COURSE NUMBER: MBA 232.1
COURSE TITLE: Financial Institutions and
Markets
UNITS OF CREDIT: 3
INSTRUCTOR: Jim Wilcox
E-MAIL ADDRESS: jwilcox@haas.berkeley.edu
CLASS WEB PAGE:
MEETING
DAY(S)/TIME: Tuesdays and Thursdays, 9:30-11:00 AM.
PREREQUISITE(S): Core
CLASS
FORMAT: Lectures
and in-class discussion
REQUIRED READINGS: Customized textbook and professional and
popular articles
(The customized textbook
and readings will consist of about 60% of “The Economics of Money, Banking, and
Financial Markets (Business School Edition), 3rd edition, 2013, by (former Fed
Governor) Frederick S. Mishkin and also material and
articles from the professional and popular press, some recent and some not yet
written.)
BASIS FOR FINAL
GRADE: Homework 30%, Midterm Exam 30%,
Final Exam 40%.
ABSTRACT OF
COURSE'S CONTENT AND OBJECTIVES:
Financial
institutions aren’t what they used to be. The sizes, shapes, activities,
location, regulation, and risk management of banks (both commercial and
investment), insurance companies, credit unions, finance companies, and other
industries in the financial sector have changed greatly. Because each financial
industry now tends to offer many more financial products and services and tends
to be regulated and managed more like the others, the distinctions between the
financial industries have diminished.
Both for those who work in the
financial sector and for everyone else—because we all use financial services
and products—these large and rapid changes make learning about the financial
services sector interesting and valuable. In this course we will analyze and
discuss how de-regulation then and re-regulation now, technology and financial
innovation always, and economic conditions intermittently have contributed to
these changes in financial institutions.
The
financial crisis gave us some painful answers and left us with some important,
new questions. For the foreseeable future, the recent crisis changed important
institutions and regulations. And, it also changed how, and how much, owners
and managers of financial institutions pay attention to the measurement and
management of risks. We will also see how and why the crisis changed Federal
Reserve policies, both during and since the crisis.
A
principal focus of the course is the how, and why, we measure and manage
financial, and even non-financial, risks. In addition to financial practices,
we will see how compensation policies affect risk-taking. We will see that
often the main risks, their measurement, and the markets and business practices
through which they are managed are often quite similar for different financial
industries.
We
will address how much, and why, interest rates differ across the
almost-innumerable financial instruments. That discussion will help us better
understand some of the risk-return trade-offs that financial institutions face.
We then learn how (and how well) financial institutions measure interest rate,
market, credit, liquidity, and other risks. With that in hand, we will examine
how firms can and do deliberately lower (or raise!) risks with all sorts of
easy-to-grasp methods.
BIOGRAPHICAL
SKETCH:
Jim
Wilcox teaches courses on macroeconomics, on financial markets and
institutions, and on risk management in financial institutions.
He has written widely on bank
lending, Federal Reserve policies, credit markets, real estate markets, credit
unions, and macroeconomics. Among other
topics, his research has addressed reform of the FDIC, the effects on bank
executives of mergers, the ability of banks to reduce costs following mergers,
differences in bank supervision and regulation around the world, the effects of
bank loan losses and capital pressures on lending and small businesses, the
effects of the baby boom on house prices, how bank mergers affect small
business lending differently than acquisitions do, economies of scale in credit
unions, and why so many households do not have bank accounts.
From 1999-2001, Jim was
the Chief Economist at the Office of the Comptroller of the Currency, the
leading U.S. banking regulator. He has also served as the senior
economist for monetary policy and macroeconomics for the President’s Council of
Economic Advisers during 1990-91, and as an economist for the Board of Governors
of the Federal Reserve System. Thus, his working in Washington, DC included
service to one President Clinton that was sandwiched between his service to two Presidents Bush!