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MIDE Programme

2008-12-06T08:05:00.000Z

I have been wandering for sometime on what to with my life quiet recently. I was thrash between choosing to go back to school or to continue working. I made a bold decision during the middle of September 2009 to go back to school. The decision, however flimsy, was echoed by the global financial meltdown. The next question was on what to read? I spent some considerable number of weeks on it but I decided to go for the Masters in International and Development Economics (MIDE) in University of Applied Sciences, Berlin. The decision was a very intelligent one since, global financial miracles are happening in developing countries and the opportunity to understand the economics of these countries is a big plus in not only working there but also providing a special interest in the economic challenges facing “Third World”-countries. It will also prepare me to work in areas related to global economic affairs and development.

As the months pass by, I hope to provide information about my life in Germany, work, study and all important information that I will come in contact with during my studies in Germany and the MIDE programme.

The programme

The Master’s in International and Development Economics has been established for students who have a first degree in economics / business administration or in other social sciences with a focus on economics. It is designed to enhance understanding of development economics, the international economic context in which socio-economic development takes place, and of key sectors and policy areas that are relevant for developing countries, with a particular focus on agriculture, financial institutions and public enterprises. In order to understand the challenges of formulating current development policies, the programme covers both the principal theoretical debates as well as specific contemporary examples of strategies, policies and projects.

MIDE was accredited by the Foundation for International Business Administration Accreditation (FIBAA).

Promoting sustainable development in an unequal world

What does ‘globalisation’ really amount to? Does it benefit developing countries, or lead to widening differences between rich and poor?

Should developing countries completely open up their economies to international trade and capital flows?

What are the lessons for developing countries of the ‘Asian Miracle’? … the transition debacle in Russia? … or Argentina’s financial crisis?

What specific policies are required to promote key sectors, such as agriculture, finance and public administration?

Do poverty reduction strategies, as advocated by the World Bank, help the poor or contribute to their problems, as some critics allege?

These are some of the issues that will be covered in this Master’s programme, which will provide students with a comprehensive understanding of the current debates in international and development economics.

Degree accreditation

2008-12-05T06:43:00.002Z

Degree accreditation

Successful completion of MIDE leads to a Master of Arts degree. The degree is officially accredited by the Foundation for International Business Administration Accreditation (FIBAA) for the period from 20 February 2006 to the end of the winter semester 2010/2011. The accreditation qualifies MIDE graduates for entry to the higher branch (‘Höherer Dienst’) of the German Civil Service

Accreditation Certificate (German, PDF 257 KB)

Accreditation Report FIBAA (German, PDF 55 KB)

Scholarships

2008-12-05T06:43:00.001Z

Scholarships

The German Academic Exchange Service (DAAD Homepage) grants a limited number of scholarships covering living expenses (the service fee will be waived). To be eligible to apply for the DAAD scholarship, applicants must be

from a developing or transition country and
have two or more years of professional experience.

To apply for the scholarship, please download the DAAD application form (Download Application for Research Grants and Study Scholarships, PDF 252 KB). Further information about the scholarship and the necessary prerequisites are available here (PDF 21 KB).
If you wish to apply for a scholarship, please indicate this in your application form for the MIDE programme.
The MIDE application form, the supporting documents as well as the DAAD application form should be sent to

FHTW Berlin
MIDE Admissions
10313 Berlin
Germany

The MIDE office will process the DAAD application for you. The deadline for scholarship applications is 30 September in the year before the MIDE programme starts.

You may also send your scholarship application together with your application for the MIDE programme via the German Embassy in your home country to the DAAD. The DAAD will then forward your application to the MIDE office. Please note that the deadline for applications via the German Embassy is 31 August in the year before the programme starts.

To facilitate processing, we encourage applicants to send their application directly to FHTW Berlin.

Applicants for a scholarship will be selected by the DAAD in co-operation with the FHTW Berlin.

We encourage all applicants who cannot study without a scholarship to explore alternatives to the DAAD scholarship. The MIDE programme normally receives more than 150 scholarship applications for only 5 to 7 available grants. If you want to apply for a scholarship from another organisation, please do so as early as possible (usually at least one year before the MIDE programme starts). The FHTW Berlin does not offer assistance if you wish to apply for a scholarship other than DAAD.

Costs

2008-12-05T06:42:00.001Z

Service fee

The service fee for the 18-month programme is 2,000 €, payable in two instalments. The first instalment of 1,000 € must be paid by 31 November of the year prior to the start of the programme. The second instalment of 1,000 € is due by 31 August in the year you start the programme.

Semester Fee

In addition to the service fee there is a semester fee of currently 244,00 € (subject to change). The semester fee must be paid before the start of each of the three semesters of the programme. The semester fee for the first semester is due together with the first instalment. This semester fee covers a ticket for all public transport in Berlin, as well as an administrative fee, and contributions to both the Studentenwerk (the organisation which runs student cafeterias and halls of residence throughout Berlin) and ASTA (the student union). Please see the university's webpage for further information regarding this fee.

Living expenses

In addition to the service fee, approximately 650-850 € per month will be necessary to cover your living expenses.

Accommodation 180,00 € -280,00 €
Books 100,00 €
Food 200,00 € - 300,00 €
Health Insurance 55,00 €
Cultural Events 100,00 €
Public Transport Included in Semester Fee

How to apply

2008-12-05T06:40:00.002Z

How to apply

Applications are due by 30 September for the programme starting in April of the following year.

To apply, applicants must submit the following documents (please do not staple them):

a completed MIDE Application form (.doc, 130 KB)
a letter of motivation (not less than 1 page in length)
officially certified copies of your university degree(s) and grade transcripts (Please note: It is very important that these copies have their authenticity officially certified by an appropriate person or institution; official translations into English or German should be provided where necessary)
an explanation of the grading system at your previous university
two letters of academic recommendation
your curriculum vitae (résumé)
a copy of your birth certificate or passport or ID card
proof of your English language ability
two passport photos
a two page summary of your undergraduate/postgraduate thesis (If you were not required to write a thesis during your undergraduate degree, please tick the appropriate box on the MIDE application form. No further documents will be required in this case.)
a proof of at least one year of professional employment since graduation if the first degree is equivalent to a 3 year German Bachelors degree or 180 ECTS
a proof of at least two years of professional employment since graduation if you wish to apply for the DAAD scholarship

If you have not been required to write a thesis during your undergraduate degree programme, please indicate this on the MIDE application form in the section "Thesis" on page 2. In this case you will not be required to hand in a thesis summary or substitute paper.

Please note that, in accordance with university regulations, we are only able to consider applications that are fully completed, and which are accompanied by all the necessary supporting documentation. Please do not send secondary school certificates, training certificates etc.

Applications sent by fax or email will not be considered.

Please send your application to:

FHTW Berlin
MIDE Admissions
10313 Berlin
Germany

For further information please use our e-mail form to contact us or call
Cindy Gottstein (Course Administrator) phone: +49/30 5019-2867.

Admission requirements

2008-12-05T06:40:00.001Z

Admission requirements

Download a brochure with all relevant information about the programme (admission requirements, deadlines, costs, scholarships, job prospects, etc.) here (PDF, 59 KB).

First degree

Bachelor’s degree or German “Diplom”

Applicants with a degree from Europe: at least 60 ECTS in Economics and Business Administration, thereof at least 15 ECTS in Economics;

International Applicants: at least 12 Economics and Business Administration classes, thereof at least 3 classes in Economics (these must be equivalent to the above mentioned ECTS; the admission committee will decide on the equivalence)
Applicants with a degree from Europe: A total of 210 ECTS credit points or equivalent will be required. Applicants with only 180 ECTS credit points or equivalent will be eligible if they have completed at least one year’s professional employment or training since graduating.
Applicants with a degree from other foreign countries: The degree must be equivalent to at least a 3 year German Bachelors degree (Bachelor degrees from India, Pakistan, the Philippines, Nepal and Bhutan are not considered equivalent.) To find out whether your degree is equivalent, please contact mide@fhtw-berlin.de. Applicants must then have completed at least one year's professional employment or training since graduating. In this case, proof of professional employment must be submitted.
If the degree is equivalent to a 4 year German degree, professional employment or training is not an admission requirement.

Proof of English language ability

TOEFL
paper-based 580 points
computer-based 237 points
internet-based 96 points
IELTS grade 6.0
CET band 6 (for applicants from the People's Republic of China).
Native speakers of English are not required to supply proof of their English language ability.
If English was the official language of instruction for your first degree, please supply official proof.

Admission Criteria

Admission to the programme is based on the following criteria:

Average grade (35%)
Number of Economics subjects taken (25%)
Letter of motivation (30%)
Letters of Reference (10%)

Applicants from the PR of China

You should submit a certificate from the Akademische Prüfstelle der Deutschen Botschaft (APS), Chaoyang District, Dongsanhuan Beilu 8, Landmark Tower 2, Office 0311, 100004 Beijing, phone: + 10 65 90 71 38 fax: + 10 65 90 71 40 email: kuaps@163bj.com. You are advised to set about obtaining this certificate as early as possible as the process can take some time.

Applicants from Vietnam

You must submit a certificate from the Akademische Prüfstelle der Deutschen Botschaft (APS). Address: Deutsche Botschaft in Hanoi, APS, 29 Tran Phu, Q. Ba Dinh, Hanoi, phone: 04-845 38 36/7; 04-843 02 45/6 fax: 04- 843 99 69; email: ku-101@hano.auswaertiges-amt.de.
Please note: Interviews will be held twice a year in November and May. Deadline for submission of the APS application is 15.09./31.03.

Applicants from Mongolia

You must submit a certificate from the Akademische Prüfstelle der Deutschen Botschaft (APS). Address: Deutsche Botschaft in Ulan Bator, APS, Straße der Vereinten Nationen, PF 708, phone: +976-99225839; email: aps.ulanbator@gmail.com.

The Course Programme

2008-12-05T06:39:00.001Z

The Course Programme

The programme comprises three semesters consisting of 19 course modules, including a Project and Dissertation Period of 6 months. Six courses are compulsory (marked with *), eight out of 13 offered optional courses must be taken (one of these either Quantitative Methods of Economics or Project Planning & Evaluation).

First Semester

Second Semester

M19 Thesis

The aim of the Thesis Seminar (U1) is to develop the capacity of students, working in groups, to formulate clear and specific research objectives, and to comment and advise each other as they proceed with work on their own theses... more

What is a "Fachhochschule"?

2008-12-05T06:37:00.000Z

A "Fachhochschule" (FH) or a university of applied sciences is a German speciality, with only a short tradition to look back on. Its establishment in 1976 was the result of educational policy debates held in the 1960s, when the German industry complained about education being too theoretical at traditional universities.

"Fachhochschulen" are well known for their practical, hands-on approach and close cooperation with commercial enterprises. Not only do these institutions of higher education provide up-to-date know-how, but they are also able to swiftly respond to a rapidly changing work environment. In recent years, universities of applied sciences have been regarded as the most successful type of higher education in Germany. This is evident in both their low dropout rate and their significant number of successful graduates. What primarily attracts students to a "Fachhochschule" is its clear structure and organisation of degree courses, the small class sizes (up to 40 students) and the evaluation of each student's progress throughout the term.

At a "Fachhochschule", students can pursue either Bachelor's or Master's degree study programmes. Degrees earned at a "Fachhochschule" do not differ from those of other traditional universities. At the Bachelor's level, programmes run for either six or eight terms, whereas Master's programmes run for either two or four terms. Some programmes still award the traditional German "Diplom" degree and have not yet been adapted to the new internationalised structure of Bachelor's and Master's degree study programmes. These traditional degrees are supplemented with the acronym "FH", which stands for "Fachhochschule", e.g. "Diplom-Ingenieur (FH)". German "Diplom" programmes usually consist of eight terms with an internship (one term) and a colloquium for the student’s final thesis, an extensive, independent and practice-oriented undertaking.

Still More Consequences of Accessing Grace through Faith with hoekstra

2008-11-13T06:17:00.001Z

Who through faith . . . escaped the edge of the sword, out of weakness were made strong, became valiant in battle. (Heb_11:34)

We have seen that by trusting in the Lord, His people "subdued kingdoms, worked righteousness, obtained promises, stopped the mouths of lions, quenched the violence of fire" (Heb_11:33-34). Other testimonies indicate that there are still more consequences of accessing grace through faith.

By faith, some of God's servants "escaped the edge of the sword." The prophet Elisha

experienced this. The king of Syria sent his army to encompass the city. "There was an army, surrounding the city with horses and chariots. And his servant said to him, 'Alas, my master! What shall we do?' " (2Ki_6:15). Elisha saw the true situation by the eye of faith, so he prayed. " 'LORD, I pray, open his eyes that he may see.' Then the LORD opened the eyes of the young man, and he saw. And behold, the mountain was full of horses and chariots of fire all around Elisha" (2Ki_6:17). Then, the Lord struck the enemy forces with blindness and delivered His people.

Others of God's people "out of weakness were made strong." King Jehoshaphat showed what this meant. "The people of Moab with the people of Ammon, and others . . . came to battle against Jehoshaphat" (2Ch_20:1). In weakness, the king cried out to the Lord. "We have no power against this great multitude that is coming against us . . . but our eyes are upon You" (2Ch_20:12). The Lord assured them of His victory. "The battle is not yours, but God's . . . You will not need to fight in this battle . . . stand still and see the salvation of the LORD, who is with you" (2Ch_20:15, 2Ch_20:17). Strengthened by faith and filled with expectation, they marched out to watch the enemy armies destroy one another.

Others "became valiant in battle." Samson exemplified this. "The Philistines came shouting against him. Then the Spirit of the LORD came mightily upon him . . . and his bonds broke loose from his hands. He found a fresh jawbone of a donkey . . . and killed a thousand men with it" (Jdg_15:14-15).

We may face many imminent threats, but we can trust the Lord to provide His escape. "The Lord will deliver me from every evil work" (2Ti_4:18). The Lord can also provide His strength, even when we are weak. "For My strength is made perfect in weakness" (2Co_12:9). Our God can also make us valiant in battle. "Take up the whole armor of God, that you may be able to withstand in the evil day" (Eph_6:13).

O Lord, You are my deliverer, my strength, and my source of courage. Teach me to look to You when I am in danger, when I am weak, and when the battles rage. I long to walk by faith in the blessed consequences of Your abounding grace, Amen.

Moses Keeping the Passover, by Faith with Hoekstra

2008-11-04T06:02:00.000Z

By faith he kept the Passover and the sprinkling of blood, lest he who destroyed the firstborn should touch them. (Heb_11:28)
When Moses boldly led Israel out of Egypt, his fearlessness was based upon his faith in the true and living God. "By faith he forsook Egypt, not fearing the wrath of the king; for he endured as seeing Him who is invisible" (Heb_11:28). His confidence in the invisible Lord God had been confirmed by what he saw regarding the Lord's faithfulness when he kept the Passover, by faith.
The crushing blow of God's judgment upon Egypt was the death of the firstborn in every household. "The LORD struck all the firstborn in the land of Egypt . . . So Pharaoh rose in the night . . . Then he called for Moses and Aaron by night, and said, 'Go, serve the LORD as you have said' " (Exo_12:29-31). Israel was delivered from this judgment by trusting in the Lord's protection, which was provided through the shed blood of the Passover lamb. "Now the LORD spoke to Moses . . . every man shall take for himself a lamb . . . a lamb for a household . . . Then the whole assembly of the congregation of Israel shall kill it at twilight. And they shall take some of the blood and put it on the two doorposts and on the lintel of the houses where they eat it . . . For I will pass through the land of Egypt on that night, and will strike all the firstborn in the land of Egypt . . . I am the LORD. Now the blood shall be a sign for you on the houses where you are. And when I see the blood, I will pass over you; and the plague shall not be on you to destroy you when I strike the land of Egypt" (Exo_12:1, Exo_12:3, Exo_12:6-7, Exo_12:12-13). Responding in faith, Moses and the Israelites were delivered. "By faith he kept the Passover and the sprinkling of blood, lest he who destroyed the firstborn should touch them."

We, too, are delivered from judgment by faith in the blood of the ultimate Passover lamb. "Christ, our Passover, was sacrificed for us" (1Co_5:7). We who trust in the shed blood of Christ are forgiven, delivered from the eternal wages of sin by God's abounding grace. "In Him we have redemption through His blood, the forgiveness of sins, according to the riches of His grace . . . For the wages of sin is death, but the gift of God is eternal life in Christ Jesus our Lord" (Eph_1:7 and Rom_6:23). This eternal life (of endless duration and abundant dimensions) is ours through the New Covenant of grace. "This cup is the new covenant in My blood, which is shed for you" (Luk_22:20).

Lord Jesus, my Passover Lamb, I thank You for Your shed blood that rescued me from the eternal judgment that I deserved. I praise You for the abundance of life that Your New Covenant of grace brings to me, by faith!

Moses Leading Israel Out of Egypt, by Faith with Hoekstra

2008-11-03T06:43:00.000Z

By faith he forsook Egypt, not fearing the wrath of the king; for he endured as seeing Him who is invisible. (Heb_11:28)

Moses left Egypt on two occasions, involving two distinctly different sets of circumstances. On the first occasion, he left Israel behind in Egypt, going out in fear. On the second occasion, he is seen leading Israel out of Egypt, by faith.

Moses' first departure saw him fleeing for his life, fearing what the Pharoah might do to him. Moses' heart had been drawn to the people of God. He went out to consider their situation. "When Moses was grown . . . he went out to his brethren and looked at their burdens. And he saw an Egyptian beating a Hebrew, one of his brethren" (Exo_2:11). Moses killed the Egyptian and buried him in the sand. When his brethren became aware of this reckless deed, Moses was frightened. "So Moses feared and said, 'Surely this thing is known!' When Pharaoh heard of this matter, he sought to kill Moses. But Moses fled from the face of Pharaoh and dwelt in the land of Midian" (Exo_2:14-15). So, Israel was left in Egypt in bondage, and Moses' desire to see God's people delivered was thwarted.

Moses' second departure found him leaving courageously, with no fear of what Pharoah might do. "By faith he forsook Egypt, not fearing the wrath of the king." Much had transpired between these two departures. For forty years, Moses had humbly tended sheep on the back side of the desert. "Now Moses kept the flock of Jethro his father-in-law, the priest of Midian. And he led the flock to the back of the desert, and came to Horeb, the mountain of God" (Exo_3:1). There, the Lord revealed Himself to Moses in a burning bush, sending him back into Egypt to demand the release of God's people. "I am the God of your father — the God of Abraham, the God of Isaac, and the God of Jacob . . . Come now, therefore, and I will send you to Pharaoh that you may bring My people, the children of Israel, out of Egypt" (Exo_3:6, Exo_3:10). So, Moses boldly confronted one of the most powerful leaders in the world. "Thus says the LORD God of Israel: 'Let My people go' " (Exo_5:1). Then, the Lord performed awesome wonders until He caused the will of mighty Pharoah to be broken. "The LORD struck all the firstborn in the land of Egypt . . . So Pharaoh rose in the night . . . Then he called for Moses and Aaron by night, and said, 'Go, serve the LORD as you have said' " (Exo_12:29-31). The ultimate difference in this second departure was that Moses had seen the Lord and had learned to trust in Him. "For he endured as seeing Him who is invisible."

Lets Pray:

O Lord God, awesome deliverer, I know what it is to run away from situations in fear. I also know what it is to lead out in faith. The difference, Lord, is seeing who You are and what You alone can do. Please reveal Yourself to me that my faith might grow!

More on Abraham's Patient, Heavenly Pilgrimage, by Faith with Hoekstra

2008-10-28T06:45:00.000Z

And truly if they had called to mind that country from which they had come out, they would have had opportunity to return. But now they desire a better, that is, a heavenly country. Therefore God is not ashamed to be called their God, for He has prepared a city for them. (Heb_11:15-16)

Abraham (and his family) lived as "strangers and pilgrims on the earth" (Heb_11:13). He lived as an obedient sojourner here on earth, trusting God to lead him about as one who was in the world, but not of the world. He also lived as a patient, heavenly pilgrim, trusting God to lead him eventually to the eternal homeland that awaits all who have saving faith in the Lord. We have a similar calling from the Lord. "Beloved, I beg you as sojourners and pilgrims, abstain from fleshly lusts which war against the soul" (1Pe_2:11).

Abraham understood that spiritual sojourners and heaven-bound pilgrims must stay away from earth-bound cravings that undermine one's godly quest. "And truly if they had called to mind that country from which they had come out, they would have had opportunity to return."

