MGT 890, ECON 363a, LAW 20515: The Global Financial Crisis

Fall 2015
Wednesdays, 2:40 5:30 pm, Evans Hall: Room 2400
Last Updated 9/2/2015
The Honorable Timothy F. Geithner
Professor Andrew Metrick
metrick@yale.edu
(203) 432-3069
165 Whitney Ave, Room 4522
Course Assistant: Ashley Garand, ashley.garand@yale.edu, 203-432-2781
TAs: Christian McNamara, Roz Wiggins, June Rhee.
TA Office Hours: By appointment. Email ashley.garand@yale.edu

Course Description
This course surveys the causes, events, policy responses, and aftermath of the recent global financial
crisis. The main goal is to provide a comprehensive view of this major economic event within a
framework that explains the dynamics of financial crises in a modern economy.
The instructors aim to maximize the value of in-class time. To this end, students will be expected to watch
the video of course lectures in advance, with class time reserved for discussions, cases, group
presentations, and a crisis simulation. All students will be expected to contribute to class discussions both
online and in-person. Secretary Geithner will lead the discussions and participate in breakout sessions on
10/7, 11/18, and 12/2. Professor Metrick will lead the discussions on other days, and will be in all classes
and cycle through all breakout sessions.
The required book for the course is Stress Test, by Timothy F. Geithner (Crown, 2014), which is available
at most bookstores or from Amazon. Other recommended reading is given below on the syllabus and will
be available on the course's Canvas website.
Online Platforms
Canvas (https://yale2.instructure.com/)
We will use the Canvas platform to host important course information, including the lecture videos,
quizzes, and readings. Students will submit their assignments via Canvas, as well.
Discussion Board (http://mgt890.som.yale.edu/)
The discussion board will host threads for each video and case we cover in class. Students will use this
platform to post questions and comments about course material, and will be used to determine the
community contribution portion of a students grade (see grading details below).

MGT 890: The Global Financial Crisis

Grading
Your grade will be based on the following five categories:
Quizzes (20%): The class lectures are available on the Canvas platform. Each lecture is broken up
into individual lessons that are a few minutes long. After each lesson there are a few ungraded
multiple-choice questions, and after each full lecture there are eight quiz questions. These
questions are straightforward and are just intended to make sure students have absorbed key facts
and concepts in advance of the classroom discussion. Quizzes must be taken by 11:59 the day
before class. For each student, we will drop your lowest two quiz grades before computing your
quiz average.
Community Contribution (20%): Prior to each class, beginning in the second week of class,
students are expected to submit at least 1 question or comment to the online board for each video
lecture and case study we cover. (There are a total 12 video lectures and 10 case studies that will
require comment. Students will be allowed to skip commenting on four of these 22 without any
penalty.) The online submissions can be about the lectures, the readings, or any other topic related
to that days class material. The instructors will use these online discussions as the basis for the
class discussions.
For full credit on this grade component, 200 points are required students earn 1 point for each
post or comment on the online board. Points are accrued based on the number of up-votes less
down-votes on each submission. For example, a question with 10 up-votes and 2 down-votes will
earn 1 point for posting, and then the net of the votes (8), for a total of 9. How can you excel at
this? Ask good questions, give thoughtful answers to other students questions, and do not waste
our collective time with comments just to fill space. Discussion threads for each class will close at
11:59 P.M the day before class.
Note that we will not be evaluating in-class comments as part of this grade. Nevertheless, please
come to class prepared to speak and to keep the collective conversation going. If things are slow,
the faculty will gleefully cold call.
Case Presentation (20%): For five of the class meetings, we will break out into sections in the
second half of class for student-led case discussions, with participation by teaching assistants (one
per room) and faculty (roving). These cases consider various aspects of the Lehman bankruptcy
and aftermath, the crisis in Europe, and the new banking regulations of the Basel committee. Each
student will be a member of a three to five-person team assigned to present and lead the discussion
on one of these cases, with the grade based on the effectiveness of this presentation.
Crisis Simulation and Memo (20%): On September 30, we will use the second half of class for a
simulation of the business and policy challenges in the weekend before the Lehman bankruptcy in
September 2008. Student teams will be assigned to different roles, will prepare a strategy,
negotiate with other teams, and then submit a memo on their strategy and outcomes. In the second
half of class on October 7, Secretary Geithner and Professor Metrick will discuss the memos and
outcomes in breakout groups.
Final Paper (20%): The final paper will be an analysis of specific policy decisions made during
the financial crisis. Length will be limited to eight pages. A complete list of topics will be
provided in early October, along with additional references that can supplement the class readings.
Some examples of possible topics are
MGT 890: The Global Financial Crisis

1) Should the Federal Reserve have aggressively raised interest rates to try to tame the housing
bubble? What are the arguments for and against?
2) Should the Bank of England have bailed out Northern Rock?
3) Did regulators do the right thing in allowing Lehman Brothers to fail? Did they really have a
choice?
4) Should the Federal Reserve have rescued AIG? What would have happened if AIG had been
allowed to fail?
5) Compare the regulatory responses in Iceland and Ireland during the crisis.
6) What do people mean by the "too-big-to-fail" problem? Has it been fixed with new laws and
regulations?

