November 10, 2008 Symposium on the Economic Crisis, presented by the Council for Ethical Leadership at Capital University
Monday evening the Council for Ethical Leadership at Capital University celebrated its 25th anniversary and move to Capital University. The Council originated as the Council for Ethics in Economics in the 1970s to advance ethical business practices. The Council began through a dialogue regarding the marketing of infant formula to third world countries and expanded to discussions of applied ethics on many topics over the succeeding decades, including the Monday evening panel discussion of the causes and effects of the current economic crisis.
A five member panel moderated by Erick Zanner, of the School of Management and Leadership at Capital, discussed the scope of the crisis and their assessments of the impact and future.
James W. Coons, principal of J. W. Coons Advisors and chair of Governor Strickland’s Council of Economic Advisors, defined the subprime mortgage situation. He discussed the mortgage loan debacle and its history. He stated that greed and fraud were aspects that led to the crisis by institutions loaning funds when they were not warranted.
Mark E. Schweitzer, a senior vice president and director of research of the Federal Reserve Bank of Cleveland, discussed the need for liquidity of banks and the Federal Reserve’s role helping to ensure liquidity through appropriate policy and interest rate adjustments at the Treasury level. He stated in response to a question that the challenge for the Federal government has been deciding what financial institutions can be saved through federal intervention. He noted that the federal focus has been on how funding will be used to restore confidence in the institution, and that some institutions, such as National City Bank could not be saved in that manner.
Peter E. Klingelhofer, a consulting analyst with the State Teachers Retirement System of Ohio, noted the depository difference between the financial institutions that have survived and those that have not. He observed that Bear Stearns and Lehman did not have the ability to maintain their financial stability through deposits, while those institutions that have survived have that continuing ability.
Michael Distelhorst, professor of law at Capital where he teaches commercial lending law and previously taught legal ethics and served as president of the Council for Ethics in Economics, observed that all parties to the economic crisis shared a role in abandoning values resulting in ethical issues related to character and accountability. He noted that borrowers knew they could not afford the mortgages they were offered, while others involved in the transaction aggressively marketed them for their own gain.
Nancy H. Rogers, who served as interim Ohio attorney general and who will return to The Ohio State University Moritz College of Law following the recent election, discussed the human factor and the economic crisis complaints the attorney general’s office has received. She described the economic devastation areas such as Cleveland have experienced, noting that often the other victims of subprime mortgage loans have been the neighbors who have not participated in them, but have been left in the homes in otherwise abandoned and boarded up neighborhoods. She challenged students in the audience to solve problems going forward related to the many abandoned houses in areas where housing demand has declined. She also noted that increased regulation of financial institutions may be the result.
As to the future the panelists observed that ironically the United States may have benefited economically due to the subprime mortgage bubble, however, the resulting decline may be felt for several years. Foreign investment will decline and it may take five or more years to rebuild the trust and confidence necessary to engage future purchases in the US bond market. Meanwhile the impact is being felt because many US banks do not trust each other in loan funding decisions.
The panel session was well attended by both students and the community in a standing room only presentation at the Huntington Recital Hall at Capital University.
This report was prepared for Bexley Public Radio by by Glenn Soden. Glenn is a former board member and chair of the Council for Ethics in Economics and a current member of the advisory board of the Council for Ethical Leadership.
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Design is copyright 2008. All rights reserved. Bexley Public Radio Foundation. Text is copyright 2008. All rights reserved. Glenn Soden.