First-year retrospective

I sprinted across a grassy field on a swelteringly hot day, perhaps feeling lighter that a load has been lifted off my shoulders. My legs started to buckle and as I dove down to take a spill, curiously the feeling was that of elation, not a dread of getting injured. The moment I hit the ground, the football clutched in my arms begins to roll away and dark figures who had been chasing me eagerly lunge forward to retrieve it. As I recovered my balance, I heard a scuffle and trash talking about the exact location of the line of scrimmage. My teammate dropped the ball and a player from the opponent kicked it back towards us, farther away from our goal. In retaliation, my teammate kicked it closer to the goal claiming the other team was cheating.

There was a reason why grown-ups were squabbling like kids…and having so much fun! We had just taken the final exam in Macroeconomics at the end of a grueling first year of EWMBA program at UC Berkeley’s Haas school of Business. How time flies! It feels just like yesterday that arrived at Downtown Berkeley’s BART station for the orientation event in the middle of August 2008. It was a nice and sunny day, yet I was shivering in the cold breeze as I waited for the shuttle from Doubletree Berkeley Marina to pick me up. Today is already Saturday, May 16, 2009.

Preparations for this momentous game started three weeks ago with the forming of MFL (multi-cultural football league). The “helping hands of Haas” took tips from Prof.Wilton’s Marketing class and in a customer-focused, entrepreneurial fashion, organized a clinic for newbies to football meant to cover basic rules and familiarity with the game as well as throwing and catching practice. There was a strong turnout today despite the weather and we had enough players to form 4 teams. After 90 minutes on the field and then bidding goodbyes to everybody, as I drove back home, I reflected on indelible memories of the past year.

I had previously written about my experiences at the orientation last year and how I was the first person to be cold called by in class by Prof. Nondorf. (Un)Fortunately, cold calling wasn’t a regular affair, except for Prof. Schultz’s Organization Behavior and Leadership classes and Prof. Spiller’s Ethics class. Prof. Weil’s Accounting class was a one-of-a-kind experience, with his use of comedy, protagonists and personification of accounting concepts. There was some cold calling but he did that in a methodical fashion so you could see it coming.

Prof. Su very effectively ran supply-chain simulations in his class on Operations. Prof. Spiller and Prof. Schultz conducted in-class exercises to illustrate concepts. Prof. Wood and Prof. Wilton chose long-running capstone projects in Macroeconomics and Marketing to apply all the concepts learned in class. Prof. Livdan held a quiz every class in Finance and Prof. Gonzalez handed out homework every week in Microeconomics. Mr. Rittenberg effectively brought his acting skills to the Leadership Communications class.

Prof. Gonzalez chose to save the best for last – spending the last two hours of class after the finals to discuss the current economic situation and delving into MBS, CDOs and CDS. Prof. Wood very effectively used contemporary news articles to supplement class discussion topics on Macroeconomics. We learned a lot about Ritz-Carlton from Prof. Wilton, about buying a home in a recession from Prof. Livdan and about the Chicago White Sox from Prof. Weil.

The amount of reading material was significantly more than I had anticipated. Prof. Spiller’s were the most dense, with topics culled from erstwhile and contemporary philosophers. Prof. Schultz also handed out quite a bit of reading material but he made it a point to discuss each paper in class.

Over the next two years, we’ll choose from a pool of electives from both the weekday and weekend offerings. My cohort will graduate together but we will no longer all sit in the same classes. So, the memories from this past year are all more cherishable.

Bloated credit ratings

A number of inter-related factors led to the current economic situation.

Some say it started with Alan Greenspan's wholesale de-regulation of the financial system starting in the early '90s and continuing well into this this decade. Steven Perlstein wrote in The Washington Post in an early 2006 article that Greenspan's policies at the Fed has left the financial system "more prone to assets bubbles, corporate scandal and financial crises".

Fed also significantly lowered interest rates earlier this decade to pull the country out of the mild recession in 2000-2001. One one hand, it encouraged home ownership and simultaneously fueled innovation in financial instruments (so lenders can offer higher returns). There was little transparency in the composition and characteristics of the loans held in the pools sold as complicated securities and the power bestowed to credit rating agencies increased. The agencies (Moody's included) are alleged to have gone from being watchdogs for investors to being lapdogs for debt issuers. At the heart of the issue is the question of whether credit risks were undetectable or whether they were ignored. Did the three top credit-rating agencies go easy on their ratings of risky securities to rake in huge profits, eventually leading to huge losses for investors?