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Subprime Time
Topics: Economics-Financial CrisisGovernance-Governing Rules, Regulations, and ReformsWith markets reeling in the wake of the subprime mortgage fiasco, BusinessWeek (September 3, 2007) turned to Wall Street eminence and Lazard CEO Bruce Wasserstein (MBA ’71) for “much needed perspective on the current turmoil.” Asked about lessons to be learned, Wasserstein said, “One is some modesty for all concerned: the rating agencies, the banks, asset managers. And certainly the masters of the debt universe and the Ph.D.’s with their black boxes turned out to be fallible. You can look at this as a shakedown cruise of our modern financial system. There are a lot of loose bolts here and there. That’s OK, if they are tightened.
A return to common sense is overdue. We need a dramatic retooling of risk management and portfolio selection. The regulatory techniques and the rating agency approaches also need a revamp.”
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