Abraham and his seed had many tests and trials in their pilgrimage with the Lord. If they had set their attention on the country they forsook, they would have been tempted to return there. The enemy of our souls wants to wage war against us by ensnaring us again in the world that we have forsaken: "in which you once walked according to the course of this world, according to the prince of the power of the air" (Eph_2:2). Everyone is vulnerable to such attack. Even one of Paul's early associates in ministry fell prey to this enticement. "Demas has forsaken me, having loved this present world" (2Ti_4:10). Thus, the Lord warns us to stay away from any indulgent relationship with the world. "Do not love the world or the things in the world. If anyone loves the world, the love of the Father is not in him" (1Jo_2:15).

Instead, we are to desire the priorities of Abraham and his family. "But now they desire a better, that is, a heavenly country." Even though the land of promise was in their inheritance some day, they hungered for the ultimate realities of heaven above. Such heaven-focused faith is pleasing to our heavenly Father. "Therefore God is not ashamed to be called their God, for He has prepared a city for them." In this heavenly city ("the city of the living God — Heb_12:22), we will dwell forever with our glorious Lord!

Lord God, the only true and living God, I regret those times that the world has drawn my attention away from my heavenly homeland. I cry out to You — please anchor my heart in heaven above, that I might thereby please You in my pilgrimage here on earth below, Amen.

Noah Building an Ark, by Faith

2008-10-25T10:51:00.000+01:00

By faith Noah, being divinely warned of things not yet seen, moved with godly fear, prepared an ark for the saving of his household, by which he condemned the world and became heir of the righteousness which is according to faith. (Heb_11:7)

At times, the Lord asks His people to engage in assignments that seem to make no sense at all. Perhaps, it is a task that we have never undertaken. Perhaps, it is preparation for a problem that we have never encountered previously. One of the most profound examples from such categories was Noah building an ark, by faith. His example is profound both in the circumstances that he faced, as well as the extent of the impact of his faithful response.

The extreme wickedness of humanity was the setting. "Then the LORD saw that the wickedness of man was great in the earth, and that every intent of the thoughts of his heart was only evil continually" (Gen_6:5). A worldwide flood would be man's deserved judgment. "So the LORD said, 'I will destroy man whom I have created from the face of the earth . . . I Myself am bringing the flood of waters on the earth' " (Gen_6:7, Gen_6:17). Noah was an upright man who lived in close fellowship with the Lord. He would be graciously delivered. "But Noah found grace in the eyes of the LORD. . . . Noah was a just man, perfect in his generations. Noah walked with God" (Gen_6:8-9).

To build an ark for a monumental flood must have appeared absurd in a world that had never experienced such a phenomenon. Nonetheless, Noah fully accepted this divine admonishment, even though he had never witnessed what God was warning about. "By faith Noah, being divinely warned of things not yet seen . . . prepared an ark." His faithful obedience was motivated by holy respect for the Lord and for all of His pronouncements: "moved with godly fear."

The consequences of his labor of faith were far-reaching. His own family was saved: "prepared an ark for the saving of his household." By Noah's godly trust, the rest of the world was condemned for their ungodliness and unbelief: "by which he condemned the world." Noah himself became numbered among those who illustrate that the Lord's righteousness is received by trusting Him: "and became heir of the righteousness which is according to faith." Additionally, he became a reminder of being ready for the return of the Lord. "But as the days of Noah were, so also will the coming of the Son of Man be" (Mat_24:37).

Dear Lord, please teach me to respond in faith, as Noah did, whenever You call me to a perplexing assignment. Also, as impending judgment awaits the growing worldwide ungodliness, help me to proclaim Christ as the present ark of rescue, while eagerly anticipating His return, Amen.

An Introduction to Private Equity

2008-10-18T10:58:00.000+01:00

As its name implies, a private equity firm invests in assets not freely traded on public stock exchanges. Private equity investments can take many shapes; the most well-known is the buyout, a term popularized by Bryan Burroughs and John Helyar's 1989 book Barbarians at the Gate, later made into a television movie, following the battle for control of RJR Nabisco. The battle was ultimately won by legendary private equity firm Kohlbergh Kravis Roberts & Co., better known as KKR.

A buyout refers to the purchase of a controlling interest company unit. A leveraged buyout, commonly referred to as an LBO, which KKR implemented to acquire RJR, is a takeover that uses a significant amount of borrowed money. Other types of private equity investments include mezzanine financing and venture capital. Mezzanine financing uses subordinated debt along with equity to invest in a company, typically prior to an initial public offering. Venture capital, considered a subset of private equity (see the Vault Career Guide to Venture Capital), refers to investments in the launch or early development a company. As opposed to venture capital firms, private equity firms invest in later-stage companies.

Although private equity is a relatively young business -- the first of today's large private equity firms, Warburg Pincus, was founded in the late 1960s -- now there are more than 2,700 such companies worldwide. In addition to KKR and Warburg, other large players include the Blackstone Group, Texas Pacific Group and the Carlyle Group. (Like KKR, Carlyle was also featured in a mainstream film, receiving air time in Michael Moore's 2004 documentary Fahrenheit 9/11 for its connections to former President George H. W. Bush and various Saudi investors, including the bin Laden family.) Leading investment banks such as Goldman Sachs, Lehman Brothers and JPMorgan Chase also have private equity units that are now huge players in the industry.

Private equity firms raise money for funds from entities such as pension funds, endowments, corporations and wealthy individuals. Funds are typically set up as limited partnership, thus the LP at the end of most of their names, as in JPMorgan Partners Global Investors, LP. Investors in the funds act as limited partners, a private equity firm as general partner. A private equity firm will first spend time raising money for a fund. Once it hits a certain amount, it will then announce a first "closing" and begin looking for deals. It could take several years to invest all the money in a fund, and a private equity firm might raise more money in a fund after the first closing. Only when a firm announces a fund's final closing is it no longer open to new investors.

The businesses that a private equity firm purchases with money from its funds are referred to as its "portfolio companies." The Blackstone Group has an equity stake in some 40 portfolio companies, which, according to The Economist, together have over 300,000 employees and annual revenue of more than $50 billion. If combined as a single entity, these companies would make Blackstone one of the top 20 Fortune 500 firms. In comparison, Texas Pacific Group's portfolio companies have over 255,000 employees and revenue of $41 billion, while Carlyle's portfolio companies have 150,000 employees and revenue of $31 billion.

Private equity firms make money two ways: either selling their stakes in portfolio companies to corporate buyers at higher prices, or floating their stakes on the public market through IPOs. These two avenues are commonly referred to as "exit strategies." As business owners, private equity firms can increase the value of their investments in several ways. One, and perhaps the most obvious way, is to increase a company's profitability. Another is simply holding onto a company until it falls back in favor with investors or the market. A third is to break up a company into separate units and sell them individually; often, the sum of the values of each unit of a firm is higher than its value as a whole.

Private equity firms also make money through annual management fees, commonly 1 to 2 percent of the total amount of a fund. Fees are charged to the fund's investors (the limited partners). So, for example, if a firm has raised a $1 billion fund, it might pocket $20 million in management fees each year from its limited partners.

Sources: vault.com

Private Equity

2008-10-18T10:52:00.001+01:00

At a base level, private equity funds raise money for companies in need of a capital infusion. In that respect, they're similar to investment banks. But while investment banks raise money by selling stocks or bonds on the public markets on behalf of client companies, private equity funds do it by raising cash from wealthy individuals and institutions like pension funds. In turn, they use this money to invest in companies.

However, the similarity between PE funds and investment banks ends there. Where investment banks don't take a controlling ownership interest in the companies they take public, PE firms use the capital they raise - along with leverage gained from issuing debt - to assume control of businesses either as co-owners or, often, sole owners.

Like their hedge fund counterparts, private equity funds have seen explosive growth in recent years. According to Fortune magazine, over 1,000 U.S. companies were purchased by private equity funds in 2006 alone. The funds spent, or have committed to spend, in excess of $400 billion for these deals. By any measure, that's a lot of capital.

The managers of private equity funds sometimes pool their resources to buy targeted a company, as happened in several high-profile examples during 2006. In one of the largest such transactions, HCA Inc., the largest for-profit operator of hospitals in the U.S., was purchased by a consortium of four private equity funds for $32 billion.

In some deals, private equity funds use a technique known as a "leveraged buy-out" (LBO) for all or part of the purchase costs. In an LBO, the acquiring group uses loans, bonds or other debt instruments to raise the capital necessary to buy the target. Often, they use the target company's own assets as collateral. Sometimes, the managers of a company work with private equity groups to raise the money necessary to buy the stock of the firm they're running. These deals are known as "management buy outs," or MBOs.

The bottom line is that private equity funds have become a huge force in the global economy, powerful enough to raise concerns over the ability of the largest to pool resources and so drive up deal prices to the point potential industry bidders drop out.

In ideal situations, PE funds invest in underperforming companies, turn them around, and sell their stake at a profit some years later, often in the public markets. Sometimes private equity companies engage in "asset stripping," or breaking up a company and selling its assets separately in order to make their profit.

Venture capital and private equity are often used interchangeably. Strictly speaking, venture capital firms focus on funding promising new businesses, where private equity firms focus on generating value from established businesses through restructurings and better management.

Firms like Texas Pacific Group, Carlyle Group, Bain Capital and Blackstone Group are a few of sector's big players. Firms this big tend to get the most media attention because of the size of the acquisitions they complete. However, many mid-tier firms are also at work, acquiring smaller companies that can benefit from an injection of capital and management talent.

Roles and Career Paths

The private equity industry is booming. One New York recruiter says there is competition for talent at PE firms, which are battling with investment banks and hedge funds for people with the skill sets they need.

At the senior-most levels, PE professionals can make huge sums of money. These are individuals with the experience and contacts to identify, originate and close deals. Below them are the analysts, number-crunchers and lawyers necessary to undertake the due diligence that will make the deals work profitably. According to recruiters, mid-tier firms in particular are seeking to bring more analyst and associate positions in house, rather than rely too much on outside consulting firms to get their work done.

Careers in private equity offer two main entry points. Like their investment bank peers, PE funds prefer people to have a minimum of two to three years of experience at an investment bank, management consulting firm or accounting firm. People emerging from a graduate business school with an MBA program, who have some real-world experience, are also in demand.

Skills and Qualities

- Analytical ability and math aptitude - Team-working prowess - Confident and outgoing - Ability to grow and maintain client relationships.

Sources: efinancialcareers.com

Student Loans

2008-10-17T07:10:00.000+01:00

So what is going on with student loans?

You can choose to pay attention to predictions of disaster or of business as usual. But the financial aid administrators on the front lines say it is still too early to tell whether roiled credit markets will mean that masses of students will be unable to line up the loans they need to pay for the fall semester.

Deadlines for tuition payments are only now approaching, and lenders often do not disburse loan funds to campuses until weeks later – after students can no longer drop classes and switch to part-time status.

For example, “it’s a federal rule that you don’t disburse federal funds prior to 10 days before the start of classes,” at the earliest, said Jerry Alan Donna, director of financial aid at Salem College in Winston-Salem, N.C.

Many lenders, however, have tightened their credit standards, making it harder for borrowers to qualify for so-called private loans, the ones not guaranteed by the federal government. One loan company, Graduate Leverage, predicts a multibillion-dollar gap between what students want to borrow and what companies have to lend.

“You’ll see certain students applying who can’t get loans,” said Dan Thibeault, president of Graduate Leverage.

Sources: Nytimes.com

Assurance of Salvation through Faith with Hoekstra

2008-10-17T06:58:00.000+01:00

And this is the testimony: that God has given us eternal life, and this life is in His Son. He who has the Son has life; he who does not have the Son of God does not have life. These things I have written to you who believe in the name of the Son of God, that you may know that you have eternal life, and that you may continue to believe in the name of the Son of God. (1Jo_5:11-13)

If we are to grow in grace, we must live by faith. "Therefore it is of faith that it might be according to grace" (Rom_4:16). If our faith is to develop and mature, we must know where faith comes from. Jesus (and His word) is the source of our faith. "Looking unto Jesus, the author and finisher of our faith . . . faith comes by hearing, and hearing by the word of God" (Heb_12:2 and Rom_10:17). As we get to know our Lord better and better, as we get into His word more and more, our faith grows. As our faith grows, we experience the grace of God in increasing ways. One of the wonderful workings of God's grace is to bring us assurance of salvation through faith.

Some people wonder if they are saved. Others hope that they are saved. Still others think that they might be saved. God wants people to know that they are saved. "These things I have written to you who believe in the name of the Son of God, that you may know that you have eternal life." Of course, salvation (the gift of eternal life) is given to those who "believe in the name of the Son of God." This means that they trust in the person and work of Christ. They believe He is God, the Son. They believe He died and rose victorious over sin and death. Many who have entered into salvation are, nonetheless, without assurance of this great gift.

Assurance is imparted through the consideration of the previous testimony of the faithful and true word of God. "And this is the testimony: that God has given us eternal life, and this life is in His Son." The gift of eternal life has truly been provided for by the Lord. However, the Father wants us to be reminded that this eternal life is "in His Son." Everlasting life is not some "packaged blessing" that comes to us separated from Jesus. The life God has for us is found through a dependent relationship with a person, Jesus. If we have Jesus in our lives, we have the life that is found in Him. "He who has the Son has life; he who does not have the Son of God does not have life." If we have invited the Lord into our lives, He now dwells in us. "As many as received Him, to them He gave the right to become children of God" (Joh_1:12). Jesus gives us assurance of salvation through faith in Him.

Lord Jesus, I thank You for coming into my life when I received You by faith. Therefore, I know that I have eternal life, since that life is in You. Thank You for the grace that brings such assurance through simple faith in You, Amen.

Public vs. Private Company Managers: Which Are More Likely to Impact the Bottom Line?

2008-10-16T07:56:00.000+01:00

Executives who hone their skills at the helm of private companies tend to be more driven, more bottom line-oriented and have much more flexibility than CEOs at publicly owned companies, who are constrained by their need to balance multiple objectives in a corporate ecosystem.

That was the consensus of four panelists who discussed the management challenges at private equity-backed firms during the recent Wharton General Management Conference. The panel was titled, "Managing Public vs. Private Companies in an Age of Buy-outs."

Today, private equity is facing "an industry transition from competing on capital [and] financial engineering to competing on value creation and access to the best management talent," said panelist Elena Botelho, a partner at ghSmart, an executive assessment and talent management consulting firm for investors, boards and CEOs. "This is driven by the need for these firms to get maximum improvements in their portfolio, especially now that the market is tough."

Botelho noted that this affects the way CEOs are hired as well as how top executives perform in an era of increasingly common corporate buy-outs. The result is a blurring of the lines between public and private firms, with shifting expectations of senior management. Although the current credit freeze has limited the number of recent private equity deals, the situation has created a unique set of pressures for managers, since so much attention -- from the media and the federal government -- remains focused on financial performance. At publicly traded companies, the normal expectations of shareholders about quarterly earnings have been ratcheted up with the significant increase of federal regulatory involvement. But as private equity firms gain more investor interest as an alternative to the public markets, CEOs at private companies find themselves expected to reap quick gains in a rapidly changing environment.

Gone, however, are the days of private equity "strip-and-flip" buying and selling, a period that many see as having ended with the collapse of two Bear Stearns hedge funds in July 2007 -- the beginning of the ongoing credit turmoil. A key question now is whether private CEOs, accustomed to taking greater short-term risks to maximize long-term returns, can thrive in a new, more transparent environment under unprecedented demands.

"Private equity firms get measured on IRR (internal rate of return), which is highly sensitive to the time they hold an investment, so every extra year means they have to drive more EBITDA [Earnings before Interest, Taxes, Depreciation and Amortization] improvements," Botelho said. "Before, if they bought the company, took on leverage and flipped it in two years, especially in an environment where multiples [or] valuation was expanding, it was a lot easier to show attractive IRR. Now they need to attract the best managers to improve the business."

More Science than Art

According to panelist Mark Brownlee, associate vice president at Infosys Technologies, CEOs in publicly traded firms necessarily practice business as more of an "art" compared to the top executives at privately held entities, where expectations and results are uncluttered by the corporate "ecosystem." In public companies, this ecosystem comprises "their trading partners, shareholders, their public culture and brand, and ... far too many people to answer to," Brownlee said.

At the private companies he has worked with, however, executives "don't care about an ecosystem," Brownlee noted. "[They] are much more isolated and can make more independent decisions. Management teams can be more like business technologists -- they understand the science of running a business. With a public company, you need to be the face of the company, dealing with analysts and [having] a constant interaction with the media. [Private] companies are great places to be because that's where you can work with people practicing the science of business."

Jonathan Hsu, CEO of New York-based 24/7 Real Media, a digital marketing firm, agreed. The comparison is "pretty stark," Hsu said. "Running a mid-size company and [being] responsible for everything makes you tougher than someone entrenched in a large public company."

Increased liability for public company executives and enforcement of the Sarbanes-Oxley Act, in addition to the comparisons shareholders have made with returns garnered by hedge funds -- fair or not -- have only exaggerated the distinction, Hsu added. "These trends have made public company executives more short-term focused [on] quarterly earnings targets, and in general, more risk-averse."

"For us, the title of CEO doesn't really exist," said Jude Tuma, founder and managing partner at Geminus Capital Partners. "When hiring a CEO, I do not look to a public company, [where a candidate would have] a very defined role. At private enterprise, we're looking for someone who can do a lot of different things."

Hsu suggests that the time it takes to interact with a public company's board and its shareholders -- what he called "a glorified cocktail party that you have on the road, all the time" -- detracts from a CEO's performance. At private companies, "quite frankly if you do well with the bottom line they leave you alone." Not so with public "corporate overlords," he said.

Lambs and Cheetahs

Botelho stressed that the panel was discussing private equity-backed firms, not necessarily private companies in general, and that top CEOs at publicly traded firms can be just as nimble and focused on the bottom line as their private counterparts. "Jack Welch is probably one of the best examples," she said.

To fine-tune the comparison, she referred to a study that ghSmart did in collaboration with economists and finance professors at the University of Chicago. It analyzed in detail assessments of more than 300 candidates for CEO jobs at firms funded by buy-out or venture capital investors. Candidates were rated on more than 30 specific abilities under three leadership categories. The "Hard" category included leaders who are efficient, aggressive, persistent and proactive. "Soft" was characterized as being flexible, a good listener, open to criticism and a team player. The third group was neither particularly hard nor soft, but seen as being persuasive, organized, analytical and calm. These are all positive traits, of course, but the "hard" and "soft" candidates were later re-defined as "cheetahs" and "lambs," making it clear which group made for better performers in terms of the bottom line.

A surprising finding of the study was that buy-out investors are twice as likely to invest in lambs, probably owing to their interpersonal skills and the level of comfort they instill. The cheetahs made board members nervous with their aggressiveness and willingness to move forward without waiting for direction.

The "success" of the candidates who won the jobs at the firms ghSmart studied was determined in two ways, depending on if the CEO was still in the job or had left. If still with the firm at the time of the study, success was measured as meeting or exceeding targeted EBITDA. If he had exited, an attractive return on the investment was deemed successful.

The bottom line? According to the study's metrics, lambs achieved success only 57% of the time. The cheetah outpaced even the most bullish expectations, with 100% of those in the study earning their money in a "successful" fashion, according to investors' expectations.

"Where [the cheetahs] really spiked was what we call 'PEP talk' -- persistence, efficiency and productivity," Botelho said. "They drove hard, made the right decisions and went at it pretty relentlessly. The other group is [the one] we'd like to have dinner with. What made them special was consensus-building."

Given the results, she said, "When looking at CEOs, you're probably going to go for a cheetah." Later, in an interview, Botelho said she would never suggest that the best public company CEOs are not talented, driven and bottom-line oriented. Though the panel focused on private equity-backed firms with assumed profitability, it was also true that "there are scores of private companies that are family- or founder-owned, or are partnerships that don't have the performance pressure that comes from having public shareholders or active financial investors.... Some of those fall far behind public companies in quality of talent, business practices and results."

Still, Brownlee's point about corporate ecosystems rang true to her. "The point is that the set of issues a public company CEO has to deal with is broader than that of a private company," Botelho said. "Therefore, their balancing act between different objectives is more complex.

She added that firms that take a long-term view -- public and private -- use down markets like the current one to grab talent they otherwise couldn't afford or attract. "For example, in the last downtown of 2001, American Express hired a lot of people out of top strategy consulting firms when those firms were struggling with decline in demand. We see the same with our clients now -- they are actively looking for strong performers that are 'poachable.' In private equity in particular, it's typically difficult to attract senior talent from other firms because of carry (the executive's financial interest in the portfolio companies when they sell the company). In times like this, some of the portfolio companies are starting to struggle, and therefore carry is not looking as valuable as it did 18 months ago. The challenge for these companies is to have strong assessment processes to differentiate truly strong performers from thousands of average players."

