One of the most prestigious universities in the world wants to prepare public leaders for the next big financial crisis. Here’s why you should care.
An FKD Feature exclusive

As the economy hums along and unemployment drops to lows that we haven’t seen it years, Yale University is starting a program to prepare leaders for the next financial crisis.

It seems that no one is getting too cozy about our kind-of-good economy, as many of the behaviors that led us to the financial brink haven’t been corrected on Wall Street or on Main Street.

For many, it’s only a matter of time before we face another calamity — and we should have a generation of leaders who know what to do during those critical moments.

You-know-what hit the fan in 2008

In case you weren’t old enough to remember, the financial crisis was caused by a perfect storm of economic troubles. At the time, public officials were blindsided by the events that quickly transpired and scrambled to save the entire global financial system from an epic catastrophe.

That high-stakes, nerd-driven drama was immortalized by the book Too Big To Fail by Andrew Ross Sorkin. The book later became an HBO movie starring some recognizable Hollywood folk.

For a few days back in 2008, it seemed like our economy was on the brink of a frightening collapse. After unprecedented interventions and some extremely controversial bailouts, we avoided the worst-case scenario.

This story has a semi-happy ending — the system didn’t implode, but we later endured a long and painful recession.

As you probably already know, The Great Recession, as it’s come to be labeled, is notorious for having hobbled our economic prospects, especially for millennials. We’re still suffering an economic hangover from the Great Recession nearly a decade later, which is why we would like to avert a such a serious financial crisis in the future.

Yale’s star lineup

To address this problem, The Yale School of Management is launching a master’s program in system risk next year, and it’s aimed at people who work at regulatory agencies and central banks from around the world.

To help teach crisis-aversion tactics to the influential global policy elite, Yale used its Ivy League cache to attract some of the foremost minds in this evolving field of systemic risk.

The program is chaired by former Treasury Secretary Timothy Geithner, who was the one of the architects of our financial-crisis policy, and he also will teach courses to these master’s students.  

He’s joined by former Federal Reserve Chairman Ben Bernanke and former Treasury Secretary Hank Paulson, who also are advising the program. That means nearly every high-profile person who helped our country avert disaster back in 2008 is part of this academic program in some capacity.

Real-time solutions?

Yale isn’t just starting a master’s program. It’s also building an “open online platform” aimed at helping policymakers tackle a financial crisis head-on in real-time. The point of the platform is to provide practical solutions to policymakers in the event of a financial crisis, offering up solutions and feedback on potential scenarios.

This platform, as part of an expansion of the Yale Program on Financial Stability, was made possible by the largesse of some the biggest financial titans in America, including Bill Gates, Jeff Bezos and Michael Bloomberg.

Takeaway: No magic bullets here, but well done

While this is all a well-intended effort by Yale to help contain the damage from the next crisis, there is still a lot of disagreement over what worked and what didn’t during the financial crisis. Additionally, crises in the future may be completely different from last one, and our solutions that were applied may not be useful in the future.

Then again, because we haven’t addressed the bad behavior that led to the last financial crisis, it’s almost a near certainty that we’ll have some sort of similar event in the future.

From a policy angle, the idea that some of our influential public leaders are being schooled in financial-crisis policies as an academic discipline is like a nice, warm blanket that helps us sleep at night.

Of course, regulators and politicians probably should have addressed the unsustainable debt problem that we have in our country — because that behavior ultimately fuels financial crises.

Evidently, we haven’t yet learned from our mistakes, so hopefully when the next financial crisis is triggered, public officials will be able to contain the economic damage more quickly than last time.

In that sense, Yale’s Financial Stability program is like a policy consolation prize — better than nothing.

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Posted 05.11.2017 - 10:50 am EDT