Integrity and responsibility

Integrity and responsibility are bound closely to the values we hold important in the SOM community.
We aspire to hold ourselves to the highest levels of honesty in all interactions, including academic,
personal, and professional behavior (see links under SOM Honor Code for more details). Lack of integrity
and responsibility, especially improper collaboration, is viewed very seriously and has led to expulsion in
the past. The guidelines offered below address some key aspects. Please contact the professor or TAs if
you have doubts or concerns.
All assignments in this course must be your own work (for individual assignments) or the
collective work of your group (for group assignments). You can ask other students (and certainly ask
TAs and faculty) to help you understand the assignment, but not to so much that we are answering the
questions for you.
Technology Policy. Please only use your laptops/tablets/phones for taking notes or looking at
course materials. All community members should feel empowered to ask anyone to cease and desist any
other tech activity.

MGT 890: The Global Financial Crisis

CLASS SCHEDULE
See the syllabus link in Canvas for updates to this class schedule.
Time Slots: I = 2:40 3:50; II = 4:00 5:30
All locations are Evans 2400 unless otherwise noted
#

Date

Topics, Readings, and Schedule

Introduction to the Global Financial Crisis
Coursera Module 1
I: Course Organization and Overview
II: Class discussion of modules and readings
Suggested Readings:

9/2

Stress Test, Introduction + Chapters One and Two

Bernanke, Ben, 2010, Testimony to the financial crisis inquiry commission.
Gorton, Gary B. and Andrew Metrick, 2012, Getting up to speed on the financial crisis: a
one-weekend-readers guide, Journal of Economic Literature 2012, 50:1, 128150
Schularick, Moritz and Alan M. Taylor 2012, Credit booms gone bust: monetary policy,
leverage cycles and financial crises, 1870-2008, American Economic Review 102, 10291061.

MGT 890: The Global Financial Crisis

Date

Topics, Readings, and Schedule

Safe Assets and the Global Savings Glut

Coursera Modules 3 and 4

I) Class discussion of modules and readings
II) Case Session (in breakout classrooms): instructor-led discussions
Lehman A
Lehman B
Suggested Readings:
Stress Test, Chapter Three
2

9/9

Jobst, Andreas, 2008, Back to basics-what is securitization? Finance & Development 45,
48.
Pozsar, Zoltan. 2011, Institutional Cash Pools and the Triffin Dilemma of the U.S.
Banking System, International Monetary Fund Working Paper 11/190.
Bernanke, B., C. Bertaut, L. DeMarco, and S. Kamin, 2011, International capital flows
and the return to safe assets in the United States, 2003-2007, FRB International Finance
Discussion Paper No. 1014.
Gorton, Gary B. and Andrew Metrick, Securitization, 2013, Handbook of the Economics
of Finance, Volume 2A, George Constantinides, Milton Harris, and Rene Stulz eds., 170, Elsevier. (just read the first three sections)

MGT 890: The Global Financial Crisis

Date

Topics, Readings, and Schedule

The Housing Crisis
Coursera 5
I: Class discussion of modules and readings
II: Guest speaker: Professor Robert Shiller
Suggested Readings:

9/16

Bernanke, Ben S., The Subprime Mortgage Market, Speech at the Federal Reserve Bank
of Chicagos 43rd Annual Conference on Bank Structure and Competition, Chicago,
Illinois, May 17, 2007.
Shiller, Robert J., 2007, Understanding Recent Trends in House Prices and
Homeownership, in Proceedings of the symposium "Housing, Housing Finance, and
Monetary Policy." Kansas City: Federal Reserve Bank of Kansas City, pp.89-123.
Mayer, Christopher, Karen Pence, and Shane M Sherlund, 2009, The rise in mortgage
defaults, The Journal of Economic Perspectives 23, 27-50.
Foote, Christopher L, Kristopher S Gerardi, and Paul S Willen, 2012, Why did so many
people make so many ex post bad decisions? The causes of the foreclosure crisis,
working paper, National Bureau of Economic Research.

MGT 890: The Global Financial Crisis

Date

Topics, Readings, and Schedule

Anxiety: January 2007- September 2008
Coursera 6 and 7
I: Class discussion of modules and readings
II: Case Session (in breakout classrooms): student-led discussions
Lehman E: The Effect on Lehmans U.S. Broker Dealer
Lehman H: The Global Contagion
Suggested Readings:

9/23 Stress Test, Chapter Four

Yom Bernanke, Ben S., 2007, The Recent Financial Turmoil and its Economic and Policy
Kippur Consequences, speech at the Economic Club of New York, New York, New York
October 15.
Part I
of Fitch Ratings, 2001, Asset-backed commercial paper explained, Asset-Backed Criteria
class Report.
will be
taped Shin, Hyun Song, 2009, Reflections on northern rock: The bank run that heralded the
global financial crisis, The Journal of Economic Perspectives 101-120.
Covitz, Daniel, Nellie Liang, and Gustavo A Suarez, 2013, The evolution of a financial
crisis: Collapse of the asset backed commercial paper market, The Journal of Finance
68, 815-848.