Sources: knowledge.wharton.upenn.edu

Once More on the Source of Faith with Hoekstra

2008-10-16T07:53:00.000+01:00

Then He who sat on the throne said . . . "Write, for these words are true and faithful" . . . Then he said to me, "These words are faithful and true" . . . So then faith comes by hearing, and hearing by the word of God. (Rev_21:5; Rev_22:6 and Rom_10:17)

Jesus is the faithful and true witness, who gives us the reliable truth that we must have in order to find life and live life as God intended. "Jesus Christ, the faithful witness . . . the Faithful and True Witness . . . And He . . . was called Faithful and True" (Rev_1:5; Rev_3:14; and Rev_19:11). As we see His faithful and true character, faith toward Him develops in our lives. His word is a vital part of this process, since it has the same character that He has (faithful and true). "Write, for these words are true and faithful . . . These words are faithful and true."

When people humbly receive the word of God, the scriptures change their lives. This is how we started out with God: "Having been born again, not of corruptible seed but incorruptible, through the word of God which lives and abides forever, because 'All flesh is as grass, and all the glory of man as the flower of the grass. The grass withers, and its flower falls away, but the word of the Lord endures forever.' Now this is the word which by the gospel was preached to you" (1Pe_1:23-25). We were born again into the family of God when the incorruptible, living, eternal word of God was planted like a seed in our hearts. This occurred by our hearing of the gospel. We believed the good news of Jesus Christ, and this gospel seed germinated within us unto life eternal.

After being born again by grace through faith in Christ, God's plan was that we continue to respond to His word (like those in Thessalonica did). "For this reason we also thank God without ceasing, because when you received the word of God which you heard from us, you welcomed it not as the word of men, but as it is in truth, the word of God, which also effectively works in you who believe" (1Th_2:13). These saints welcomed the scriptures into their lives. They knew that it was not a mere human message. They knew it was from the Lord. They were eager to hear it and to rely upon its life-nurturing message. Therefore, it effectively worked in their hearts, as they believed in the truths they were hearing. "So then faith comes by hearing, and hearing by the word of God." Initially and continually, faith comes by hearing the faithful and true words of God, and that faith accesses grace.

Dear Lord, even as You are faithful and true, so Your word is faithful and true. I began by a faith that was stirred through the gospel message of Your word. I know that I can only grow in faith as I humbly receive You word into my life day by day. Lord, I long to live by faith that I might grow in Your grace, in Your holy name, Amen.

Top 10 Business Schools That Are The Toughest to Get Into

2008-10-11T13:56:00.001+01:00

Article provided by The Princeton Review

You can’t be scared of a little competition, but these schools might give you a reason to sweat it a bit. The Princeton Review examined institutional data at the nation’s best 296 business schools and found that these 10 business schools were the toughest to get into. How competitive admission is at the business schools you’re considering is influenced by a number of factors including the average undergraduate GPA of the entering class, average GMAT score, and the percentage of accepted and matriculated students. You’ll find typical responses from admissions officers in the profiles of each school below. Rankings are listed in order, with No. 1 being the toughest.

1. Stanford University (Stanford, Calif.)The top criteria for admission are "intellectual vitality," "demonstrated leadership potential" and "personal qualities and contributions" -- Stanford looks for community leaders, so the "impact [you made] on [your] workplace" matters much more than your job responsibilities. The GSB admissions office says that candidates should not include academic recommendations unless they reflect work experience (as a T.A. or research assistant, for example). Students report a broad range of GMAT scores, with a median of 720 (the GRE is also acceptable in some cases), and a median TOEFL score of 283.Students who considered Stanford University also looked at Harvard University.

2. Harvard University (Cambridge, Mass.)A "reputation as the best business program in the country" makes Harvard Business School one of the top prizes in the M.B.A. admissions sweepstakes. Applicants lucky enough to gain admission here rarely decide to go elsewhere. The school’s full-time-only program is relatively large; approximately 900 students enter the program each year. Academic ability, leadership experience and unique personal characteristics all figure prominently into the admissions decision.Students who considered Harvard University also looked at Stanford University, University of Pennsylvania and Columbia University.

3. Columbia University (New York)The admissions department at Columbia notes, "Columbia Business School selects applicants from varied business and other backgrounds who have the potential to become successful global leaders. Their common denominators are a record of achievement, demonstrated leadership and the ability to work as members of a team." The school also reports, "By design, efforts are made to admit students who add different perspectives to the learning experience." Admission to the program is extremely competitive.Students who considered Columbia University also looked at Harvard University, Stanford University and the University of Pennsylvania.

4. University of California -- Berkeley (Berkeley, Calif.)When looking at applicants to Haas graduate programs, the school considers all of the following in determining admissions status: "demonstration of quantitative ability; quality of work experience, including depth and breadth of responsibilities; opportunities to demonstrate leadership, etc.; strength of letters of recommendation; depth and breadth of extracurricular and community involvement; and strength of short answer and essays, including articulation of clear focus and goals."Students who considered University of California -- Berkeley also looked at Columbia University, Harvard University, New York University, Northwestern University, Stanford University, University of California -- Los Angeles and the University of Pennsylvania.

5. University of Pennsylvania (Philadelphia)Wharton is among the most selective M.B.A. programs in the country. On average, the school receives between seven and 10 applications for each available slot. The school’s Web site notes that "approximately 75 to 80 percent of all applicants are qualified for admission." Applicants are evaluated holistically by at least three members of the admissions committee. All prior academic experience, including graduate work and certifications, is considered. GMAT scores also figure into the decision. Quality of professional experiences, career choices and stated goals for entering the program are all carefully reviewed. Committee members also look for evidence of leadership, interpersonal skills, entrepreneurial spirit and good citizenship.Students who considered University of Pennsylvania also looked at Harvard University, Stanford University and Columbia University.

6. Massachusetts Institute of Technology (Cambridge, Mass.)Completed applications to the MIT Sloan M.B.A. program include a cover letter, two letters of recommendation, post-secondary transcripts (self-reported prior to interview; if called for an interview, applicants must provide official transcripts), a current résumé, four personal essays, supplemental information and GMAT or GRE scores. The school requires additional materials from applicants to the entrepreneurship program, the leaders for manufacturing program and the biomedical enterprise program. The nature of the program favors candidates with strong quantitative and analytical skills, as well as those with strong personal attributes including leadership, teamwork and ability to make decisions and pursue goals.Students who considered Massachusetts Institute of Technology also looked at Columbia University, Dartmouth College, Yale University and University of Pennsylvania.

7. Yale University (New Haven, Conn.)The admissions committee at Yale University School of Management seeks accomplished students with highly diverse professional and academic experience. Recently admitted students come from a range of backgrounds, including such unlikely fields as jewelry design, athletics, medicine, nonprofit organizations and the performing arts. The school does not publish any specific admissions standards; however, the class of 2008 had an average GMAT score of 701 and an average college GPA of 3.4.Students who considered Yale University also looked at Harvard University and University of Pennsylvania.

8. New York UniversityNYU’s admission’s committee strives to create a business school community that is as vibrant and diverse as New York City itself. In addition to having a strong academic background, Stern students are leaders in a wide range of fields, bringing diverse expertise and experiences to the program. The entering class of 2008 numbers just over 400 and boasts an average undergraduate GPA of 3.4. The class’s average GMAT score was 700, with a range of 640–750.Students who considered New York University also looked at Columbia University, University of Pennsylvania and University of Chicago.

9. University of Michigan -- Ann Arbor (Ann Arbor, Mich.)Applications to the University of Michigan M.B.A. program must include undergraduate transcripts, GMAT test scores (on average, successful applicants score 700), TOEFL test scores (for international students), letters of recommendation, a personal statement and a résumé. The school also looks at an applicant’s record of success, clarity of goals, and management and leadership potential. The program does require previous work experience and, though not required, interviews are "highly recommended." There are many minority recruitment efforts, such as the Consortium for Graduate Study in Management, Robert F. Toigo fellowships in finance, the National Society of Hispanic M.B.A.s conference, the National Black M.B.A. conference and many more.Students who considered University of Michigan -- Ann Arbor also looked at Duke University, Northwestern University, University of Chicago and the University of Pennsylvania.

10. Dartmouth College (Hanover, N.H.)Like many other schools, Tuck wants to know that you love it for what it is, not only for what it can do for you; show that you have researched the school thoroughly. The class of 2009 reports an average GPA of 3.5 and GMAT score of 713.Students who considered Dartmouth College also looked at Columbia University, Harvard University, Northwestern University, Stanford University and the University of Pennsylvania.MSN Link: http://spotlight.encarta.msn.com/Features/encnet_Departments_Grad_default_article_ToughestBizSchool09.html?GT1=27001

HLS JD Program

2008-10-11T13:54:00.000+01:00

The First Year

Harvard Law School recently undertook a sweeping overhaul of its first-year curriculum. The new curriculum reflects legal practice in the 21st century, adding courses in legislation and regulation and international and comparative law to the traditional curriculum of civil procedure, contracts, criminal law, property, and torts. Beginning in 2009-2010, all first-year students will also take a problem-solving course in which they will grapple with real-world challenges involving complex fact patterns and encompassing diverse bodies of law. Students also participate in a Legal Research and Writing class, which teaches important skills essential to the practice of law. And students choose electives, in both the international law arena and, more generally, from the wide array of courses Harvard offers.

The first-year class is divided into seven sections of seventy-five students each. Faculty Section Leaders, generally senior faculty members who teach one of the section’s basic courses, provide guidance and support to the students in their sections and develop a program of extra-curricular activities related to the law.

In addition to section activities, students may participate in first-year reading groups—groups of 10-12 students—that offer the opportunity to interact with faculty in informal settings outside the classroom. Led by faculty members who often focus on areas of particular personal interest, these ungraded groups explore such topics as diverse as law and literature, legal responses to terrorism, regulation of climate change, and issues of bioethics. (For a full list of the first-year reading groups offered in 2008-09, see http://www.law.harvard.edu/cgi-bin/showregistration.cgi)

The Upper-Level Years
In the second and third years of law school, Harvard students shape their own courses of study, selecting among a wide offering of electives. Students generally take a mix of classroom, clinical, writing and cross-registration credits, selecting courses at the Law School and throughout the University that align with their interests. Five optional Programs of Study – Law and Government; Law and Social Change; Law and Business; International and Comparative Law; and Law, Science and Technology—developed by the Law School faculty provide pathways through the upper-level curriculum. The Programs of Study offer students guidance on structuring an academic program that will give them extensive exposure to the law, policies, theory, and practice in their chosen areas of focus. Of particular importance for many students are clinical and inter-disciplinary opportunities, which enable students to experience law in practice and to understand how law appears from the perspective of other activities and approaches. The Law School encourages students to engage in their third year in a capstone learning experience: advanced seminars, clinical practice, and writing projects that call on students to use the full extent of their knowledge, skills, and methodological tools in a field to address the most interesting, complicated and intractable legal problems of today.

Sources: www.law.harvard.edu

How to Get Into Harvard Law School - Can Getting Into Harvard Law School Really Be This Hard? by H. Jefferson, Jr.

2008-10-11T13:50:00.001+01:00

Getting into Harvard Law School has always been difficult, and due to rising demand, its harder to get in today than its ever been. In fact, getting into law school anywhere can be very difficult, if not impossible, even for some very smart, accomplished students. Because Harvard Law School enjoys unmatched prestige as well as unmatched demand for admission, admission is reserved for only the most spectacular students or those who are able to effectively market their law school application.

Unfortunately, most prospective law students don't start paying attention to the process soon enough. Ideally, preparation for your law school application should begin years in advance. Obviously, one of the benefits of thinking this far ahead is an ability to attend to one's undergraduate courses and grades. For better or worse, your undergraduate GPA will play an important part in your Harvard Law School application, so you want this as close to a 4.0 as possible.

Similarly, your LSAT test scores will be vital to the success of your Harvard Law School application. Indeed, if your LSAT score is less than stellar you will have little chance of getting into an excellent law school. I recommend that prospective law students begin preparing for the LSAT 2-3 years before he or she intends to take the test. This is years before most students begin such preparation and will allow you to master the skills required to excel and maximize your LSAT score. This preparation should include live courses, reading numerous prep books, and taking literally hundreds of practice tests. I believe this attention to your LSAT score can help you succeed at getting into Harvard or any other great law school more than anything else.

Finally, after you've done everything you can do about your GPA and LSAT score, you should dedicate yourself to doing everything you can to getting into Harvard Law School. This should include a campus visit and getting to know everyone who might be involved in the admission decision. This may not be easy to do, but is worth the effort. You should also go out of your way to find the most impressive and persuasive sources you can to write your letters of recommendation. Likewise, the other elements of your Harvard Law application, such as your personal statement, must be carefully tailored to address the wants of the Harvard Law admissions committee, and must be perfectly presented.

Although getting into Harvard Law School is incredibly difficult, it can be done. Every year hundreds of new Harvard Law students begin their Harvard Law journey - you may be next.H. Jefferson, Jr. is an expert on on law school admission, having applied to and been admitted by 11 of the top law schools in the United States. To learn more about the the techniques and strategies you can use to get into the law school of your choice, visit http://www.coverttactics.com
Article Source: http://EzineArticles.com/?expert=H._Jefferson,_Jr.

B-school: nervous students and case studies by Benjamin Pimentel

2008-10-11T12:45:00.002+01:00

SAN FRANCISCO (MarketWatch) -- A few weeks ago, Stanford MBA student Kate Jackson was gearing up for her final year in school before launching her career in high finance.Then Lehman Brothers (LEHMQ: , , ) imploded. Frantic, the 26-year-old Ohio native quickly reached out to a classmate.

"We were emailing each other and hitting refresh to see the latest news," recalled Jackson, who was then wrapping up her summer internship in Paris. "The first thought was: 'What on earth is going on? ... We don't understand this. This is our field and this is the craziest thing that's happening in our field.'"

For many U.S. business school students, the financial crisis has triggered shock and confusion, especially for those eyeing careers on Wall Street. Their concerns are echoed by professors who nevertheless see a silver lining in the debacle: a rare opportunity for a deeper look into the financial world, aided by a flood of new information gushing out of the Wall Street meltdown. As our economic crisis worsens, most MBA students worry about jobs while their professors see a learning opportunity. But some students tell Ben Pimentel they're sticking with finance no matter what. (Oct. 8).

At Harvard Business School, where students are trained to examine in depth the actual experiences of companies, case studies are already underway on the collapse of major financial firms, such as Bear Stearns, said Carl Kester, deputy dean for academic affairs.

"I would say somewhere between half a dozen and a dozen case studies are beginning to take shape as we speak," he said. "This is the kind of event that really attracts scholars. This event is going to be the lode star for faculty research for a number of years."

At the Stanford Graduate School of Business, the crisis reignited Darrell Duffie's interest in Freddie Mac, the mortgage company bought out by the federal government in September. Four years ago, Duffie, a finance professor, published a case study speculating about such a bailout which, back then, seemed like an unthinkable scenario.

"One silver lining of this crisis is that we have an excellent set of experiences from which to learn, that it is no longer abstract," he said. "I used to teach the importance of asking hard questions as a risk manager and there weren't too many cases in the past. There weren't too many examples of large financial institutions doing such wrong-headed things. ... Now, we have so many good examples to point to."

However, Frank Lichtenberg of Columbia Business School cautioned that business schools should also not be swept up by the headlines to the point of ignoring established ways of teaching management.

"We are in terra incognito and it is striking that many proponents of deregulation are saying that there is a very important role for government, that markets don't necessarily operate efficiently," he said. "But it's also important to take the long view. There is a body of knowledge that's systematic that we're trying to convey to students. It would not be doing them a service to put all of that on hold."

Meanwhile, some MBA students see their careers potentially being put on hold.

A recent graduate of the MIT Sloan School of Management program joined a Wall Street firm just in time to see the finance world collapse. She is still employed, but asked not to be identified because it might jeopardize her position.

She said she thought she could be laid off in the next year and that it would be "unwise" if she didn't consider other options. At the same time, she added, she's trying to make a name for herself in her new job and is trying to stay focused on her work.

Jackson, who will graduate in June, said she worries about being able to take out student loans. Her classmate, Michael Armstrong, said he is "waiting to see how things play out," adding, "I'm shocked at the magnitude and the craziness of all this."

The crisis has highlighted the increasingly important role of the financial system in society, even as it points to risks associated with the careers in that field, said Gerard McGeary of Yale School of Management. "The fact that there are three or four fewer firms than there were last year shows you what a risky business investment banking can be, but also how integrated it is to our economy and our society," he said.

Kester, of Harvard, said students "who were aiming at investment banking as a career are almost surely moving toward Plan B."

Jana Kierstead, director of Harvard's MBA career services office, said job offers to the school's MBA students are down roughly a third this year from 2007. Many Harvard students who worked as interns at such firms as Lehman Brothers, Bank of America (BAC:, , ) and Merrill Lynch (MER:, , ) are "waiting to see what happens to them," she added.

To be sure, an MBA degree from a top university likely will still be a ticket to a lucrative career. Just last year, the average base salary for a new Harvard or Stanford MBA grad was roughly $116,000.

In fact, Harvard MBA student Lena Sene said that while there is concern, "There is no panic. ... There is a general sense of calmness and understanding that these things are out of our control. There is also a sense of comfort knowing that this school has given us a ton of resources."

In fact, most top business schools have stepped up efforts to assist outgoing students and recent graduates through career counseling and alumni outreach.

Nicole Gehrmann, assistant director of MBA recruiting at U.C. Berkeley's Haas School of Business, said the school is drawing from lessons from the dot-com bust and have been telling their students "to have a plan A, plan B and plan C."

Harvard has mobilized its alumni to help in career coaching, Kierstead said. The Wharton School of the University of Pennsylvania added staff to its MBA career management group in response to the crisis, said director Michelle Antonio.

Paul Oyer, a Stanford economics professor, said it would not be surprising if fewer MBA grads venture in the finance world, noting that "what happens to you in school sticks with you for a long time."

In fact, he studied what happened to Stanford MBA students before and during the 1987 stock market crash, and found that much fewer graduates became investment bankers before the 1987 stock market crash than before, and those who did stuck with those careers for a long time.

"My guess is if you look at the classes of 2006-2007 in 2030, they're going to look different than [the classes of] 2008 and 2009," he said.

Still, Allyson Moore, director of career development at the Yale School of Management, said some students are still hopeful for careers in finance. "Sometimes, amidst an upheaval, there is considerable opportunity. It might even be easier to more quickly their value to an organization."

Jackson of Stanford affirmed this belief, noting that, while the future remains unclear, she is sticking to her Plan A. "Not until every investment management firm out there tells me they won't hire me, I'm still very interested in this field." Benjamin Pimentel is a MarketWatch reporter based in San Francisco.

Faculty Discuss Credit Crisis and Bailout Options

2008-10-11T12:37:00.000+01:00

September 2008

STANFORD GRADUATE SCHOOL OF BUSINESS —The financial, securities, and world markets were reeling in late September with the historic news of a proposed $700 billion federal bailout of the U.S. financial sector via a massive purchase of troubled mortgage-related assets. That earthshaking news came on the heels of the government’s rapid takeover of mortgage giants Fannie Mae and Freddie Mac, its $85 billion bailout of American International Group, the collapse of Lehman Brothers investment bank, and the subsuming of Merrill Lynch into Bank of America.

To help put the crisis in perspective, the Stanford Graduate School of Business convened a panel of eight experts from the Schools of Business, Law, and Humanities and Sciences on the issue on Thursday evening, Sept. 25. The discussion ran the gamut from how the United States got into this mess, to how this crisis fits in with past credit crises, to the proper role of regulation, to the advantages, and many disadvantages, of the bailout plan just underway in Washington, D.C., and to whether the financial sector is really sufficiently “different” than the rest of the economy to warrant a $700 billion rescue, courtesy of the American taxpayer. Here is a summary of the discussion, which is available in full as a video.

How We Got Here
The origins of the current crisis are a classic tale of corporate-finance 101 not being followed, said Finance Professor Peter DeMarzo. “It’s almost like a syllabus from one of [Professor Jim Van Horne’s] corporate finance courses,” he said. “It begins with agency problems—incentive misalignment on the part of mortgage issuers who, as we know, didn’t have incentive to worry about the quality of loans they were issuing. And then leverage on Wall Street amplifying that shock,” he said, noting that 20 times leverage was not uncommon.

And the introduction of credit default swaps that require sellers to pay up in the case of defaults that were deemed remote but are now widespread, has exacerbated the problem. So have the deep layers of complex derivative products written against the underlying mortgage loans.
“If you want to take a lot of risk it’s really easy with derivatives, and you can get into a lot of trouble very quickly, which is what a lot of financial institutions did,” said Finance Professor Darrell Duffie.

“Where the daisy chain ends, nobody knows,” said Van Horne.
The bailout is not being discussed to save the country just from a credit crisis, but also from a liquidity crisis, where financial institutions have virtually no place to turn for funding to bolster their dismal balance sheets, some panelists explained.

