Recovering the national economy may be as simple as ensuring bipartisan collaboration.
Timothy Massad, assistant secretary for financial stability for the U.S. Department of the Treasury, spoke on Monday to an audience of 200 in the Geneen Auditorium at the Fuqua School of Business about the importance of political parties coming together to reach viable solutions to economic problems. In a speech entitled “Lessons Learned: A Retrospective of the 2008 Financial Crisis,” Massad discussed lessons from the 2008 crisis that can help the U.S. recover from its current financial situation.
“It is important to remember that we can come together, we have come together before and we need to do it again to address extraordinary challenges,” he said.
Understanding that it must be difficult for younger generations to fully comprehend the severity of the financial situation during former President George W. Bush’s time in office, Massad explained to the audience the country’s past economic situation.
“It’s hard to imagine a financial system as something that could collapse but think of it as a power cord,” he explained. “There are lines connecting cities and states much like our transmission lines. [In the economy] credit and financial services flow through those lines and that’s where the power comes from. When the system becomes overburdened in one place it will crash leading to failure in other parts and that’s what the fall of 2008 was.”
In 2008, the financial system was on the brink of collapse due to underlying forces that built up over many year and the government placing Fannie Mae and Freddie Mac into conservatorship, Massad said. Then the collapse of Lehman Brothers caused the stock market to plummet and additional pressure to be put on money market bonds.
Massad stressed that without strong government intervention, the country would have experienced its second Great Depression.
“If the government had not acted in the fall of 2008, the nation would have plunged into a depression with 16 percent unemployment,” he said.
Massad is also the leader of the Troubled Asset Relief Program, a program implemented by the Bush administration to strengthen the financial sector. Recognizing the third anniversary of the TARP program, Massad credited TARP’s actions to avoiding a complete collapse of the financial system.
“The government demonstrated unequivocal and clear commitment, through TARP we did that,” he said. “The financial system today is much stronger as a result, and the weakest part of the financial system no longer exist. Capital is higher, leverage lower, more credit is available.”
Despite the public losing confidence in the government during the downturn in 2008, Massad said he was optimistic about the future of the economy noting that reopened markets as well as lower borrowing costs are signs of the government moving in the right direction towards economic growth. Although today’s political atmosphere is very tense, Massad added that for the most part, both parties are under the agreement that compromises must be made for the greater good of the country.
Jonathan Nester, a bank analyst working in Durham, said he enjoyed Massad’s insider’s perspective into the government’s response to the crisis in 2008.
“It was nice to hear someone who is qualified to speak on the topic and who has been involved and has in depth experience,” Nester said.
Senior Will Eastman said that Massad provided a good reminder to the Duke student body that it wasn’t just the Obama Administration and the Democratic party that helped pull the country out of the brink of collapse.
“I think people often forget the facts,” Eastman said. “They often attribute TARP to the Obama Administration, but Massad was good at explaining that it was in fact started by the Bush Administration and was a bipartisan effort.”
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