MGT 890: The Global Financial Crisis

Date

Topics, Readings, and Schedule

Panic: Lehman and Aftermath
Coursera 8
I: Class discussion of modules and readings
II: Simulation Exercise (in breakout rooms): Lehman weekend
Suggested Readings:

9/30 Stress Test, Chapters Five and Six

Krishnamurthy, A., 2010, How debt markets have malfunctioned in the crisis, Journal of
Economic Perspectives 24, 3-28.
McCabe, P., 2010, The cross section of money market fund risks and financial crises,
working paper.
Gorton, Gary, and Andrew Metrick, 2012, Securitized banking and the run on repo,
Journal of Financial Economics 104, 425-451.

MGT 890: The Global Financial Crisis

Date

Topics, Readings, and Schedule

The Policy Response
Coursera 2 and 9
I: Class discussion of modules and readings (Zhang Auditorium)
II: Lehman Simulation discussion (in breakout classrooms)
Suggested Readings:
Stress Test, Chapters Seven and Eight

10/7

Bernanke: Some Reflections on the Crisis and the Policy Response, At the Russell Sage
Foundation and The Century Foundation Conference on "Rethinking Finance," New
York, New York, April 13, 2012
International Monetary Fund, 2009, Navigating the financial challenges ahead, Global
Financial Stability Report (just read Chapter III)
Reinhart, Vincent. 2011. A Year of Living Dangerously: The Management of the
Financial Crisis in 2008, Journal of Economic Perspectives, 25(1): 71-90.
Geanakoplos, John, 2014, Leverage, Default, and Forgiveness, Journal of
Macroeconomics 39, 313-333.

Europe in the GFC

Coursera 11
7

10/14

I: Class discussion of modules and readings

II: Case Session (in breakout classrooms): student-led discussions
European Banking Union C: Fortis
European Banking Union D: Dexia

10/21

MGT 890: The Global Financial Crisis

NO CLASS: FALL BREAK

Date

Topics, Readings, and Schedule

The (Continuing) Crisis in Europe
Coursera 12
I: Discussion of modules and readings (and crisis update)
II: Case Session (in breakout classrooms): student-led discussions
Ireland and Iceland C
Ireland and Iceland D

Suggested readings
8

10/28

Stress Test, Chapter Eleven

Mario Draghi, 2012, Presidents address at the 14th ECB and its Watchers
Conference, Frankfurt am Main, June 15
Lane, Philip R. 2012, The European Sovereign Debt Crisis, Journal of Economic
Perspectives, 26(3): 49-68.
Shambaugh, Jay C., 2012, The euro's three crises [with comments and discussion by
Ricardo Reis and Helene Rey], Brookings Papers on Economic Activity 157-231.
Bernanke, Ben, and Harold James, 1991, The gold standard, deflation, and financial crisis
in the great depression: An international comparison, in Financial markets and financial
crises (University of Chicago Press).

Eurozone Crisis Panel and Breakout Sessions Participants TBA

9

11/4
No Coursera Lecture

MGT 890: The Global Financial Crisis

10

Date

Topics, Readings, and Schedule

Regulatory Aftermath
No Coursera lecture
I: Lecture on bank capital, Dodd-Frank and regulation
II: Case Session (in breakout classrooms): student-led discussions
Basel III B
Basel III D
Suggested Readings:
Stress Test, Chapters Nine and Ten

10 11/11
Noeth, Bryan, 2011, Financial regulation: A primer on the Dodd-Frank act, Liber8:
Economic Information Newsletter, Federal Reserve Bank of St. Louis.
Acharya, Viral V., Thomas Cooley, Matthew Richardson, Richard Sylla, and Ingo
Walter, 2011, The Dodd-Frank wall street reform and consumer protection act:
Accomplishments and limitations, Journal of Applied Corporate Finance 23, 43-56.
Moodys Analytics, 2011, Basel III regulations: A practical overview.
Draghi, Mario, Financial Integration and Banking Union, speech at the conference for
the 20th anniversary of the establishment of the European Monetary Institute, Brussels,
12 February 2014
Responding to Future Crises
Coursera 10
11 11/18
I: Class discussion of module (Zhang Auditorium)
II: Coursewide Q&A (Zhang Auditorium)
11/25

NO CLASS: THANKSGIVING BREAK

I: Geithner summary lecture (Zhang Auditorium)

12

12/2 II: Geithner Q&A (in breakout rooms)

MGT 890: The Global Financial Crisis

11

Date

Topics, Readings, and Schedule

Summary and Review
Coursera 13

13

12/9

I: Class discussion of module and readings

Suggested Reading:
Stress Test, Epilogue

12/15

MGT 890: The Global Financial Crisis

Final Papers Due by 5:00 p.m.

12