“I think this started as a credit problem, related to mis-ratings of a lot of structured products, and a lack of full understanding of the nature of the inherent risk” in the underlying mortgages, said Finance Professor Ken Singleton. But now, “it’s very much evolved to a liquidity crisis ... a type of funding crisis. It’s very difficult for a lot of institutions to get funding,” especially given the fact that many banks are arguably technically insolvent if current values were slapped on the assets in their balance sheets.

That dire capital position of banks “has brought to a virtual halt interbank lending” and helps explain the problems in the money-market sector, he said. “The first step one has to think about in getting out of this liquidity and credit crisis is how do we recapitalize the banking sector? And at what level do we need to recapitalize it to undo this freeze as its come to be called in the markets, to bring about greater funding liquidity in the system.”

Indeed, this time the market impact has been swift and almost without precedent, panelists said. It has caused “previously unthinkable financial market dislocations,” said DeMarzo. “We’ve seen the collapse essentially of the short-term credit markets in a variety of settings. We’ve seen zero—and for a few hours negative—interest rates on Treasuries. So, negative interest rates—meaning investors paying the government to keep their money safe because they are not sure where else to put it.”

“Pretty dramatic stuff. Feels for many like we are looking into the abyss,” he said.

What the Government Could Do
Several panelists described alternative proposals or offered their own, very different ideas for solving the problem.

Insuring, not bailing
Singleton noted that conservative Republicans on Sept. 25 were broaching a solution that would act more like a government insurance policy against the most toxic of the assets held by financial institutions.

The notion “is to change the value of the toxic assets themselves,” he said. The Republican alternative is “essentially an insurance policy” that would “raise the value of the toxic assets effectively on the balance sheets of these institutions without having to buy them off the books, and therefore effectively raise capital” for the firms.

“One could think about loan-like recapitalizations of these institutions as well,” he said.

Forcing banks to bear the bailout burden
Finance Professor Jonathan Berk said he’s spent the better part of his week writing letters to leaders to stress that the financial institutions—not the U.S. taxpayer—must ultimately bear the financial cost of the bailout, as the price of the risk they took, and to discourage repeat irresponsibility.

He said he could design a hypothetical proposal that would achieve three aims that should be paramount now: “One, it has to stabilize markets. Two, it must not occur at taxpayer expense, and three, it must not set up incentives so that in the future, people will take more risk,” and the crisis recurs. “The current proposal doesn’t satisfy these,” he said.

Instead, the government could buy mortgage-backed securities from the hard-hit banks at the securities’ face value—as an example, $100, even if their current market price is 30 cents. It would do so with the aim of selling them again when the markets have stabilized. But, the government would also “get a guarantee from sellers that they will make up any loss the government has on the sale of the securities,” perhaps in the form of a tax giving the government “number-one priority debt claim on any of these firms,” he said.
That way, “the people who are being bailed out would fund the bailout.”

Another idea that could be considered, Berk said, would be to find some way to force investment banks to once again bear the full brunt of liability for their traders’ actions. One possible way to do that: force investment banks to go back to being partnerships. “When Goldman Sachs was a partnership, the partners had unlimited liability. So you can imagine how carefully they monitored their traders.”

Accounting changes
Business School Dean Robert Joss, a former Treasury official and former vice chairman of Wells Fargo Bank, noted that the banking sector might argue for suspending the current accounting methods for how the mortgage assets are valued, to ease the impact of limited liquidity.
Banks might argue that “you would save the taxpayers a lot of money by suspending mark-to-market accounting and going to some other kind of intrinsic value accounting based on cash flows, not an arbitrary number that people can make up.” He said. “Let people value them just like they’ve valued other loans in times of stress.”

Combining that approach with a limitation on short selling of stocks, which has created a “vicious downward cycle,” and the government could “save your firepower for when we see just where the institutional problems are” and “get some confidence back into the system.”

Increased transparency

One major problem with the current situation is that so many holders of mortgage-related securities got disconnected to the actual risk of the mortgages underlying them.
One proposal is to improve transparency, said Duffie. That way, “no matter how this daisy chain goes, it will always be possible for you to drill down through the daisy chain to the very bottom where you know who the borrower is, and how much they owe, and you can figure out how it’s related to all the other borrowings.”

Cut off the fat tail
Law Professor Joseph Grundfest said a more politically appealing solution might be for the government to buy the underlying mortgages by offering to pay, for example, 50 percent of face value for them. That way, any mortgage worth less will be sold to the government, and “ we then know with precision how much the bailout is going to cost the government.” It has the added advantage of removing the accounting uncertainty for holders of mortgages that might decline to 50 percent or less of face value, because they could always be sold to the government for 50 percent. In accounting lingo, “we cut off the fat tail,” he said.

“In effect the government is agreeing to write a put option,” he added.

As for the mortgages bought by the government, politicians will like being able to say “we can renegotiate the length of the loans, we can renegotiate the interest payments, that way we are not throwing my constituents out on the street.”

A new kind of rating agency?
Grundfest said that he’s currently at work on a research project to create a new form of rating agency that is not funded by the institutions whose products are being rated. He likened the current rating system to “the people who own the restaurants paying the restaurant reviewers to issue reviews,” he said. “It’s only a question of time before you get a bad meal.”

His project envisions BOCRAs—buyer-owned and controlled rating agencies. Under that scenario, the financial institutions which are required by regulators to buy rated securities would pay for the ratings, including setting up the incentive structure of the raters. “If it turns out the BOCRAs do a bad job with the ratings, then the buyside has only itself to blame,” he said.

How Does This Crisis Compare to Past Ones?
The current crisis is both similar and vastly different from past credit-related crises such as those involving leveraged buyouts, commercial real estate, or third-world debt, the panelists said.

Van Horne noted that in U.S. economic history, there have been 16 credit crises, all marked by speculative excesses of varying kinds. They were all followed by a peak in bankruptcy filings, he said, and sometimes “a collapse in commodity prices.”

The current crisis is not the most severe the country has endured, but might be the most severe since World War II, “with the possible exception of 1974 and ’75,” he said. However, “the government intervention in the markets is the greatest since the 1930s, it seems clear.”
Each involved speculative excesses and an inattentiveness to eroding underlying debt quality. Each involved Wall Street compounding such bad bets with steep leverage. And once they passed, each new crisis’ participants had forgotten the economic lessons of the ones before.
This crisis is distinguished by its reach into the widespread market and the fact that residential real estate is so central to the problem.

“All previous crises were contained to institutions,” said Joss, whereby participants could sit down, work out their accounting, and reach a solution. Not this one.

“This is a situation where credit has been securitized, marketized, distributed—very difficult for the authorities to get their arms around the size, the shape, the magnitude of the problem.”
In past crises, it took a little over two years “to purge the system of the speculative excesses and get back really to a solid financial footing,” Van Horne said. “We are now in the first year of this purge.”

Should There Be a Bailout at All?
For many panelists, the current crisis raises fundamental questions about the role of market regulation and government intervention.

Is the financial sector special?

Economics Professor Monika Piazzesi said there is an ongoing debate among macroeconomists as to whether the financial sector should be considered more vital to the U.S. economy than other sectors—whether it deserves government bailout or whether it should be permitted to suffer through a cyclical business decline and emerge in a revamped state on its own, without government intervention.

“The vast majority of macroeconomists work with models where the financial sector is just like any other sector,” said Piazzesi. “There is only a small group of macroeconomists that think that the financial sector is special, and they have been importing ideas from corporate finance, in fact, to standard models of macro.”

But it’s an important subgroup, she noted, and includes one key proponent: Federal Reserve Chairman Ben Bernancke.

Proponents of this view say that “the financial sector is the valve through which liquidity to producers and consumers flow,” noted Duffie. “If you want to improve the life of Americans according to this hypothesis, then we have to start by making this valve unclogged.”
Berk said the possibility that the bailout isn’t necessary may never be explored due to fear of another depression.

“It might be that we don’t need a bailout, but it’s not clear whether we could ever find out,” he said. “The specter of the Great Depression is such an unpleasant event, that I think most people’s view is we don’t want to find out if we don’t need this bailout. We’d rather just do the bailout, and not suffer the consequences.”

Should the industry be far more regulated?
It could be argued that special treatment of the financial sector warrants special oversight, Piazzesi said. “If they are special and we want to bail them out, then they should be regulated, and deregulation in the 1980s was probably a bad idea—we should regulate them more.”
Moreover, “if these firms expect to share their losses with the taxpayer, there should be an insurance premium that these firms pay ... and ideally the premium should depend on the amount of risk that these companies are taking.”

While Van Horne said he favors regulation of both financial institutions and the derivatives market, others said that shouldn’t be necessary.

In principle, said Duffie, “you shouldn’t need to shut down derivatives, they actually make the market work more efficiently because they do make it easier to transfer risk.” But all market participants need to be far more careful in the risk management and regulation of such products because “it is so easy to concentrate a lot of risk in a very small toxic instrument like a credit derivative.”

Berk added that trying to directly regulate the crafters of these financial products is wrongheaded. “You’re trying to regulate the smartest people in the economy,” he said. “Investment bankers are paid the most because they are very, very smart. If you come up with a regulation, they are going to be smart enough to get around that regulation.”

Pros and Cons of the Bailout Package

At the time of the panel discussion, the government was considering a $700 billion purchase of mortgage assets as a way to reassure international financial institutions that billions of dollars of such assets, whose value had been thrown into question, had a solvent buyer. Congressional democrats were pushing for curbs on executive compensation for financial company executives who stood to benefit, and many were gravely concerned about the vast powers being sought by the Treasury Department to determine the price and conditions under which the assets would be purchased. Others wanted relief for homeowners or for the American taxpayers footing the bill for the massive bailout.

Singleton called the Treasury’s proposal “a rather indirect way of recapitalizing the banking system,” which he said is the real crux of the problem. “If you mark to fire sale prices the assets that are on the balance sheet now, a large portion of the financial sector is insolvent. The proposal that is on the table is essentially to buy at a higher price, and I’m actually not quite so concerned about whether we are making a fair price for them. The question is how much do we want to pay above the [fire sale prices] to inject capital into the system?” he said.

“Surely there is a more direct way to address the problem,” he said. One way would be to invest in the banking sector, essentially offsetting the “liquidity discount” now in the market. He said government should get an equity stake in that case “on the part of the American taxpayers” and not “give away that liquidity discount.”

Others said the Treasury had not explained how it would price the assets it would buy, and that continued turmoil in the housing market complicated the picture.
“One of the most troubling aspects to the bailout in my judgment is the lack of a precise pricing mechanism,” said Van Horne. “The Treasury purposefully has talked about reverse auctions but has not specified what will be involved, and is asking for more or less blanket authority.”

Sources: www.gsb.stanford.edu

The financial crisis from a specific perspective by Mathijs van Dijk

2008-10-11T12:35:00.000+01:00

Mathjis van Dijk , Associate Professor of Finance at the Rotterdam School of Management, Erasmus University has received a NWO-VIDI grant for his project entitled

“Liquidity Black Holes”.

Liquidity black holes arise when financial market liquidity suddenly dries up. Trading financial assets becomes prohibitively expensive and asset prices tank. Examples of liquidity black holes are the 1997 Asian crisis, the 1998 Russian debt / LTCM crisis, and the August 2007 subprime mortgage crisis. Liquidity black holes are self-reinforcing. Falling prices lead to further selling because financial traders lose confidence or hit their loss limits. As a result, financial markets break down.

Liquidity black holes can have severe economic consequences. They can cause financial institutions to fail (consider the recent bank run on Northern Rock), undermining the trust in the financial system. They also disrupt the economy directly by blocking companies’ access to capital. We know little about the causes and consequences of liquidity black holes. Under what circumstances do they arise? What is the role of different groups of investors? What is the impact on asset prices? How can financial regulators mitigate the damage to the economy?
This research will answer these vital questions. First, I will investigate liquidity black holes in international financial markets. Looking at a large number of countries over a long period of time will allow me to identify the conditions under which the liquidity and prices of many financial assets collapse simultaneously. Second, foreign investors (notably hedge funds) are often blamed for causing liquidity black holes in emerging markets. I will examine whether foreign investors indeed destabilize the financial system of emerging economies or whether they actually provide liquidity during crises. Third, I will develop a new technique to analyze the impact of liquidity black holes on asset prices.

This research will help financial institutions to anticipate liquidity black holes and financial regulators to design policies to deal with these episodes of financial turmoil.
The NWO-Vidi grant is intended for researchers who, after their defense have done several years of postdoctoral research. The researchers have also generated innovative ideas and successfully and independently developed those ideas. The scientists are among the best ten to twenty percent of their field.

The Enronization Of The Banking Industry by J. Edward Ketz, Associate Professor of Accounting (SMEAL College of Business)

2008-10-11T12:31:00.000+01:00

"Those who cannot learn from history are doomed to repeat it." We frequently utter those words of Santayana, yet we commit the same mistakes.

The ashes of Enron are not a decade old, but we have forgotten the sources of this debris. Instead of sweeping out the rubbish, we cover it up and are surprised to encounter a growing trash pile. Yesterday it was Enron and WorldCom; today it is the banking sector. Who will it be tomorrow—the federal government?

The Bush administration has proposed a $700 billion bailout of Wall Street, which would be the largest wealth transfer from the middle class to the rich. Before we accept this or any other proposal, let's recall the lessons from Enron and WorldCom.
Enron was a bright star in the energy industry. Unfortunately, the firm disintegrated in 2001, leaving many investors empty handed. We learned that the company was a house of cards with jokers for managers.

Four factors sum up the problems surrounding Enron. With few constraints, top managers engaged in self-dealing, including high salaries, huge stock options, and lots of perquisites to themselves. Managers employed aggressive accounting methods to hide their problems and inflate profits. Regulators and watchdogs didn't do their jobs. And Congress stifled real reform by enabling corporate managers to abuse the system and incur few penalties. Let's review these problems and compare them with today.

Enron managers had salaries much higher than the average worker. They had stock options that were supposed to reward them for good performance, but were written so that they enjoyed their millions whatever the performance. They acted as if they were the sole proprietors of the organization. When CEO Jeff Skilling left Enron, his severance package was worth millions.
Ditto for the banking industry. Top managers are consistently overpaid. If they actually delivered value, then maybe they would earn their salaries and stock options. As bank executives have failed us in this subprime mess, why are they receiving these huge salaries and outrageous stock options? And when they screw up, they leave with severance packages in the tens of millions of dollars. If only we had corporate directors who would rein in these undeserved remunerations.

Enron engaged in aggressive accounting behavior, including inappropriate applications of fair-value accounting and incorrect accounting for special purpose entities. Enron misapplied fair-value accounting when it overstated the value of its assets and concomitantly its net income. Enron also used special purpose entities with which to transfer resources, but accounted for these transactions as if the special purpose entities were independent entities.

Business schools and the financial market crisis

2008-10-11T12:28:00.000+01:00

I have heard from a lot of people in the past month. Many of them ask me about the job market for our MBAs, our endowment, our executive education business and about our alumni whose jobs are at risk. But there are some who ask what are you doing about this? What is your role now and in the future as a business school?

I don't presume or pretend to have all the answers, but I do have some thoughts. Firstly, I believe a lot of today’s troubles have been driven not just by greed, but by a lack of confidence.

I think the average employee, maybe a business school graduate, lacks the confidence to ask the tough questions. We saw it in Enron when fast-talking Fastow got his way and no one challenged him. We saw it at WorldCom as well. That past era of trouble is all too recent I might add. Now we have seen it with structured products that most people didn't understand.

Where, I ask, were the bright, well-educated, and especially confident young employees who should have been challenging the logic of this stuff? They were not confident enough, I say. It is uncomfortable to ask for an explanation of an acronym like CDO. What does it mean? What is its real value? Is it sustainable? These are tough questions because they expose the questioner to the smirk of the all-knowing creator of the product. Someone like Fastow maybe.

The other problem I see is one of self-perpetuation of leaders. When we look at the credit crisis, many of the firms now in trouble were led by people who had been in place for many years. They had built great teams perhaps, but were they too cosy to challenge each other -- or challenge the person at the top?

I said I don't have all of the answers. The one thing I do know is that as business schools, we need to teach the basics, but we also need to convince our students to be sceptical and to challenge conventional thinking. MBAs need to have the confidence to ask the tough questions and not be satisfied with the answers until they get the facts.

We also need to instil a confidence that makes people eager to do new things and not just hang on to a job because it pays well. The confidence to reinvent oneself periodically creates opportunities for innovation and entrepreneurship, and ensures that teams don't become too entrenched.

There are lessons as well here for boards of directors. How many boards accepted valuations and management assurances without really asking the tough questions and understanding the answers? How many boards allowed leaders to remain in place without much of a succession plan?

Well, when the dust settles, and I hope it does, there will be lots of blame to go around. I am sure I will continue to get some of the same tough questions. As for me, I intend to focus on the future and make sure our students learn from the past. There is too much to ignore.

Sources: www.mba-channel.com

MBA Programs Prepare Business Students to Switch Gears from Financials, Explore New Options

2008-10-11T12:01:00.000+01:00

By Susan Donaldson James

As Wall Street continues to buckle and choke on the mortgage crisis, many MBA students are rethinking the path to finance jobs with six-figure starting salaries and bonuses that can push annual earnings past $200,000. Overnight, many students have been forced to abandon their hopes for “dream jobs” as investment bankers, switching gears and looking at new options.
The nation’s top business schools say that although students are not in full panic mode, they are increasingly nervous about what lies ahead.

“A lot of students are still hanging,” said Karin Ash, director of career management at The Johnson School at Cornell University. “Recruiters just don’t have word yet from above. Right now they have offers, but the next six months will be telling.” “Surprisingly, it’s not as gloomy as you might think,” she told ABCNews.com. “Students haven’t been hit with the same stunning news as someone who had been working for a company for years.”

Today, about one-third to one-half of all students with a Master of Business Administration head for the financial world and as many as 10 percent look to investment banking. But many have seen their plans dashed in the last two weeks as the 158-year-old investment banking giant Lehman Brothers filed for bankruptcy and top brokerage Merrill Lynch agreed to be taken over by Bank of America.

Two other industry icons — Goldman Sachs and Morgan Stanley — have announced that they would start acting more like commercial banks, as the federal government prepared for an unprecedented bailout of Wall Street.

Students who took offers from Lehman Brothers are still in limbo, wondering whether Barclays, which is trying to take key Lehman assets, will honor the deals. Other companies have been similarly oblique.

200,000 Financial Jobs Gone
According to the Bureau of Labor Statistics, the financial services industry has already shed more than 200,000 jobs in the last year. After Bear Stearns collapsed in the spring, business schools braced for potentially more layoffs and jobless alumni looking for help.
But many have already put programs in place to show students other opportunities — perhaps not as dazzling but less risky.

“It’s still early in the year,” Ash said. “They will use a lot of their type A energy to do what they can to tackle the challenges.”

In 2007, about 21 percent of all Cornell’s MBA students chose the investment banking industry.
“It’s the challenge of the job,” she said. “It’s one of the hardest jobs coming out of business school and the most exciting, in terms of deal-making and making news. With all the recent actions happening on Wall Street, being a part of it draws them. In addition, it compensates.” Annual entry level salaries for investment bankers begin at $95,000 and can more than double after just one year by the time bonuses arrive.

Many of Cornell’s alumni have called to offer their help coaching students in searching for other options. This week, they offered a session on boutique investment banking and energy training for students.

But Michael Chang, 28, and a second-year MBA student, said there is “still a lot of doom and gloom” among his classmates at Cornell. People are nervous. Hiring plans are on hold.”
Luckily, Chang has sealed a job with CitiGroup in New York. “The headlines are a bit overblown,” he told ABCNews.com. “Given all that’s happened — the bankruptcies and what’s going — the market has held up fairly well under the circumstances. I am an optimist. I think we are going to be OK.”

Alexis Jhamb, 26, is relieved that she is concentrating on energy and consulting at Northwestern University’s Kellogg School after a summer internship at Chevron Gas Trading Group in Houston.

“I am confident in my decision,” she said. “The energy question is on everyone’s mind, including the politicians.”

Students Turn to Consulting
Many of her peers who interned at Lehman and Merrill are now looking at consulting.
“Switching to consulting when you have had a banking internship is a harder sell,” Jhamb said. “There is a lot more homework, and it’s an incredibly competitive market right now. Not only are you competing against your own classmates, but against more experienced hires.”
Last week, Kellogg students convened for a session to develop new strategies.

“The message we’ve gotten from our deans is that things look better on the West Coast than the East Coast,” she said. “Also, truly consider offers from internships and don’t sit on offers too long. You might be holding a place for one of your peers.”

