On October 15th, 2008 at 19:00 there was a panel discussion in the NAB Auditorium on the topic of The Economic Downturn in US. The special guest was Grigoriy Ananiev who is the present Head of Citibank and an ex- AUBGer. Five AUBG professors joined him in the discussion on the financial crisis. Dean Sullivan explained how it all began with the mortgage crisis, then Mr. Ananiev showed the audience the problem from the banks’ perspective, professor Erdinc compared the current situation to the Great Depression, professor McGoldrick explained how we should have seen it coming, professor Cutler presented data showing the possible real effects of the crisis, and professor Nilsen concluded with some predictions about the future. As a result of this extremely useful, helpful, enlightening...discussion now at least 10% of AUBGers know why is the financial crisis happening and what will be the consequences of it.

In the beginning nothing seemed strange or at least in any way a little odd to the bankers, the investors, or even to the borrowers. Banks parted from their usual practice of lending money to sound borrowers and began to suffer some unexpected losses due to write offs of some part of their loans. As a result the asset side of the banks’ balance sheet deteriorated and they did not have the needed funds when needed. This is a consequence of the difference in the maturity of the banks’ debt and receivables. Since the period of maturity of the banks’ debt was shorter than the period of maturity of the banks receivables, the time to pay liabilities came faster than money with which they were supposed to pay the liabilities. The result of this was either banks go bankrupt or they are saved from the Fed. This situation is very similar to the situation US had some 80 years ago, but there is one very crucial difference – now the Fed is cutting the interest rates and is pouring money into the banking sector and during the Depression the Fed was doing quite the opposite. So our hopes are that the result of the Fed’s actions will be the opposite to the result of their actions 80 years ago. The data that professor Cutler presented showed that until 2010 the economic downturn will persist and then some time during 2010 – 2011 we are expecting the return of the economic growth.