People and Institutions Have to Learn to Live Within Their Means

“I teach corporate finance, investments, real estate finances, and money banking and credit,” says Associate Professor Charlie Stone of the Economics Department. “My specialty is mortgage- and asset-based securities,” he adds, referring to the relatively new crop of financial tools that lowered the cost of capital for institutions and for people – and which have played a major role in the recent nosedive of the international economy.
    While a New York University graduate student majoring in urban studies and economic history, the restless Stone spent a few years traveling, teaching English, and selling real estate before deciding to finish graduate school. He completed his master’s and Ph.D. in economics at the CUNY Graduate Center, where he met his wife, Anne Zissu, a French student with a master’s degree in econometrics from the University of Nanterre. Zissu, who was teaching at Temple University in Philadelphia for the last 20 years, was recently hired as the chairperson of New York City College of Technology’s Department of Business.
    “During our summer and winter breaks, we introduced courses about mortgage- and asset-backed securities at the University of Dauphine, France in the late 1990s,” he says.
    Asked about the recent financial meltdown and its connection to the new financial instruments he’s been teaching about, Stone pulls no punches.
    One of the biggest problems has been that people not only have been using real estate as a credit card, but that financial institutions were willing to loan the money against future value, based on asset growth,” he sighed. “Not a sound way to do business.”
    

    “Now that governments worldwide have poured liquidity into the system,” in the form of rescue packages similar to the one the U.S. government approved recently to help financial institutions, “we will have a problem with the demand of credit. As you enter a recession,” adds Stone, using a word feared by politicians, “financial institutions will have to reevaluate the risk their customers pose.”
    Without going overboard with government regulations, Stone agrees that there should be more oversight of financial institutions and the amount of risk they take relative to their assets, because when they become insolvent it poses a threat to the rest of the market. “We were very close to a collapse of the financial markets.”
    “This crisis will force everybody to reduce their exposure to risk and loans,” says Stone, who is online via Blackboard five days a week, taking questions from students.
     “Now that things are falling apart, students are paying a lot more attention,” he adds matter-of-factly.