Her advisers also suggested looking into the high-tech industry, as well as nonprofits and entrepreneurship. “A lot people are looking at second-tier firms or offices in Dallas, rather than Boston.”

Kate McGee, 28, will earn her MBA from Columbia Business School in May, and has also received a job offer after her summer internship at JPMorgan Chase in its consumer retail group, but she knows even that carries some risk.

Before going to Columbia, McGee worked for Tommy Hilfiger, where her clothing line was discontinued. “I would be lying if I told you that a part of me wasn’t nervous,” she said. “I come from the retail industry where companies have experienced many rounds of layoffs.” Real Life Economics Lessons for Students

Still, she is excited about what she is learning in these hard economic times. “It’s awesome to be in the center of everything right now,” she said.

Harvard Business School is also taking advantage of the Wall Street turmoil to give students “some teaching moments,” according to Jana Kierstead, managing director of MBA career services.

“We tell them to think strategically about how they spend their time,” she told ABCNews.com. “Things happen. Life happens and you have to be prepared.”

Though there are no specialties at Harvard, about 44 percent will pursue careers in finance; 10 percent of those go into investment banking. They are encouraged to develop a five- to seven-year vision and “always have parallel paths,” said Kierstead. “Whatever you are aspiring to, it does take a mental shift, absolutely, and that takes a bit of time.”

‘No Sense of Panic’
“In general, I’d say the students are calm,” she said. “There is no sense of panic. They are mindful and watching what is happening and processing what it means for them and we are helping them do that.”

Harvard has increased its staffing in an already robust coaching program, offering enhanced skill development and reaching out to retain existing companies and recruit hew ones. It is urging students to take a look at boutique and mid-market banks, some of which are “doing very well,” she said. “If they are in long-term corporate finance, they might look at finance leadership companies, which are attractive now,” she said. “When one path closes, they begin to look at other Fortune 500 companies that might not otherwise be candidates.”

Nick Coons, 29, who interned at Lehman this summer as part of Harvard’s MBA program, was given a “firm offer” that is still in limbo.

He said the mood among his classmates is “fairly hopeful,” and those who were originally only interested in finance are looking at consulting and general management. “Students are definitely starting to cast a wider net in terms of industry preference.”

But David Parker, 25, of New Jersey, who hopes to launch a digital media business with a Harvard classmate, is worried that even though his plans are comparatively less risky, “we’ll see if our funding dries up, too.”

“I’m definitely not feeling lucky,” Parker said. “Looking back over the last few years people were making a million dollars or more at my age. It is somewhat disheartening to see that and I wish I’d had an interest in hedge funds.”

“Most people are confident that they’ll get a job,” he said. “They just won’t get their dream job.”
And for Guarav Malik, a finance student from India in the MBA program at Rutgers Business School in New Jersey, that means not any job in the United States.

Future Job Opportunities for MBA Students
“We do have companies coming in who are looking to hire financial analysts, but not a single company is looking for international students,” he told ABCNews.com.

The 24-year-old interned this summer at CitiGroup, but given the tight market for jobs, it is unlikely to sponsor his H1B visa and Malik will return to India, where the market is more robust. “They still have to get back to me, but I am hoping,” he said.

Even the undergraduate business colleges are preparing their students for the downturn. At Babson College in Wellesley, Mass., one-third major in finance.

“As a market overall, undergraduates are still in demand,” said Megan Holker, director of Babson’s center for career development. “We fare better than the MBAs because we are cheaper labor. This is a specialized school and they hit the ground running.”

“They can switch gears, they are a little more nimble,” said Holker. “My message to them is clearly things are rocky, so you’ve got to broaden your horizons, but your experience doesn’t have to be on Wall Street.”

Holker suggests financial leadership programs at conglomerates like United Technologies, General Electric Co. and Unilever. Like Harvard, Babson encourages its graduates to look at “hip, boutique” firms like Rothchild Group and Harris Williams. “There’s money in these places, too,” she said. “You don’t get the bonus, but you’re not working 100 hours a week.”
Still, for most business school grads, Wall Street is “definitely a dream,” she said. “It’s the prestige of the brand and all that comes along with it. Harder than making the switch is to switch gears in their brains.”

But most graduates of the nation’s most prestigious business schools will survive, according to Doug Matthews, CEO and president of Right Management, a human-resources consulting and professional staffing company in Philadelphia.

“This is a little more dramatic because so much money is at risk and it’s so quick and so global,” Matthews told ABCNews.com. “But this has been going on forever, where kids come out of school completely able and can’t find jobs in their areas of study.”

“There’s a generational aspect to this,” he said. “They want choices anyway — it’s like air to them — and don’t want to be locked to one company. People will still get hired.”
Matthews encourages students to turn to their strengths, be determined and don’t give up.
“Try to find something more stable, give it a year and after the presidential elections and things stabilize, the recruitment will start again and they’ll have prestige with those good degrees. Like the housing market, it will rebound at some point.”

“Network, differentiate yourself, leverage your past experience,” he said. “It’s still a good market.”

The credit crunch and the MBA application spike. US MBAs take cover

2008-10-11T11:14:00.000+01:00

“Despite the softening economy, the placement rate for our 2008 graduates is on par with last year's graduates,” confirms Allyson Moore, Director of the Career Development Office at the Yale School of Management. “Historically, more than 50% of our graduating students have accepted full-time offers in the financial services industry, and it remains the top field of interest. However, this year our students enjoyed particular success in Consulting, with nearly one-quarter of our 2008 graduates entering the industry compared to 14% last year.”

Indeed, most consultancies are still hiring MBAs in comparable numbers to the period before the subprime crisis hit. Many felt that they cut back too severely during the last downturn seven years ago, and they are wary of making the same mistake again this time round.
Learning lessons

Companies learned lessons during the 2001 downturn, but so did MBA programs. “As the economy tightens further, MBA career services offices will continue to innovate to ensure that students are well equipped to compete in this highly competitive labor market. The Yale School of Management has frequent conversations with recruiters and a clear sense of how the upcoming belt-tightening will affect our students,” Moore explains. “We expect the investment banks to rely heavily on converting their top performing interns into full-time hires, which will likely impact their on-campus full-time recruiting efforts this fall. However, last year, 100% of our first-year students who worked as summer associates for investment banks returned to campus with full-time offers so we remain optimistic about the upcoming recruiting season.”

On the applications side, things are looking up as increasing numbers of students take advantage of a ‘break’ in their careers to get an MBA, and the profile of candidates is broadening at the same time. Mae Jennifer Shores, Director of MBA Admissions at UCLA’s Anderson School of Management, says: "Not only are applications at UCLA increasing, fuelled in part by changes in the US and world economies, but the diversity of students applying to business school is widening. We find more individuals in the pipeline with backgrounds in government, not-for-profit firms, and international agencies. The MBA is no longer seen as primarily a degree for those who wish to pursue careers in investment banking, consulting, and consumer goods or manufacturing. Rather, the MBA is now recognized as a degree that provides a breadth of skills that are applicable to virtually any career, including those dedicated to social entrepreneurship."

“The credit crunch hasn't had the same impact on Canadian hiring that it did in the US job market and we've been fortunate that our 2008 placement rate has continued to track ahead of the results for our May 2007 class, a group that achieved a placement rate of 92%. We've heard from a small number of candidates that the credit crunch has influenced their MBA decision, but most candidates instead use personal factors like the desire to switch careers, or develop a new skill-set as primary motivators to pursue an MBA," says Niki Healey, Director of MBA Admissions & Recruitment at the Richard Ivey School of Business, in London, Ontario. .

"Employment of MBAs is an expensive proposition for corporations," says Richard E. Sorensen, chair of the board at the accrediting agency AACSB International, confirms. "When the economy slows, MBA recruitment is an area where companies cut back. However, here in the United States, the number of recruiters on campus over the past two to three years has been increasing."

Many career offices agree that students in recent years have become savvier and more flexible in choosing their post-graduate careers. This, along with re-doubled efforts at career offices, has reduced the effect of the credit crunch on recruiting. Ann Richards, at the Johnson School at Cornell says: “We had a good employment recruiting year, for both internships and full time employment, but the economy seems to be slowing. This means students may have to put a little more effort into their job search for the coming year. Many schools, including the Johnson School are encouraging their new students to begin Career Leader, a career counseling and self assessment program, before orientation, so they can hit the ground running when companies arrive on campus this fall.”

Sources: topmba.com

Living by Faith Contrasted with Living by Law with Hoekstra

2008-10-10T07:54:00.001+01:00

For as many as are of the works of the law are under the curse; for it is written, "Cursed is everyone who does not continue in all things which are written in the book of the law, to do them." But that no one is justified by the law in the sight of God is evident, for "The just shall live by faith." Yet the law is not of faith, but "The man who does them shall live by them." (Gal_3:10-12)

In our previous meditation, we considered God's call to live by faith, given through the prophet Habakkuk. "Behold the proud, his soul is not upright in him; but the just shall live by his faith" (Hab_2:4). We also looked at the first of three appearances of this quote in the New Testament. "For I am not ashamed of the gospel of Christ . . . for in it the righteousness of God is revealed from faith to faith; as it is written, "The just shall live by faith." (Rom_1:16-17).The second appearance is given in Galatians, where living by faith is contrasted with living by law.

This contrast between law and faith involves a curse that is related to the law. "For as many as are of the works of the law are under the curse." The curse is upon those who attempt to establish an acceptable relationship with God based on human works, as measured by God's holy law. The accompanying Old Testament quote explains the curse. "For it is written, "Cursed is everyone who does not continue in all things which are written in the book of the law, to do them." The curse is that those who choose to live by human performance under the law must always accomplish everything the law commands. Performance of some of the law's demands some of the time is unacceptable. This comprehensive pressure requiring perfect performance may seem curse enough. Yet, the consequences of inevitable failure intensifies the curse. This dreadful consequence can be seen in the reminder of the blessed remedy that God's grace provides. "Christ has redeemed us from the curse of the law, having become a curse for us (for it is written, 'Cursed is everyone who hangs on a tree')" (Gal_3:13-14). Those who violate any portion of the law's demands deserve the judgment that Jesus took on the cross.

This gracious provision of salvation through the substitutionary death of Christ reminds us that faith, not law, is our abundant hope. "But that no one is justified by the law in the sight of God is evident, for 'The just shall live by faith.'" Faith involves depending upon the work of another, even Christ. Living by law is not living by faith. It is living by human performance. "Yet the law is not of faith, but "The man who does them shall live by them."

Lets Pray;

Dear Lord, I praise You for taking upon Yourself the curse of the law that I deserved. My heart exults that the just shall live by faith, not by human performance. Please teach me to live by faith and not by law, Amen.

Growing in Grace through Living by Faith with Hoekstra

2008-10-09T07:34:00.000+01:00

Behold the proud, his soul is not upright in him; but the just shall live by his faith . . . For I am not ashamed of the gospel of Christ, for it is the power of God to salvation for everyone who believes, for the Jew first and also for the Greek. For in it the righteousness of God is revealed from faith to faith; as it is written, "The just shall live by faith." (Hab_2:4 and Rom_1:16-17)

In our four previous devotions on Jesus as our ultimate example, we concluded our series on "humility and grace" and began to consider "faith and grace." If we want to grow in the grace of God, we must live by faith, since faith accesses grace. "We have access by faith into this grace in which we stand" (Rom_5:2).

Our present, initial verse also builds upon our earlier studies on humility, which was repeatedly contrasted with pride. "God resists the proud, but gives grace to the humble" (Jam_4:6). Habakkuk was inspired of the Spirit to state the same truth in this form. "Behold the proud, his soul is not upright in him." James contrasted pride with humility. Here, the prophet concluded his statement by contrasting pride with faith. The proud person is depending upon himself. The humble person is willing to depend upon the Lord. The humble person is the one who will be growing in the grace of God.

This simple proclamation of living by faith is so profound that it is repeated in three strategic epistles in the New Testament. The first mention is in Romans in connection with the gospel of grace. "For I am not ashamed of the gospel of Christ, for it is the power of God to salvation for everyone who believes, for the Jew first and also for the Greek." Paul was not embarrassed by the good news of the grace of God that was available in Jesus Christ. He knew that it was God's powerful truth that would save the soul of anyone (Jew or Gentile) who would believe in Christ. That message of grace offered God's righteousness to all who would believe. "For in it the righteousness of God is revealed from faith to faith." The same righteousness that the law demanded, the gospel of grace provided. "But now the righteousness of God apart from the law is revealed, being witnessed by the Law and the Prophets, even the righteousness of God which is through faith in Jesus Christ to all and on all who believe" (Rom_3:21-22). The righteousness that people need (both for a standing in heaven and for a walk on earth) comes by grace through faith. Yes, initially and continually, "The just shall live by faith."

Lets Pray;

O righteous Lord, I praise You for the gift of Your righteousness, by grace through faith. My heart rejoices that I have a righteous standing before You in heaven above. My heart humbly cries out in faith for a daily impartation of that same righteousness in and through my life for a godly walk on earth below, through the grace of Christ, Amen.

True vs. False (X) TRUE AND FALSE HUMILITY with Marc D. Carpenter

2008-10-07T08:10:00.000+01:00

Let's turn to Proverbs 16:18-19:

Proverbs 16: (18) Pride goes before destruction, and a haughty spirit before a fall. (19) It [is] better [to be] of a lowly spirit with the poor than to divide the spoil with the proud.

Today, the Lord willing, I will be preaching on true and false humility. The reason I chose this as one of the topics in this series on the true versus the false is that most people have no idea what true humility is. Lost religionists of all stripes, from Arminians to Calvinists, are full of false humility. You can see the false humility just oozing from them. I hope to show you that this is actually a form of pride. As we've seen time and time again in this series, what they call good, God calls evil. God says in Isaiah 5:20 "Woe to those who say to evil, good; and to good, evil; who put darkness for light, and light for darkness; who put bitter for sweet, and sweet for bitter!" We've seen that what lost people call the true God, the true Christ, the true Holy Spirit, and the true gospel, God calls a false god, a false christ, a false spirit, and a false gospel. What lost people call shepherds, God calls wolves. What lost people call a church of God, God calls a church of Satan. What lost people call love, God calls hate. They call the darkness light, and the light darkness. What they call godly, God calls satanic, wicked, evil, blasphemous, and an abomination. This is true for the subject at hand. Their view of humility is actually the OPPOSITE of humility. Let's look at the TRUE humility that believers have and contrast it with the FALSE humility that unbelievers have.

In the Old Testament, the Hebrew words that are translated "to humble," "humble," and "meek" all come from the same root, a-NAH. Literally, it is "depressed" or "to depress." We think of someone who's depressed as someone who's overly sad, but that's not the way "depressed" is used. It is used in the sense of "debased" or "lowly" or "needy." It's the same in the New Testament. The word that is used for the verbs "to humble" or "to abase" is tap-i-NO-o, which means "to depress," and the word that is used for the adjective "humble" or "lowly" is tap-i-NOS, which means "depressed." The one English word to keep in mind that best describes humility is LOW. Humility is being LOW.

How is godly humility manifested? First, it is manifested in a knowledge of one's sinfulness in light of the holiness of God. When one comes to the knowledge that God is absolutely sinless and undefiled and that He demands holiness that equals His, the sinner sees himself as unable to meet up to the standard that God requires. He sees that he is totally unworthy in and of himself to receive even the least of God's favors. He sees in the light of God's justice that his sin deserves everlasting death. Let's turn to some examples of this:

Genesis 32:10:

Genesis 32: (10) I am not worthy of all the mercies and all the truth which You have done for Your servant, for I passed over this Jordan with my staff, and now I have become two companies.

Psalm 51:5:

Psalm 51: (5) Behold, I was brought forth in iniquity, and in sin my mother conceived me.

Isaiah 6:3-5:

Isaiah 6: (3) And one cried to the other and said, Holy, holy, holy [is] Jehovah of Hosts; all the earth [is] full [of] His glory! (4) And the doorposts shook from the voice of the one who cried; and the house was filled with smoke. (5) Then I said, Woe [is] me! For I am cut off; for I [am] a man of unclean lips, and I live amongst a people of unclean lips; for my eyes have seen the King, Jehovah of Hosts.

Romans 7:14-24:

Romans 7: (14) For we know that the Law is spiritual, but I am fleshly, having been sold under sin. (15) For what I work out, I do not know. For what I do not will, this I do. But what I hate, this I do. (16) But if I do what I do not will, I agree with the Law, that [it is] good. (17) But now I no longer work it out, but the sin dwelling in me. (18) For I know that in me, that is in my flesh, dwells no good. For to will is present to me, but to work out the good I do not find. (19) For what good I desire, I do not do. But the evil I do not desire, this I do. (20) But if I do what I do not desire, [it is] no longer I working it out, but the sin dwelling in me. (21) I find then the law, [when] I desire to do the right, that evil is present with me. (22) For I delight in the Law of God according to the inward man; (23) but I see another law in my members having warred against the law of my mind, and taking me captive by the law of sin being in my members. (24) O wretched man [that] I [am]! Who shall deliver me from the body of this death?

You might be wondering why I didn't read verse 25. Well, it's to make a point. While it is true that a regenerate person shows humility by seeing his sinfulness, IT DOESN'T STOP THERE! There are many who have admitted their sin but who were unregenerate! Think of Pharaoh. Think of King Saul. Think of Nebuchadnezzar. Think of Judas. They admitted that they sinned, but they were lost. If one goes no further than saying he's a sinner and deserves God's wrath, he remains dead in his sins! And here's where we get into the first point of false humility. Suppose someone is under deep conviction of his sin and deeply troubled about the state of his soul and is telling people that he is on his way to hell because of his sin and doesn't know the way out. Or suppose someone says that he is too sinful for God to save him because he knows that God is holy, righteous, and just. What would the false religionists say? They'd say, "That man is under Holy Spirit conviction. Look at the humility of that man." But in truth, that man is not showing godly humility at all! He is showing false, satanic humility! Now that sure sounds mean to the lost religionist. Here's a guy who's struggling with his sin, he knows he's doing wrong, he knows he's not worthy, and yet we're calling all this wicked? That's exactly what we're doing. And the reason why we're doing this is because this man is ignorant of the only thing that makes the difference between heaven and hell. As long as he hasn't found the answer, he is wicked and evil, no matter how much crying and sleeplessness he goes through.

Let's read verses 24 and 25 of Romans 7 and then go on and read the first two verses of chapter 8:

Romans 7:(24) O wretched man [that] I [am]! Who shall deliver me from the body of this death? (25) I thank God through Jesus Christ our Lord! So then I myself with the mind truly serve [the] Law of God, and [with] the flesh [the] law of sin. (8:1) [There is] therefore now no condemnation to those in Christ Jesus, who do not walk according to flesh, but according to Spirit. (2) For the Law of the Spirit of life in Christ Jesus set me free from the law of sin and of death.

Paul knew his sinfulness, but he also knew that he was not going to be judged based on his sinfulness! He knew that he had a righteousness that answered ALL of the demands of God's law and justice, even while he remained a sinner in his character and conduct! He knew that he was NOT condemned, because of the atoning blood and imputed righteousness of Christ alone! And what did Isaiah know when he had confessed his sinfulness? Let's go back to Isaiah 6 and read verses 6 and 7:

Isaiah 6: (6) Then one of the seraphs flew to me [with] a live coal in his hand, snatched with tongs from the altar. (7) And he touched [it] on my mouth, and said, See, this has touched your lips; and your iniquity is taken away, and your sin is covered.

His iniquity was covered by the atoning blood and imputed righteousness of the coming Messiah!

Now let's turn over to the story of the Pharisee and the tax collector in Luke 18. Let's read verses 10 through 14:

Luke 18: (10) Two men went up into the temple to pray, the one a Pharisee, and the other a tax collector. (11) The Pharisee [was] standing, praying these things to himself: God, I thank You that I am not as the rest of men, rapacious, unrighteous, adulterers, or even as this tax collector. (12) I fast twice [on] the sabbath; I tithe all things, as many as I get. (13) And standing at a distance, the tax collector would not even lift up [his] eyes to Heaven, but smote on his breast, saying, God, be merciful to me, the sinner! (14) I say to you, This one went down to his house having been justified, [rather] than that one. For everyone exalting himself will be humbled. And the [one] humbling himself will be exalted.

Jesus uses the tax collector as an example of humility. The lost religionists will use this passage, too, to promote their false view of humility. They will say that the tax collector called himself a sinner, so those who realize that they are sinners are either saved or on their way or under Holy Spirit conviction. But look at what the tax collector knew. He didn't just admit that he was a sinner - HE KNEW WHERE MERCY IS FOUND! And when he asked God to be MERCIFUL to him, what was he asking? A study of this word is very enlightening. The verb that the tax collector used was one that is only used one other place in the New Testament. It's found in Hebrews 2:17. Let's turn over there:

Hebrews 2: (17) For this reason He ought by all means to become like [His] brothers, that He might become a merciful and faithful high priest in the things respecting God, in order to make propitiation for the sins of [His] people.

