Risk Intelligence News Center

In order to stabilise its public debt levels after a bank recapitalisation, Spain would have to generate a swing in its public finances that is not only unrealistic, but also self-defeating. The tax rises and spending cuts required would make the recession deeper and cause the primary balance to deteriorate.

In order to put itself on a path towards external debt sustainability, Spain would need a huge adjustment in its trade balance. In the short run, a fall in domestic demand could quickly improve the trade balance. However, in the medium term, Spain can only service its foreign debt if it finds balanced and sustainable growth, which requires a real-terms depreciation that will not occur unless the value of the euro falls sharply.

The center-right Dutch government collapsed late last month because of its inability to agree on the austerity measures. How do you read that situation and its implications for the eurozone-wide debate over austerity?

If you start losing the support of countries like the Netherlands, then you know you've gone too far already. We are clearly going to see a change in emphasis--from austerity to growth. Also because we have agreed on much of the austerity, in a sense, and now we just need to implement it and pass the laws. There's no question that we are going to see a shift in emphasis. But what are they going to agree on? We are going to have to find policies that are acceptable in all of these countries. Right now, they agree that we need some growth--even Germany--but they are not yet at the point where they agree on the specific measures. So that's going to be the next bargaining.

Consolidation has been a fact of life in the wholesale financial services sector, resulting in fundamental change in the financial architecture and public exposure to systemic risk. The underlying drivers include advances in transactions and information technologies, regulatory changes, geographic shifts in growth opportunities, and the rapid evolution of client requirements, which in combination have obliged financial firms to rethink their roles as intermediaries. Moreover, financial sector reconfiguration has accelerated as a result of the global market turbulence that began in 2007, with governments either forcing or encouraging combinations of stronger and weaker financial firms in an effort to stem the crisis and improve systemic robustness. In the process, financial firms that are "systemic" in nature and had a major role in creating the crisis have come out of it with even larger market shares and greater systemic importance. Given the episodic socialization of risk in the form of widespread use of public guarantees to firms judged too big or too interconnected to be allowed to fail, the role of systemically important financial institutions (SIFIs) is central to the financial architecture and the public interest going forward. This survey paper considers the sources of systemic gains, losses and risks associated with SIFIs in historical context, in the theoretical and empirical literature, and in public policy discussions--i.e., what is gained and what is lost as a result of the available policy options to deal the dominant role of SIFIs in the financial architecture?

The paper, presented last month at the Federal Reserve Board's conference on central banking and the financial crisis, takes aim at overhauling the tri-party repo, or repurchase, market, one of the pillars of the so-called shadow banking system.

The authors propose a "bottom up" stabilization approach that works at the level of what they call systemically important assets and liabilities rather than at the level of the systemically important financial institution that owns them.

"The advantage of the bottom up approach is that it assigns responsibility and a management of an asset class to a clearing house that over time will develop expertise--not just in bad times on how to resolve them--but in good times over how to manage risk of the assets" like repos and derivatives, Viral V. Acharya, an economics professor at New York University's Stern School of Business, said in an interview Friday.

Graduate student Rob Schreur discusses his experience in the Master of Science in Risk Management Program for Executives at NYU Stern School of Business.

Rob is CIO of Philips Pensionfund (PPF) in the Netherlands, with responsibility for asset liability management, strategic allocation, financial risk management, performance measurement, and investment monitoring. Rob heads a team of eight investment professionals. He received his Master in Economics from Tilburg University and his Master in Law from Maastricht University.

NYU Stern Establishes Center for Real Estate Finance Research

May 15 Inaugural Conference Features NYC Commercial Real Estate

 Industry Leaders and New Research

Combining its strength in finance with eminent scholars pursuing the study of real estate from the perspective of financial markets, economics, and commercial real estate development, NYU Stern launches a new Center for Real Estate Finance Research.  The Center will explore key questions on topics in real estate such as residential mortgage finance reform, the role of real estate in the macroeconomy and real estate as a large asset class in portfolio management.  The Center also aims to deepen the School's engagement with business and policy leaders in this important area. Concurrently, with support of the Center, Stern will expand its real estate curriculum to prepare the next generation of business leaders for careers linked to real estate.

"Real estate development drives growth in New York City - influencing the local skyline, the employment outlook and the markets," said Peter Henry, dean, NYU Stern.  "As a hub for exploration, the Center will allow for deeper engagement with industry leaders and policy makers on the future of housing and commercial real estate and its impact on the global economy."

The Center for Real Estate Finance Research will provide a structured environment at Stern for top-quality real estate research, expand the School's real estate education for MBA and undergraduate students, and create new opportunities for partnership with the investment community, and residential and commercial real estate industries.   Additionally, as a cross-disciplinary hub, the Center will foster collaborations for research inquiry across Stern as well as the greater University.

"We learned from the global financial crisis of the systemic importance of real estate finance and continue to see how housing influences the direction and speed of the economic recovery," said NYU Stern Professor of Finance Stijn Van Nieuwerburgh, co-author of Guaranteed to Fail: Fannie Mae, Freddie Mac and the Debacle of Mortgage Finance(Princeton Press, March 2011) and Director of Stern's Center for Real Estate Finance Research. "We're in a research renaissance to uncover answers that will reshape the architecture of mortgage finance. In addition, the importance of the commercial real estate market in terms of its employment, investment and growth opportunities provides exciting research opportunities going forward."

May 15, 2012 Real Estate Finance Conference

The Center for Real Estate Finance Research will host its inaugural conference on May 15 at The St. Regis in New York, featuring NYU Stern alumni industry leaders and faculty, including:

Welcome remarks from Jerry L. Cohen (BS '53, MBA '59), Tishman Speyer Properties

A panel of alumni addressing the near-term prospects of commercial real estate: 
William Mack (BS '62), AREA Property Partners
Philip Milstein (MBA '74), Ogden CAP Properties, LLC
Larry Silverstein (NYU Arts '52), Silverstein Properties

Research presentations from NYU and NYU Stern thought leaders in real estate finance:
Viral Acharya, C.V. Starr Professor of Economics, NYU Stern

Andrew Caplin, Silver Professor and Professor of Economics, NYU

Harry Chernoff, Clinical Professor of Operations Management, NYU Stern

Xavier Gabaix, Martin J. Gruber Professor of Finance, NYU Stern

Matthew Richardson, Charles E. Simon Professor of Applied Economics, Sidney Homer Director of the Salomon Center for the Study of Financial Institutions, NYU Stern

Stijn Van Nieuwerburgh, Professor of Finance and the Yamaichi Faculty Fellow, Director of the Center for Real Estate Finance Research, NYU Stern

Center Members 
Philip L. Milstein (MBA '74), Ogden CAP Properties, LLC, provided primary support for the NYU Stern Center for Real Estate Finance Research.  Additional members to date include Jerry L. Cohen (BS '53, MBA '59), Tishman Speyer Properties; Michael B. Nash (MBA '89), The Blackstone Group; Morgan Stanley Real Estate; and Isaac Zion (MBA '96), SL Green Realty Corp.

About NYU Stern School of Business

New York University Stern School of Business, located in the heart of Greenwich Village, is one of the nation's premier management education schools and research centers. NYU Stern offers a broad portfolio of academic programs at the graduate and undergraduate levels, all of them informed and enriched by the dynamism, energy and deep resources of the world's business capital. Additional information about NYU Stern School of Business is available at www.stern.nyu.edu.