially resulted from excessive credit flowing into the housing sector based on informational problems and bad incentives…Regulators who allowed highly leveraged, regulated financial institutions to lend money to individuals to purchase homes with no money down and without recourse condoned a business model that was doomed to fail.” Unfortunately, home prices don’t go up year in and year out forever.
Barth, the Lowder Eminent Scholar in Finance at Auburn University and a senior fellow at the Milken Institute, knows a thing or two about global markets and their periods of turmoil. He’s testified before various governmental bodies as well as traveled to China, Egypt, India and Russia under the auspices of the U.S. State Department to discuss the global financial crisis.
The key, he says, is surprisingly simple: better and smarter regulation — not just more regulation — and improved financial literacy. More has to be done to educate home buyers before they make a purchase, because little mistakes have vast consequences.
He’s hopeful in the face of the crisis, though. It’s certainly nowhere near as bad as the Great Depression of 1929, he says. The unemployment rate is still far too high and it will take time for a return to more normal levels, Barth notes.
Dr. James R. Barth
Dr. Barth is the Lowder Eminent Scholar in Finance at Auburn University and a Senior Finance Fellow at the Milken Institute. His research has focused on financial institutions and capital markets, both domestic and global, with special emphasis on regulatory issues. Most recently, he served as leader of an international team advising the People’s Bank of China on banking reform.
For more information:
- Visit Dr. Barth’s Web site.