The word translated "be merciful" in Luke 18 is the same word as what is translated "make propitiation for" in this passage. And if that isn't enough, then take a look at the other Scripture passages that use words that come from the same root as the word in Luke 18.

1 John 2:2:

1 John 2: (2) And He is [the] PROPITIATION relating to our sins."

1 John 4:10:

1 John 4: (10) He loved us, and sent His Son [to be] a PROPITIATION relating to our sins.

Romans 3:24-25:

Romans 3: (24) being justified freely by His grace through redemption in Christ Jesus, (25) whom God set forth [as] a PROPITIATION through faith in His blood.

The self-righteous religionists will almost inevitably point to the tax collector - or the publican, as the King James Version puts it - to defend their heresy that newly regenerated persons don't know about the atoning blood and imputed righteousness of Christ. They'll ask, "How much did the publican know?" Well, the Bible tells us how much he knew. He knew that he did not have a righteousness that answered the demands of God's law and justice, and he knew about propitiation, which is God's wrath being appeased. And from Romans 10:1-4, we know that he was submitted to the righteousness of God revealed in the gospel, which is the propitiatory sacrifice and imputed righteousness of Jesus Christ. How much did the publican know? He knew what ALL Christians know - that salvation is by the atoning blood and imputed righteousness of Christ alone, which demands and ensures the salvation of all whom He represented.

Next, as we have already seen in some of the verses we read, true humility is evidenced by a spirit of repentance. And since I'm not planning to do a sermon on true repentance versus false repentance in this series, let me just say a word about it now. There are two main kinds of repentance that a believer engages in. The first kind is the repentance at regeneration, in which the regenerated sinner acknowledges that everything he did before salvation was dead works and fruit unto death and that he worshiped and served a false god and believed in a false gospel. This kind of repentance is never repented of again. Some think that it's the essence of humility to say that they're continuing to repent of all the dead works that they continue to produce, including continuing to repent of confessing a false gospel. This is not humility that comes from God; this is the false humility that comes from Satan. The other kind of repentance is that ongoing repentance that characterizes a believer's life, in which one not only confesses that he continually falls short of perfect righteousness, but he confesses SPECIFIC sins when they are brought to his attention. This means that a humble person is willing to take correction. Proverbs 9:8 says, "Rebuke a wise man, and he will love you." A person who claims to be humble but will not receive godly rebuke from a brother thinks too much of himself.

And speaking of thinking too much of one's self, the Bible in many places shows that Christians are to not think more highly of themselves than they ought. Let's turn to some of these passages.

Galatians 6:2-3:

Galatians 6: (2) Bear one another's burdens, and so you will fulfill the law of Christ. (3) For if anyone thinks to be something, he deceives himself, being nothing.

1 Cor. 10:12:

1 Corinthians 10: (12) So that he that thinks to stand, let him be careful that he not fall.

Romans 12:3,16:

Romans 12: (3) For through the grace which is given to me, I say to everyone being among you, not to have high thoughts beyond what is right to think. But set your mind to be right-minded, even as God divided a measure of faith to each. ... (16) minding the same thing toward one another, not minding high things, but yielding to the lowly. Do not become wise within yourselves;

And look at how Paul urges the brothers to humility by using Christ as an example in Philippians 2:3-8:

Philippians 2: (3) [doing] nothing according to party spirit or self-glory, but in humility, esteeming one another [as] surpassing themselves; (4) each not looking at the things of themselves, but each also [the] things of others. (5) For think this within you, which [mind was] also in Christ Jesus, (6) who subsisting in the form of God, thought [it] not robbery to be equal with God, (7) but emptied Himself, taking [the] form of a slave, having become in [the] likeness of men (8) and being found in fashion as a man, He humbled Himself, having become obedient until death, even [the] death of a cross.

Christ humbled Himself for us, and we ought to humble ourselves for the brothers.

I'd like to address a couple more things that false religionists see as humble. The first one is this: "I really don't understand anything about God. I really don't know anything about salvation. I'm just a poor ignorant sinner, and all I know is to rest in Jesus." "Oh, how humble he is!" say the false religionists. Pleading ignorance is a favorite of the falsely humble. And not only this, they seek to make others ASHAMED of their knowledge. They call others "proud" and "know-it-alls" when others talk about the KNOWLEDGE that all believers have. Well, as we have seen before, the Holy Spirit does not deal in ignorance. Upon regeneration, the Holy Spirit gives a SPECIFIC KNOWLEDGE to every single regenerate person without exception. Romans 10:3 shows that IGNORANCE is DEADLY when it comes to the knowledge of the righteousness of God revealed in the gospel. Isaiah 45:20 says that the idolaters are missing KNOWLEDGE. And there are many verses that we've already gone over in previous sermons that talk about the KNOWLEDGE that all believers have. This KNOWLEDGE is knowledge of the GOSPEL. It is knowledge that includes who God is, who man is, who Jesus Christ is, and what Jesus Christ did. It is knowledge of God's promise of salvation conditioned on the atoning blood and imputed righteousness of Jesus Christ alone. The one who says that he knows nothing about salvation but just rests in Jesus rests in a FALSE Jesus. He rests in someone he doesn't know anything about. How can one REST in Jesus when one is ignorant of the PERSON and WORK of Jesus?

And there's something else that sounds so humble to the ear of the lost religionist. It goes like this: A person who is already a professing Christian says, "I'm so, so sinful. I'm just too sinful to pray. God would never accept my prayers because I'm so filthy." Oh, that'll bring out the tears of the false religionists. They'll come up to him and hug him and say that they understand and that everything is okay. But what this man has shown is SATANIC PRIDE. He believes that acceptance before God is based on WHAT? His own righteousness. He believes that he can't come to God because he is UNRIGHTEOUS, so what does he believe will gain him acceptance before God? His OWN RIGHTEOUSNESS. What a proud, haughty man it is who would say that he believes in Jesus but who is too sinful to have access to God. Just think of this: Once this guy is over his depression and starts praying again, why has he begun to pray again? Because he feels that he's not so sinful anymore! He has somehow washed himself up to the point that he now can be accepted before God. What does the Bible say about this? Let's turn to Ephesians 3:11-12:

Ephesians 3: (11) according to the eternal purpose which He accomplished in Christ Jesus our Lord, (12) in whom we have boldness and access in confidence through His faith.

Upon what basis do we have confident boldness and access? Through our own works and cleanness? No - it is through His faith. Let's turn to Hebrews 4:14-16:

Hebrews 4: (14) Then having a great High Priest who has passed through the heavens, Jesus the Son of God, let us hold fast the confession. (15) For we do not have a high priest not being able to sympathize with our weaknesses but [One] having been tried in all respects according to [our] likeness, apart from sin. (16) Therefore, let us draw near with confidence to the throne of grace, that we may receive mercy, and we may find grace for timely help.

Upon what basis do we confidently draw near to the throne of grace? Through our own works and cleanness? No - it is through the Great High Priest who intercedes for us. Let's turn to Hebrews 10:19-23:

Hebrews 10: (19) Therefore, brothers, having confidence for the entering of the [Holy of] Holies by the blood of Jesus, (20) which He consecrated for us, a new and living way through the veil; that is, His flesh; (21) and [having] a Great Priest over the house of God, (22) let us draw near with a true heart in full assurance of faith, our hearts having been sprinkled from an evil conscience, and [our] body having been washed in pure water; (23) let us hold fast the confession of the hope unyielding, for He who has promised is faithful.

Upon what basis do we have confidence for entering the Holy of Holies? Through our own works and cleanness? No - it is through the blood of Jesus. Notice in verse 22 that we have full assurance of faith. Upon what basis do we have this? Through our own works and cleanness? No - it is because we have been sanctified by the blood of Christ. The false religionist sees a person who doubts his salvation and says, "humble." God says, "proud." The false religionist sees a person who is fully assured of his salvation and says, "proud." God says, "humble." A truly humble person acknowledges and repents of his sin, and says that he is not sufficient in and of himself to be accepted before God, and, at the same time, he is fully confident that he is accepted before God because of the atoning blood and imputed righteousness of Christ alone. To close, let's turn to a passage of Scripture that clearly shows the humility and confidence of believers: 2 Corinthians 3:4-5.

2 Corinthians 3: (4) And we have such confidence through Christ toward God; (5) not that we are sufficient of ourselves to reason out anything as [being] out of ourselves, but our sufficiency is of God.

Amen.

Jesus, the Ultimate Example of Humility

2008-10-05T09:38:00.001+01:00

Let this mind be in you which was also in Christ Jesus, who, being in the form of God, did not consider it robbery to be equal with God, but made Himself of no reputation, taking the form of a servant, and coming in the likeness of men. And being found in appearance as a man, He humbled Himself and became obedient to the point of death, even the death of the cross. (Phi_2:5-8)

In order to live daily by the grace of God, we must be willing to walk in humility. "God . . . gives grace to the humble" (1Pe_5:5). The word of God offers extensive teaching concerning a life of humility. Moreover, in all of the scriptures we will find no greater insight than that which pertains to Jesus, the ultimate example of humility.

Before He came to earth as a man, Jesus had existed throughout eternity past as deity, the eternal Son of God. "Bethlehem . . . out of you shall come forth to Me the One to be ruler in Israel, whose goings forth have been from of old, from everlasting" (Micah 5:2). Since He was God, claiming deity was not an inappropriate intrusion into another's domain: "who, being in the form of God, did not consider it robbery to be equal with God." Although He would of necessity exist endlessly as God (even during His pilgrimage as a man), He did not go about independently exercising His Godhood: "but made Himself of no reputation." Instead of manifesting all of His innate glory, He functioned as any human slave would: "taking the form of a servant, and coming in the likeness of men." During His earthly ministry, He Himself would emphasize His servanthood role. "The Son of Man did not come to be served, but to serve, and to give His life a ransom for many" (Mat_20:28).

In His majestic salvation mission, Jesus, the Son of God, would voluntarily accept the path of humility. "He humbled Himself and became obedient to the point of death, even the death of the cross." This humility involved a yielding to the Father that was so extensive He would even embrace the most abhorrent death of all, a sin-atoning crucifixion. In spiritual agony, He would pray, "O My Father, if it is possible, let this cup pass from Me; nevertheless, not as I will, but as You will" (Mat_26:39). This humble surrender to the Father's will is the path that our Lord calls us to walk. "Let this mind be in you which was also in Christ Jesus."

Let's pray:

Dear heavenly Father, my heart is humbled as I consider the humbling You accepted in coming to this sinful planet. As God, You deserved all honor and glory. Yet, in order to please the Father and to save sinners,You were willing to become a lowly, human servant. Unlike Your example, I am easily tempted to resist humility, even though I deserve to be totally humiliated. Lord, please work in me a humble heart like You, in Your holy name, Amen.

Harvard Business School Examines Crisis on Wall Street

2008-10-04T10:31:00.000+01:00

Dean Jay Light Leads Panel of Faculty Experts

BOSTON , Set. 24. 2008 --As the economic crisis began to spread from Wall Street to Main Street and beyond, Harvard Business School Dean and finance professor Jay Light convened a panel of fellow faculty experts yesterday to provide some explanation and perspective on the historic series of events that have thrown U.S. and world financial markets into a state of turmoil unseen since the Great Depression of the 1930s.

Joining Dean Light on the stage of Burden Auditorium before an overflow crowd of more than 900 students and other members of the HBS community were Professor Robert Merton, winner of the Alfred Nobel Memorial Prize in the Economic Sciences in 1997; Professor David Moss, author of When All Else Fails: Government as the Ultimate Risk Manager; Lecturer Nicolas Retsinas, Director of Harvard University's Joint Center for Housing Studies and former U.S. Assistant Secretary for Housing; and Senior Lecturer Clayton Rose, former head of the Global investment Banking and Global Equities Divisions at JP Morgan & Co.

Dean Light began the proceedings by pointing to three key factors that lie at the heart of the current crisis: leverage, transparency, and liquidity. In the midst of the housing bubble and the easy money that went with it, he said, there was "too much leverage, with too little ability to understand the risks." Wall Street banks were doing deals with $30 dollars of borrowed money to one dollar of their own. As mortgages were "sliced and diced" into various forms of securities, the complexities of these instruments strained the understanding of even the experts. And new mark-to-market accounting standards did nothing to clear up the picture. What we're left with are failed institutions, the disappearance of liquidity, shattered confidence, and for many, fear of what the future may hold.

According to Light, three tasks lie ahead: "First, stabilize the patient, fix the problem, and finally, think about rehabilitating and getting the patient back on his feet. That's what the $700 billion bailout is all about."

Following the Dean's remarks, Nicolas Retsinas provided an historical overview of the housing market, explaining that before the New Deal, buying a home required a 50 percent down payment. President Franklin D. Roosevelt's reforms were designed to lower the barriers for many more people by opening credit lines through bodies such as the Federal Housing Administration and the National Mortgage Association. In the 1980s, he continued, loans were made by regulated banks, but in the 1990s, there was a significant change as "neighborhood banks were transformed into large national mortgage banks," and as further assistance in absorbing risk came from Fannie Mae and Freddie Mac. All this fueled the housing boom of the 1990s, with skyrocketing prices and 25-30 percent of homes being purchased by investors. By 2005, said Retsinas, subprime lending was commonplace. "Everyone was extending credit. People who couldn't pay off their mortgages said they'd simply sell and walk away. But when the bubble burst, they couldn't." The result: a record number of delinquencies and defaults.

Focusing on Wall Street, Clayton Rose noted that over the past few decades, as deregulation and other changes took place in the world of banking, oversight was missing in action. The Securities and Exchange Commission imposed light capital requirements on investment banks, which, he said, "deployed more and more of their own capital to see higher returns" in things like mortgage-backed securities. "This worked well until a few months ago." With no access to deposits or Federal funds, brand-name firms began to go under. And those that didn't - Goldman Sachs and Morgan Stanley - were required to become bank holding companies - and as such, subject to much more regulation.

David Moss expressed concern that the bailout might encourage the continuation of excessive risk taking. "The federal government has been managing risk for a long time," he said, "with the likes of the limited liability law, workers' compensation, and the Federal Deposit Insurance Corporation. But it also has to be worried about the potential for moral hazard" - that is, creating incentives for people to make the same mistakes repeatedly because they know that the government will come to their rescue. As a result, Moss advised, it's not enough to just offer a multibillion-dollar bailout. "The Secretary of the Treasury also has to figure out a mechanism for monitoring and controlling moral hazard."

Robert Merton noted the huge amount of wealth that has been lost as a result of this crisis--$3-4 trillion. But he also pointed out the structural relationship between financial innovation and crisis. "Successful innovation will always outstrip the regulations necessary to support it," he said. "Looking forward, I agree that we need regulatory changes, but I'm concerned about unintended consequences. I'm hopeful that we will have serious discussions before we make recommendations." And as Merton sees it, it would be wrong to recommend the removal of the "technical people" responsible for the innovations that will continue to be developed in finance in the years ahead. Managers and regulators have to be "more savvy," he concluded.

About Harvard Business School
Founded in 1908 as part of Harvard University, Harvard Business School is located on a 40-acre campus in Boston. Its faculty of more than 200 offers full-time programs leading to the MBA and doctoral degrees, as well as more than 140 open enrollment and custom Executive Education programs. For a century, HBS faculty have drawn on their research, their experience in working with organizations worldwide, and their passion for teaching to educate leaders who have shaped the practice of business around the globe.

Source: Harvard MBA

5 Ways To Boost Your Recruiting Chances In A Tough Hiring Market

2008-10-04T09:22:00.000+01:00

Lately one of my most common questions via email goes something like this:

“I’m a rising senior looking at investment banking recruiting in the fall. However, the market is really tough right now, there have been a lot of layoffs, bonuses were down 30%, and it seems like a lot of the bigger banks may not be hiring much. What can I do to break in?”

The market we’re in right now is definitely the toughest since 2002 or so, and even well-qualified students and professionals are faced with the same dilemma: how to get in when hiring is down.

How A Tough Market Affects You

The primary impact of a tough hiring market is to raise “the bar” of recruiting standards. Back in 2004-2006, friends got into investment banking without previous internships, in many cases without previous finance experience at all.

While it’s still possible to do this, a poor market makes it more difficult, especially at bulge bracket firms.

To have a good shot at getting in at the largest banks these days, you’d have to have previous finance experience or some kind of extremely influential connection (the CEO would be a good place to start).

But what should you do if you have neither of those?

1) Networking: Build It Before You Need It (If you Can)

This one is admittedly difficult to pull off at the last minute, but it is the most effective strategy for breaking in when hiring is down.

If you’re anything other than a rising senior in college, whether you’re a younger student or a working professional, the good news is that you have significantly more time to build up your list of industry contacts.

As I wrote in my original article on the basics of networking your way into investment banking, the two best places to start are your alumni network and friends in the field.

If this is last-minute recruiting (e.g. you are a rising senior), you will have to focus on relationships that actually lead to jobs, and you’ll likely have to do some cold-calling in the process.

2) Give Boutique And Middle-Market Firms Some Love

Back when I wrote about working at a bulge bracket vs. a boutique, I recommended that you go to the largest firm possible. Your experience at smaller places tends to be quite random - it could be fantastic or it could be awful, whereas a bulge bracket ensures that you’ll get at least a decent experience.

These rules go out the window in a tough job market. I don’t care if you have multiple degrees from Wharton or have interned at Goldman Sachs for the previous 3 summers, there’s no predicting what will happen in this market, and you want to spread your net as wide as possible.

The logic is simple: the lower end of the market is less affected by downturns than the mega-deals are, and many boutiques out there are still hiring.

A good place to get started is this thread on Wall Street Oasis on regional boutiques - there are some good names on there to review.

By the way, by “boutique” I don’t mean the likes of Lazard, Evercore or Moelis & Company - those are all smaller, M&A-focused firms with great names and reputations that are on par with the bulge brackets. I’m referring to true regional boutiques that are not “famous” and which don’t get much attention.

3) Consider Private Equity, Hedge Funds And Related Finance Jobs

This one might sound crazy - how can you possibly pursue the typical “exit opportunity” jobs when you have no experience yet?

Truthfully, it isn’t possible unless you’ve had a previous internship in one of these fields or have some other experience that makes you especially well-qualified.

Here are a few possibilities:
You have a quantitative degree (math/engineering/science) with some financial knowledge - some hedge funds may hire you even without a previous finance internship.
You worked at a private equity fund or hedge fund last summer - I’ve had friends who have gone directly to one of these following a summer internship.
You’re a mid-level consultant or corporate development executive - rather than going to banking, consider private equity and venture capital, both of which will value your experience more than bankers would anyway.

4) Expand Your Geography - Go East, Young Man (Or Woman)

The topic of geography and working outside the US has been popular in recent reader Q&A sections, and with good reason - Europe, Asia and the rest of the world have not been hit nearly as hard by the credit crunch and recession as the US has.

If you have the appropriate language skills, you should definitely consider this one - everyone wants to start out in New York, but good luck getting hired at a large bank there with current market conditions.

Many banks have been sending some of their top talent to the Middle East and other regions, so they seem to have noticed the trend and adapted as well.

5) Make Your Resume Shine

This is an easy one that takes far less time than networking, cold calling banks, and learning additional languages so that you can work in other parts of the world, but it’s one that few people actually do.

Just from Mergers & Inquisitions alone, I’ve reviewed over 100 resumes since starting the site last year, and I’m always struck by the number of applicants with great experience and internships who don’t properly convey what they did in writing.

Having a great resume is the difference between getting noticed and not getting noticed - between getting a callback and never hearing back.

I’ve already given a lot of resume advice, from investment banking resumes to private equity resumes, and also have my resume review service for those interested in having a professional, line-by-line critique.

Why Try To Get Into Finance Right Now?

Reading about how tough it is to get hired in finance currently, you might wonder, “Why bother at all?” The answer goes back to what I wrote about in my review of 2008 analyst bonuses: it’s always better to “buy” into a market, whether real estate or the job market, when it’s at the bottom.

If you get in now, you could very easily ride the wave when the market recovers and be earning a much higher income a couple years from now compared to anyone who’s just getting started a few years from now.

The other reason, of course, is that there’s little reason to wait. Taking a few years off to travel would be fun but it wouldn’t enhance your chances of breaking in when the market recovers.

Sources: www.mergersandinquisitions.com/

10 Questions I Can Answer About the Future of Investment Banking

2008-10-04T09:15:00.000+01:00

“What should we put our money in?”

“Is this the end of Wall Street?”

“Which bank is going to fail next?”

“Should I just move to Thailand or become a ski bum?”

The talk of rumor-mongers who obsess over every last development?

Paranoid message board chatter?

Too much refreshing of the Drudge Report each day?

No.

These are all snippets of conversation from 4 friends in finance, discussing the world at large this past weekend while “on vacation” (I tried to make them turn off CNBC, but it didn’t work).

So if you’re asking the same questions, don’t feel ignorant - not even the insiders have the answers.

But I have been receiving many smaller questions lately - questions I might be able to answer.

1. Is This the End of Investment Banking?

No. Companies always need to raise money, companies are always looking to buy, and companies are always looking to sell. As long as that demand exists, the industry will continue to exist.

It will look different than it does today and than it did a year ago - specifically, there will be fewer big banks and more boutiques - but it will go on.

2. Will Bonuses Ever Return to 2006-2007 Levels?

Not in the near future. They may return after we’ve recovered and hit our next bubble; we’ve already been through junk bonds, tech IPO’s and mortgages, so who knows what’s next.

Bonuses will fall again next year, though they’ll probably remain above 2001-2003 levels (if only slightly).

3. How Will Goldman and Morgan Be Affected?

In case you missed it, Goldman Sachs and Morgan Stanley are both “bank holding companies” now.

All that means is that they’ll become smaller versions of Citi, JP Morgan and Bank of America.

Sure, they’ve been affected by the crisis just as everyone else has been, but I don’t see any drastic changes in store for banking specifically (trading, of course, is entirely different and will be far more regulated).

4. Ok, But What about Goldman and Morgan Bonuses?

Most banks pay Analysts about the same bonuses each year; last year and the year before, the top commercial banks paid around the same as the top standalone investment banks.

Bonuses at Goldman and Morgan will be down, as will bonuses everywhere else - not because they’re now “bank holding companies,” but because the economy is far worse than it was last year.

5. What About the Middle Market and Boutique Firms?

These are actually 2 different questions, but in general there will be more small, advisory-focused boutiques as talent leaves the largest firms.

Middle-market banks with little exposure to the crisis may survive, but I foresee some consolidation even in that market.

6. What About Bank of America and Merrill? (And Citi / Wachovia and…)?

Needless to say, people are going to lose their jobs. It’s hard to say how many specifically in investment banking will go, but you can bet they’re not going to keep everyone.

However, the (somewhat) good news for you is that other areas will probably be hit harder than banking.

7. What Are My Chances of Getting In…?

Lower than they were before, regardless of your stats or previous experience. If you want to improve them, take a look at my previous writing on recruiting in a tough market.

Or maybe just take a year off and become a ski bum.

8. Is There Anything in Finance that’s “Safe” Right Now?

First off, in life there’s rarely anything that’s “safe.” So the notion of “job security” in any field is a farce, and in finance it’s even more of a joke - even when times are good.

Banks? Forget about it. Hedge funds? Plenty of them have blown up as well, though you don’t hear about it as much because most are not well-known to the public. Insurance companies? Nope.

One area that is safer is private equity. Sure, they may not be doing a lot of deals lately, but they’re not going to go bankrupt when everyone withdraws their deposits, either. Once they have their assets under management, the capital is theirs to manage.

9. How Bad Will It Get?

Who knows. Back when Bear Stearns failed, we thought that was bad - now it looks like a minor hiccup.

However, given that there are no major, independent investment banks left, I don’t think it can get too much worse.

Sure, companies invested heavily in mortgage-backed securities will continue to fail, and we could have another few WaMu-style disasters, but I would be astonished if, say, Bank of America had to be bailed out.

Side note: I would not keep more than $100,000 in any bank right now, because you just never know… not to be depressing or anything.

10. What Can I Do to Get In?

What I’ve been telling you to do all along:

Go small, go East (whether Far East or Middle East) and go outside pure banking positions.

Sure, things are pretty bleak currently, but I know that firms both large and small are still hiring.

Sources: www.mergersandinquisitions.com/

US economy may plunge into depression if banking sector bailout fails

2008-10-04T08:41:00.000+01:00

The US economy may plunge into a depression if the $700 billion rescue package fails to revive the ailing banking sector, says Ilian Mihov, INSEAD Professor of Economics.

“The Great Depression (this time) is still unlikely but it is not impossible anymore. This is quite sad,” Mihov says.

The Bush administration proposed the bailout plan as US financial institutions continued to wilt under the weight of distressed financial assets. In September alone, the Federal Reserve had to rescue America’s biggest mortgage lenders Freddie Mac and Fannie Mae, as well as insurance giant AIG.

In a sign of deeper problems in the financial sector, Lehman Brothers filed for bankruptcy, Bank of America took over Merrill Lynch, while JPMorgan took over Washington Mutual. The financial sector’s deterioration has accelerated since Bear Stearns was jointly rescued by the Fed and JPMorgan from the brink of collapse in March.

“The bailout package does not solve the problems of the economy but nevertheless it is a necessary thing to do so we can stop the collapse,” says Mihov, who had studied under Fed chairman Ben Bernanke and co-authored several papers with him, including one on the Great Depression.

More banks could fail if distressed financial assets are not taken off their balance sheets because these assets continue to deteriorate every day, creating more uncertainty for the investors and bank depositors. Such a situation could force a fire sale of bank assets to satisfy demands from investors and depositors, further weakening the banks’ balance sheets.

“This is a vicious cycle that could lead to an implosion of the real economy,” Mihov told INSEAD Knowledge.

Once this happens, banks will be unwilling to lend. If companies cannot borrow from the banks, production cut backs will follow, workers will lose jobs, demand in the economy will fall and companies will be unable to pay their debts.

“This was the vicious spiral that was behind the Great Depression,” Mihov says.

But a spiral of the economy into depression can be avoided if the government takes timely and decisive action to rescue the financial sector.

“It (the bailout) has to be done,” Mihov says.

Although the Bush administration had already acknowledged the magnitude of the problem with its rescue plan, the House of Representatives rejected the plan at the end of September. In a second vote in early October, the House approved a revised version.

Democrats have blamed the Bush administration for spawning ineffective policies to deal with the 13-month old crisis and even some conservative Republicans were not convinced the plan would work.

“We have learned the lessons of the Great Depression but the politics can be so different from the economic point of view,” Mihov says.

Political differences, between the outgoing Hoover administration and the incoming Roosevelt administration, stalled efforts to minimise the damage caused by the credit squeeze on the US economy in the 1930s.

Hoover lost the elections in November 1932 and Roosevelt came into power in March 1933. During those five months, Hoover and Roosevelt could not agree on what to do with the banking sector, Mihov says. “That aggravated the situation and a lot of people became unemployed in the period of just five months.”

In the case of today’s financial crisis, politicians are failing to see the bigger picture.

“The politicians do not see the forest from the trees. The important thing is to save the economy from collapsing,” Mihov says. “We may agree or disagree whether the banks’ CEOs are overpaid or whether they should be punished or go to jail. These are important points but these are points that can be dealt with later.”

During the Great Depression, Roosevelt made decisive actions at the beginning of his administration to prevent the further collapse of the economy, but action was taken to regulate the banking sector with the passing of Glass-Steagall Act in June 1933.

The Glass-Steagall Act was a very important piece of legislation that separated investment banking and commercial banking activities. It was repealed in 1999, allowing banks to be both commercial and investment banking entities.

Whether such a regulation is needed to prevent a similar crisis in the future will have to be debated in Congress, Mihov says, but for now the important thing is to save the economy from collapsing.

Sources: Insead website

More on Contrasting Results for Self-Exaltation and Humility with Hoekstra

2008-10-04T08:08:00.000+01:00

And the tax collector, standing afar off, would not so much as raise his eyes to heaven, but beat his breast, saying, "God be merciful to me a sinner!" . . . everyone who exalts himself will be abased, and he who humbles himself will be exalted. (Luk_18:13-14)

Our present meditation continues Jesus' parable that warns against self-righteousness and encourages lowliness of mind. In this teaching, the Lord declares contrasting results for self-exaltation and humility. "Everyone who exalts himself will be abased, and he who humbles himself will be exalted." The contrasting examples in the parable are the prayers of a vainglorious religious leader and a contrite publican.

The Pharisee's prayer was addressed to himself and was filled with glorying about himself. "The Pharisee stood and prayed thus with himself, 'God, I thank You that I am not like other men . . . I fast twice a week; I give tithes of all that I possess' " (Luk_18:11-12). In stark contrast to this arrogant, feigned prayer, the tax collector would not so much as lift his countenance toward heaven. Instead, he pounded his guilt-ridden chest, humbly pleading for mercy. "And the tax collector, standing afar off, would not so much as raise his eyes to heaven, but beat his breast, saying, 'God be merciful to me a sinner'!" His attitude was like David, who knew he could not withstand the righteous judgment of God. "Do not enter into judgment with Your servant, for in Your sight no one living is righteous" (Psa_143:2).

These two men (who both appeared to be praying to God) faced drastically differing results. "I tell you, this man [the humble publican] went down to his house justified rather than the other [the self-righteous religious leader]" (Luk_18:14). The self-exalting Pharisee was abased. He was dishonored before God and confirmed in his guilty, unrepentant state. "Everyone who exalts himself will be abased." The humble tax collector was exalted. Through humble dependence, he was raised up to the blessed realm of justification. "To him who does not work but believes on Him who justifies the ungodly, his faith is accounted for righteousness" (Rom_4:5). He was declared not guilty, forgiven, righteous in God's sight. "He who humbles himself will be exalted."

Let's Pray

Lord God, I deserve to be abased for the times I have exalted myself in Your sight. I want to take my stand with this repentant tax collector. I want to humble myself before You, pleading Your mercy. I hope in You to lift me up to new realms of obedience, godly growth, and service, through Christ Jesus, my Lord, Amen.

Contrasting Results for Self-Exaltation and Humility with Hoekstra

2008-10-03T06:38:00.000+01:00

The Pharisee stood and prayed thus with himself, "God, I thank You that I am not like other men" . . . everyone who exalts himself will be abased, and he who humbles himself will be exalted. (Luk_18:11, Luk_18:14)
The importance of Jesus' teaching in our present verse can be seen in its being repeated on various occasions (Mat_23:12 and Luk_14:11). The instruction sets forth the universal inevitability of contrasting results for self-exaltation and humility. "Everyone who exalts himself will be abased, and he who humbles himself will be exalted."

This particular proclamation of the message was given in a parable that warns against self-righteousness and encourages humility. "He spoke this parable to some who trusted in themselves that they were righteous, and despised others" (Luk_18:9). The contrasting examples in the parable are the prayers of a self-assured religious leader and a repentant publican. "Two men went up to the temple to pray, one a Pharisee and the other a tax collector" (Luke 18:10). When the self-righteous Pharisee prayed, he was actually having a personal dialogue with himself, even though he vainly addressed his prayer to God?! "The Pharisee stood and prayed thus with himself" (Luk_18:11). He then appears to begin his prayer in a biblical manner, with an expression of thanksgiving. "In everything by prayer and supplication, with thanksgiving, let your requests be made known to God" (Phi_4:6). However, his gratitude was based upon the ungodly assumption that he was innately better than others, particularly, this nearby publican. "God, I thank You that I am not like other men — extortioners, unjust, adulterers, or even as this tax collector" (Luk_18:11). Then, he proceeded to elaborate upon his own virtues by reviewing his religious performance, which obviously seemed very impressive to him. "I fast twice a week; I give tithes of all that I possess" (Luk_18:12).

This self-righteous Pharisee was so assured of his good standing with God. Yet, he was measuring himself by his own eyes and in comparison to others. The scriptures that he would claim as his guide condemned such self-righteousness. "There is a generation that is pure in its own eyes, yet is not washed from its filthiness" (Pro_30:12). Although man may have been impressed with his external behavior, God saw the abomination of his godless heart. "You are those who justify yourselves before men, but God knows your hearts. For what is highly esteemed among men is an abomination in the sight of God" (Luk_16:15).

Let's Pray;

Dear Lord, I am so grateful that the blood of Christ washes away the times when I have talked or thought — or, even prayed — like this self-righteousness Pharisee. Help me to humbly embrace Your perspective, not man's, in Jesus name, Amen.

Humility and the Fear of the Lord with Hoekstra

2008-09-30T06:47:00.001+01:00

By humility and the fear of the LORD are riches and honor and life . . . with the humble is wisdom . . . The fear of the LORD is the beginning of wisdom. (Pro_22:4; Pro_11:2; and Pro_9:10)

Many of our previous meditations have clearly demonstrated that walking in humility is the pathway for living by the grace of God. "God . . . gives grace to the humble" (1Pe_5:5). In our present verses, we see that humility and the fear of the Lord are related.

Humility and the fear of the Lord result in the same blessings. "By humility and the fear of the LORD are riches and honor and life." The closing trio ("riches and honor and life") are an Old Testament description of a life that is fully blessed by God. The New Testament counterpart would be fullness of spiritual life. "I have come that they may have life, and that they may have it more abundantly" (Joh_10:10). Humility and the fear of the Lord also result in wisdom. "With the humble is wisdom . . . The fear of the LORD is the beginning of wisdom."

Humility is the candid acknowledgment of our absolute need for the Lord to work comprehensively in our lives day by day. The fear of the Lord is respect and reverence toward our great God. It is not a fear involving terror or apprehension. Rather, it is based upon profound admiration and dependent devotion.

Those who humbly fear the Lord (by placing their admiration and devotion in Him) also embrace His perspectives and values. They develop a hatred for the things that He hates. "The fear of the LORD is to hate evil; pride and arrogance and the evil way and the perverse mouth I hate" (Pro_8:13). Correspondingly, those who have respect and reverence for the Lord develop a love for all that He loves. The Lord loves for His people to walk in righteousness and justice. "The LORD loves the righteous . . . the LORD loves justice" (Psa_146:8 and Psa_37:28). The Lord loves Israel, His chosen nation. "The LORD did not set His love on you nor choose you because you were more in number than any other people, for you were the least of all peoples" (Deu_7:7). The Lord loves His church, the children of God. "Behold what manner of love the Father has bestowed on us, that we should be called children of God!" (1Jo_3:1). The Lord loves the world, those who need to know Him. "For God so loved the world that He gave His only begotten Son, that whoever believes in Him should not perish but have everlasting life" (Joh_3:16).

Lets Pray;

Lord God almighty, I humbly bow before You, acknowledging my absolute need for You to work comprehensively in my life day by day. I want to walk in the fear of the Lord, placing my admiration and devotion in You. I want to hate all that You hate and love all that You love, in Jesus name, Amen.

We should heed the lessons of the collapse of the ‘golden age’: a personal view

2008-09-30T06:44:00.000+01:00

by Ilian Mihov, Professor of Economics, INSEAD ----

It seemed like it was never going to end – the rise of the economy, the increased prosperity, the bull stock market. Forbes magazine said it would be ‘recognized as a golden age of American industry.” This was in the summer of 1929, but then the US economy collapsed. From growth rates of between three and 10 per cent in per capita terms, the US economy imploded: contracting 11 per cent in 1930, another 9.5 per cent the following year, and then shrinking a further 15 per cent in 1932. Who would have thought that the Roaring Twenties would transform into the worst economic disaster of all time?

After surging during the 1920s, share prices on Wall Street plummeted, with the Dow Jones Industrial Average falling to a low of 41.22 points in July 1932 from 381.17 points in September 1929. To put that in context today, it would be like the Dow falling to 1,666 points from a peak of 14,164 (October 9, 2007) within three years.

While the stock market fell some 90 per cent, the output of the US economy fell by a third during the Great Depression of 1929-1933, unemployment shot up to 25.2 per cent from 3.2 per cent, and one in three of the 24,000 banks in the US closed down. This is a partial, yet telling view of the magnitude of the Great Depression.

When I teach my macroeconomics class for the MBAs at INSEAD, I always discuss the Great Depression and the lecture ends on an optimistic tone with a simple statement: “The Great Depression will never happen again”. I firmly believed this because there is a widespread consensus that the Great Depression was a result of a sequence of policy mistakes. Economists have learned what policies should be applied to avoid the Great Depression.

Unfortunately, I have to revise my optimism now. It is not because what we learned was wrong, nor because we have unlearned the big lessons from the Great Depression. Optimism fades because it turns out that political bickering and petty re-election agendas can wipe out the lessons of more than 70 years ago.

What is the biggest lesson from the Great Depression? In my view, it is that monetary policy and the financial sector play a crucial role in economic development. Let me put it more precisely: good monetary policy is unlikely to accelerate the speed of economic growth – after all we have more income year after year because mankind comes up with new ideas, with new products, with more efficient ways of producing output. However, bad monetary policy can easily derail economic development. It is true for rich and poor countries alike.

Why are financial markets and the banking sector so important? Banks fulfill a very important role in the economy by matching borrowers and lenders. When we deposit $100 in a bank, the bank keeps, at most, two to three dollars in its vaults (in fact the money is often in the central bank), the remaining $98 or so is lent to a borrower.

Most businesses require loans for their normal perations. When the banking sectordoes not work properly, businesses cannot get loans and they have to curtail their production and lay off workers. As they curtail production, they demand fewer products from their suppliers and therefore their suppliers have to reduce their output and fire workers. If manufacturers cannot sell their goods because the firm downstream does not need as many products as before, they cannot generate enough revenue to repay their earlier loans. Businesses go bankrupt and banks experience further problems as their balance sheet deteriorates due to non-performing loans. At this point, banks want to lend even less because of the uncertainty generated from bankruptcies. As they lend less, the vicious circle continues – with producers cutting production and firing workers. On the top of this, depositors start worrying about their deposits because the non-performing loans have made some banks go belly up – your bank has lent out your money to borrowers who cannot return it. Depositors start withdrawing their cash and banks have even fewer possibilities for lending as they have to hoard cash in case there is a run on the bank. If the financial sector does not work, the real economy can go into a deadly spiral and shrink by 30 per cent as during the Great Depression.

It is unlikely this will happen today. But I used to think that it was impossible. The lessons of the Great Depression are so clear and vivid that it was unimaginable that someone would risk the stability of the economy just to gain votes from his or her constituency. Are these CEOs overpaid? Should they go to jail? Maybe the answer to both questions is “yes”, but it’s important to understand that penalising greedy CEOs has nothing to do with saving the macroeconomy. Many of the issues raised by politicians recently have to be addressed, but it is a separate debate and will involve separate legislation.

US economy may plunge into depression if banking sector bailout fails

2008-09-30T06:40:00.000+01:00

The US economy may plunge into a depression if the $700 billion rescue package fails to revive the ailing banking sector, says Ilian Mihov, INSEAD Professor of Economics.

“The Great Depression (this time) is still unlikely but it is not impossible anymore. This is quite sad,” Mihov says.

The Bush administration proposed the bailout plan as US financial institutions continued to wilt under the weight of distressed financial assets. In September alone, the Federal Reserve had to rescue America’s biggest mortgage lenders Freddie Mac and Fannie Mae, as well as insurance giant AIG.

In a sign of deeper problems in the financial sector, Lehman Brothers filed for bankruptcy, Bank of America took over Merrill Lynch, while JPMorgan took over Washington Mutual. The financial sector’s deterioration has accelerated since Bear Stearns was jointly rescued by the Fed and JPMorgan from the brink of collapse in March.

“The bailout package does not solve the problems of the economy but nevertheless it is a necessary thing to do so we can stop the collapse,” says Mihov, who had studied under Fed chairman Ben Bernanke and co-authored several papers with him, including one on the Great Depression.

More banks could fail if distressed financial assets are not taken off their balance sheets because these assets continue to deteriorate every day, creating more uncertainty for the investors and bank depositors. Such a situation could force a fire sale of bank assets to satisfy demands from investors and depositors, further weakening the banks’ balance sheets.

“This is a vicious cycle that could lead to an implosion of the real economy,” Mihov told INSEAD Knowledge.

Once this happens, banks will be unwilling to lend. If companies cannot borrow from the banks, production cut backs will follow, workers will lose jobs, demand in the economy will fall and companies will be unable to pay their debts.

“This was the vicious spiral that was behind the Great Depression,” Mihov says.

But a spiral of the economy into depression can be avoided if the government takes timely and decisive action to rescue the financial sector.

“It (the bailout) has to be done,” Mihov says.

Although the Bush administration has already acknowledged the magnitude of the problem with its rescue plan, US stocks fell sharply on Monday (Sept 29) after Congress failed to approve the plan.

Democrats are blaming the Bush administration for spawning ineffective policies to deal with the 13-month old crisis and even some conservative Republicans are also not convinced the plan will work this time.

“We have learned the lessons of the Great Depression but the politics can be so different from the economic point of view,” Mihov says.

Political differences, between the outgoing Hoover administration and the incoming Roosevelt administration, stalled efforts to minimise the damage caused by the credit squeeze on the US economy in the 1930s.

Hoover lost the elections in November 1932 and Roosevelt came into power in March 1933. During those five months, Hoover and Roosevelt could not agree on what to do with the banking sector, Mihov says. “That aggravated the situation and a lot of people became unemployed in the period of just five months.”

In the case of today’s financial crisis, politicians are failing to see the bigger picture.

“The politicians do not see the forest from the trees. The important thing is to save the economy from collapsing,” Mihov says. “We may agree or disagree whether the banks’ CEOs are overpaid or whether they should be punished or go to jail. These are important points but these are points that can be dealt with later.”

During the Great Depression, Roosevelt made decisive actions at the beginning of his administration to prevent the further collapse of the economy, but action was taken to regulate the banking sector with the passing of Glass-Steagall Act in June 1933.

The Glass-Steagall Act was a very important piece of legislation that separated investment banking and commercial banking activities. It was repealed in 1999, allowing banks to be both commercial and investment banking entities.

Whether such a regulation is needed to prevent a similar crisis in the future will have to be debated in Congress, Mihov says, but for now the important thing is to save the economy from collapsing.

Sources: Insead Website

Companies Under Pressure By MICHAEL M. GRYNBAUM

2008-09-26T08:03:00.000+01:00

Almost 62 years ago to the day, Aubrey Pilgrim bought a two-bit feed and seed store in east Texas with the help of a $2,500 bank loan.

His tiny operation grew up to become the Pilgrim’s Pride Corporation, the alpha-chicken of the poultry business, with 53,000 employees, customers like KFC and Taco Bell — and a heavy load of debt.

On Wednesday, Pilgrim’s Pride warned that it would break certain agreements with its lenders, underscoring the tightening bind that many companies, even those far from Wall Street, find themselves in as loans grow scarce and the economy struggles.

As a government bailout of the financial industry seemed elusive on Thursday, and the credit markets remained on edge, many analysts saw more pain ahead for debt-burdened companies, as well as their shareholders and employees.

Some of these companies, like Pilgrim’s Pride, went into hock when times were good to make acquisitions and grow. Others were saddled with debts by financiers who bought them with borrowed money. And still others are simply struggling to pay the bills as the economy worsens.

Every company needs to borrow money to finance its operations, and the cost is rising for virtually all of them because of the unease in the credit markets. But the weakest, like Pilgrim’s Pride, are being squeezed particularly hard.

On Thursday, yields on corporate junk bonds — that is, those without investment grade credit ratings — jumped to nearly 14.6 percent, the highest level since late 2002. Prices of risky corporate loans, which are traded like bonds on Wall Street, fell to record lows, fetching about 82 cents on the dollar on average, according to Standard & Poor’s. Bonds and loans of blue-chip companies like General Electric weakened too.

“Have we seen anything like this?” asked Kingman D. Penniman, the president of KDP Investment Advisors, a bond research firm. “No. I don’t think I’ve seen good credit go down so much so quickly.”

The turmoil in the credit markets is taking its toll on a wide variety of companies. Hard Rock Park, a theme park in Myrtle Beach, S.C., filed for bankruptcy on Thursday, citing “frozen credit markets.”

Analysts worry that a host of other companies, ranging from mortgage lenders to restaurant chains, will come under mounting pressure, and that companies will start to default on their debts in growing numbers.

“We’re just in the beginning of the default cycle,” Mr. Penniman said. “Companies are violating their covenants. They need to come to the debt markets and can’t get refinancing.”

For Pilgrim’s Pride, difficulty with debt is translating into big losses for shareholders.

The company’s share price plummeted nearly 40 percent on Wednesday and that much again on Thursday, when the company said it expected to report a “significant loss” for its fourth quarter, in part because of the rising cost of feed and weaker demand for its chicken. Such a deficit would cause the breach of one specific covenant, or lending requirement, with its lenders as of the fiscal year ending on Saturday.

But the company has reached an “understanding” with two groups of lenders, one led by CoBank and the other by the Bank of Montreal, over a waiver of that covenant, said Gary L. Rhodes, a company spokesman. Pilgrim’s Pride is working to reach a formal 30-day waiver, which would buy it time to work out a “longer-term fix.”

As of Thursday, the company had $2.23 billion in debt, according to Bloomberg News, some of which it piled on when it bought Gold Kist for $1.1 billion in December 2006. That was the height of the credit boom, when debt flowed freely and terms were cheap, a trap that has since ensnared many companies.

Since the onset of the credit squeeze last summer, analysts have fretted about the health of companies taken over by private equity firms, which often rely on high amounts of debt to finance their deals. But since then, many other companies have been hard pressed to repay their debt, challenged by slowing consumer spending and falling housing prices.

Already, scores of restaurants and retailers have filed for bankruptcy protection. Some, like the retailers Linens ’n Things, Mervyns and Steve and Barry’s, were backed by private equity firms. Others, like the Sharper Image and the Bennigan’s restaurant chain, were crushed by debt they had incurred for other reasons, like expanding their businesses.

“For consumer-facing companies, you can already see the early stages of trouble," said Barry Ridings, a co-head of the restructuring advisory group at Lazard. He added that companies like restaurants are often “the canaries in the coal mine” that presage trouble across the economy.

Dozens of other companies are being closely watched for signs of trouble, according to Mr. Penniman. Among those he cited whose debt showed distress were Sbarro, the Italian fast-food chain; Dollar Thrifty Automotive Group, the rental-car company; and Sealy, the mattress maker whose predecessor helped lead to the fall of First Boston.

Analysts are also watching Claire’s Stores, the costume jewelry purveyor, and Realogy, the parent company of the Century 21 and Coldwell Banker real estate brokerage firms.

Though the headlines have been dominated by the likes of financial firms like Lehman Brothers, the American International Group and Washington Mutual, the disarray of the credit markets and the wider economy have extended to every part of the nation.

Hard Rock Park, which features attractions like Led Zeppelin: the Ride, cited a panoply of ailments in its bankruptcy filing. Among them is the collapsed housing market and the spike in energy and gas prices, which led to lower-than-expected ticket sales.

But what drove Hard Rock Park to bankruptcy court was its inability to refinance a $15 million revolving line of credit, Steven Goodwin, the company’s chief executive and chief financial officer, wrote in a court filing.

“Due to the frozen credit markets,” he wrote, the company “was unable to increase the size of the revolving facility as planned.”

Essentially, the park operator ran out of money.

Visitors to Hard Rock Park’s Web site are greeted by a notice saying the park had closed for the rest of the season to restructure its finances. The company says it expects to reopen next spring.

As Stocks Rally, Credit Markets Appear Frozen by MICHAEL M. GRYNBAUM

2008-09-26T07:57:00.001+01:00

As Washington dickered, Wall Street waited.

Nervous investors stayed on the sidelines on Thursday, awaiting signs of progress on the government’s bailout. While stocks rose, the anxiety gripping the credit markets barely abated.

Banks continued to hoard cash, clogging crucial financial arteries that deliver money to businesses and consumers for car loans, credit cards and payroll payments.

Investors appeared to be taking a defensive posture as they waited for lawmakers in Washington to determine the final structure of the government’s plan. Interest rates on short-term loans jumped back toward the record levels seen at the end of last week, although the yields on Treasury bills slightly rose.

“These moves are having extraordinary negative impacts on the brick-and-mortar level of the U.S. economy,” said T. J. Marta, a fixed-income strategist at Royal Bank of Canada. “We’re not talking about highfalutin, fat-cat Wall Streeters. This is whether or not your local hospital gets the new wing put on.”

While swings in the stock market can affect Americans’ investments and mutual funds, the credit market is considered the front line of the day-to-day functioning of the economy. Businesses depend on short-term loans to pay for basic costs like electric utilities and employee salaries.

“This is the engine room of the U.S. economy,” Mr. Marta said. “It’s not very sexy, it’s kind of esoteric, nobody ever pays attention to it, but that’s what’s breaking.”

On Thursday, this was the type of critical short-term financing — including markets for commercial paper, municipal bonds and overnight bank loans — that was gumming up.

Banks, apparently stocking up amid the worst financial crisis in decades, were reluctant to lend cash, sending interest rates soaring.

The three-month Libor rate, a benchmark gauge that measures how much banks charge one another for overnight loans, jumped the most in one day in nearly a decade, reaching 3.77 percent.

The TED spread, which tracks the difference between how much banks pay for a three-month loan versus the Treasury, has tripled this month, and widened again on Thursday to a near-record high.

“There continues to be extraordinary hoarding of cash,” Mr. Marta said. “There are still a lot of things broken in the markets.”

Investors did seem slightly more confident about moving their money out of ultra-safe short-term Treasury notes; for days, they had been willing to accept minuscule returns in exchange for a safer bet than stocks or corporate bonds.

On Thursday, the yield on the two-year Treasury note rose to 2.19 percent, up 0.22 percent. The yield on the one-month Treasury bill rose to 0.1 percent, although this remained near last week’s lows. Fear was much less pronounced in the stock market, where investors seemed to place their bets with an eye toward the imminent passage of the bailout plan.

The broad Standard & Poor’s 500-stock index gained 2 percent, and the Dow Jones industrial average, which measures stock prices of 30 companies, rose nearly 200 points to close at 11,022.06. The Nasdaq composite gained 1.4 percent.

Shares of Goldman Sachs gained 1.9 percent; Morgan Stanley was up 9.3 percent. The cost to insure both companies’ debt declined, although the cost for Morgan Stanley remained near the highs of last week.

The stock market made gains despite three grim government reports on the economy. Orders for big-ticket manufactured goods fell 4.5 percent in August, a sign that businesses were reluctant to make major investments, and the Labor Department said the number of new applications for jobless benefits rose by 32,000 last week to a seven-year high.

Sales of new homes fell again last month, even as prices continued to decline. Sales were off 11.5 percent from July, and median prices were 6.2 percent lower than a year ago.

Stocks also shook off a pessimistic report from the General Electric Corporation, which said on Thursday morning that it expected to earn less money this year than it had originally forecast. The company also froze its dividend payments and suspended a stock repurchasing program.

Markets in Europe ended higher after a quiet start. The FTSE 100 in London and the DAX index in Frankfurt each gained 2 percent; the CAC 40 in Paris ended 2.7 percent higher.

Following are the results of Thursday’s auction of 34-day cash management bills and five-year notes:

Climateer Investing: Investment Banking 2.0: Into the Future

2008-09-26T07:55:00.000+01:00

Bear Stearns? Gone. Lehman Brothers? Gone. Merrill Lynch? Gone. What next? I had the pleasure of hearing Nouriel Roubini speak at a planning dinner for the 2009 Money:Tech Conference, and he had more than a few thoughts on the topic. I respect Nouriel and his analytical thinking a great deal, and he and I have had similar views of the inevitable credit-driven storm dating back quite some time. But on the issue of what will happen to the surviving investment banks, and what should happen, he and I have differing viewpoints.

According to Nouriel, the "Axe of the Apocalypse" as I like to call him, Morgan Stanley and Goldman Sachs are close behind Lehman and Merrill. His argument? Investment banks are largely financed with overnight funding, creating a massive asset/liability mismatch, and are heavily levered. In the wake of Lehman's collapse, a run on the investment banks will continue, pushing them into the arms of banking acquirers with large, stable deposit bases. This will create a universal bank that is better positioned to weather the market turmoil. While Nouriel has a valid argument, I believe his view is simply wrong, strategically, tactically and ethically.

The problem with the investment banks is that they've generally financed themselves for the good times, not the bad times. This means an excessive dependence on short-term funding and high leverage. This generated high ROEs in good times, supporting large payouts for employees and shareholders alike. But when times turned bad, compounded by poor risk management and mind-bogglingly stupid investment decision, such a capital structure has come back to haunt many a firm. Nouriel says solve the problem by joining investment banks and commercial banks, and using core deposits as a vehicle for extending the duration of the investment bank's liability structure. I say no. I say that Goldman Sachs and Morgan Stanley should materially alter their financing strategy, lengthening duration by issuing different tranches of preferred stock, subordinated debt and term debt, de-levering in order to weather the storm and accept lower ROEs in the process. This also means that these firms, their culture and their employees won't be destroyed, which is what invariably happens when investment banks do M&A deals. If my strategy is to operate my firm as an independent entity, and I tactically want to keep my key employees in their seats to ensure continuity and resources for when the market turns, I want to control my own destiny. This means securing some of that liquidity-driven option value, which can only be gotten by putting a more conservative, less leveraged, more flexible capital structure in place.

The ethics issue is an interesting one. Felix Salmon, who was sitting at my table at tonight's dinner, raised the issue of an FDIC subsidy in the event that investment banks were subsumed by commercial banks. This point was further amplified by a commenter on this blog, referring to my critical post earlier today concerning the BAC/MER deal:

Looking at this deal from a somewhat "old school" view, it is just toxic for BAC and the rest of the banking system. The theory is that MER gets access to a more stable funding source. Well, IF Merill did not have such unfathomable assets on the books with such monsterous leverage it would not ahve any trouble getting funding. Lenders have to make loans to make money. They cannot profit if there are writeoffs on cheap loans. MER would not have such a funding problem if they did not deserve it. And, IF MER was a qualified borrower, they would get the funding without much problem.

What is being carried out is a transfer of the potential MER losses to the FDIC. And that is exactly what Glass Steagell was put in place to prevent. BAC has a balance sheet with goodwill representing 50% of equity. Recall that when FNM was revealed to be using tax loss carryforwards as assets everyone finally wised up that those cannot be used to pay any bills. Which counter party to BAC will take goodwill as payment?

In almost every case, the normal banks which have gotten involved in the chase to replicate the IB transaction and deal environment have enjoyed tremendous losses as a result. Banking should still be required to be seperate from the IB business without the cross ownership. This merger is financial nonsense.

- Augustus

Augustus, I agree. The deal is a scam. A sham. And should be slammed. If these deals continue, and if Nouriel is right, what I see happening is a new wave of boutique investment banks opening for business - the next generation of Evercores, Gleachers, Beacon Groups and Greenhills. Top talent will not stay inside these monolithic mega-firms; if Citigroup is any example, these firms are not good places to work as integration disruption continues for many, many years. Value accretion? I'd say not. So once these boutiques are created what will happen? Some will merge to achieve the benefits of scale. And soon enough, we'll once again have multi-product, multi-geography investment banks as we've had for generations. The universal banking utopia was Sandy Weill's fantasy. In the real world such institutions don't function well. They are too large. Too diffuse. Lacking in a unified culture. Hard to risk manage. Bound for failure.

Investment Banking 2.0 will be the re-emergence of the boutique, the focused, nimble, high-touch firm that was the bedrock of capital formation in the early years of the stock market boom. Because these mega-firms being created at the urging of the Treasury are not sustainable. They'll live just long enough for investment banking losses to be absorbed by the commercial bank's larger capital base, after which the best talent will flee for greener pastures.

Investment banks' future questioned By Peter Thal Larsen and Francesco Guerrera

2008-09-26T07:53:00.001+01:00

When Chase Manhattan bought JPMorgan in the autumn of 2000, many thought the deal would trigger a series of mergers in the investment banking business. Senior bankers predicted that other Wall Street firms such as Bear Stearns, Lehman Brothers and Merrill Lynch would have to join forces with larger lenders or risk being marginalised.

Eight years on, those predictions are finally coming true. After an extraordinary weekend on Wall Street, Lehman yesterday filed for bankruptcy protection while Merrill Lynch rushed into the arms of Bank of America, its larger rival. Combined with the collapse of Bear Stearns earlier this year, the ranks of the Wall Street banks have been cut in half. Among the so-called "pure" investment banks, only Goldman Sachs and Morgan Stanley remain.

Not surprisingly, the crisis has once again raised serious questions about the viability of investment banks that are not part of a larger institution. "Merrill has been a strong and respected competitor in the marketplace," Ken Lewis, BofA's chairman and chief executive said yesterday. "But the market continues to question the viability of a stand-alone investment bank."

That process continued yesterday. Shares in Morgan Stanley were down almost 9 per cent by early afternoon in New York yesterday, and have lost almost half their value in the past 12 months. Goldman Sachs, which has survived the credit crunch in better shape than any of its direct competitors, was down 7 per cent. The cost of buying protection on a default of both banks also jumped sharply yesterday as traders absorbed the consequences of the decision by Hank Paulson, the US Treasury Secretary, not to support Lehman. "What's got everyone on edge is that Paulson has effectively declared that the broker-dealer model has no backstop," one banking executive said, referring to the fact that there is no regulator standing behind it.

For executives at larger universal banks - which combine deposit-taking activities with their investment banking operations - the turmoil is long-awaited proof of the vulnerabilities of Wall Street banks, which tend to have smaller balance sheets and rely entirely on the wholesale markets for their funding. They believe the recent takeovers are merely a delayed consequence of the 1999 repeal of the Glass-Steagall Act - the depression-era legislation that separated commercial banks from Wall Street broker-dealers.

"This is a tough time to be an investment bank," a senior executive at a US commercial bank said yesterday. "Given the events of the past few months, it is difficult to argue that it is better to be monoline at anything, be it investment banking, credit cards or insurance."

Vikram Pandit, the former Morgan Stanley banker who now heads Citigroup, made a similar point in an internal memo aimed at reassuring the financial giant's 360,000-plus employees of the company's ability to weather, and even profit, from the current turmoil.

"Our industry is in a state of change, but I am confident that this should be an opportunity for Citi," Mr Pandit wrote.

But others dismiss as too simplistic the idea that the business model of investment banks such as Goldman Sachs and Morgan Stanley is broken and that they are doomed to merge with a deposit-taking institution. They argue that the disappearance of three fierce competitors in the space of a few months would benefit the two surviving firms.

"Capital markets are not going to disappear, the investment banking business is still going to be there and you will only have two companies exclusively focused on it: that does not sound like a recipe for disaster," a senior investment banker said yesterday.

With Goldman considered a notch above the rest due to its trading prowess and enviable client base, much of the spotlight will be trained on Morgan Stanley, which reports third-quarter results tomorrow. John Mack, the firm's chief executive, yesterday was at pains to stress that Morgan Stanley's solid capital position and healthy revenues put it in a good position to benefit from the industry's re-shaping.

However, stand-alone investment banks face two fundamental challenges: capital and liquidity. The bursting of the credit bubble and the drying up of the securitisation market favours banks that can put large balance sheets to work in support of their clients.

The turmoil has also highlighted the vulnerabilities in the investment banks' dependence on the short-term repo market for secured funding. Wall Street banks, which have historically been overseen by the Securities and Exchange Commission, are also set to be brought under the supervision of the Federal Reserve, leading to tighter regulation of .

"The brokers may not be broken, but in future we expect the financial system in general - and the brokers in particular - to become shadows of their former selves," Matt King, a strategist at Citigroup, wrote in a recent note.

None of this means Goldman or Morgan Stanley will be forced to surrender their independence. In the past, Wall Street banks have proved adept at reinventing themselves and adapting to a changing market. For the time being, however, the Wall Street banks must be feeling increasingly lonely.

The future of banking By Vincent Freeman

2008-09-26T07:42:00.000+01:00

RIGA - “It was the best of times, it was the worse of times” — the opening lines of Dickens’ “A Tale of Two Cities” — could easily be said about the current turmoil sweeping the financial markets.

Just two weeks ago, it was inconceivable that all four U.S. investment banks would disappear or change status, or that half of all Britons would be with the same bank, or that there would be chaos in Hong Kong as depositors tried to get their money back.

New York, London and Hong Kong may seem a long way from the Baltics, but the economic crisis will affect all of us. Swedbank, the region’s biggest, is heavily invested in the U.S., especially in the toxic bad debt. As we reported in The Baltic Times last week, the bank was exposed to Lehman by 1.3 billion dollars (921.4 million euros). Despite assurances that most of the debt is secured there has been a mini-run on the bank in some Nordic countries, as reported in the press in Finland and Sweden.

The stock market plummeted between Sept. 15 and Sept. 19 as the bad news kept coming in, only to rebound on Sept. 22 on the news that the U.S. Treasury is going to bail out the financial system.

“There probably isn’t a single happy investor on the Tallinn stock exchange right now; both old-timers and newcomers have been losing money. Unless one badly needs money, there’s no point in selling shares at present,” trader for Marfin Pank Eesti, Kristjan Tolmats, told the Baltic News Service.
And it isn’t just the bad news coming out of the Unites States that has investors worried. The real estate market is in a dreadful state and the industries that depend on it have all suffered.
Latvia is now in recession, a situation analysts don’t expect to change in the near future.
“Looking at these trends, I’m quite sure we will see worse numbers in the coming two quarters,” Zigurds Vaikulis, a Parex Asset Management economist, told Bloomberg.

“The good thing is that inflation is dropping,” he said. Latvian inflation, at 15.7 percent in August, is the fastest in the EU. The overall euro zone inflation rate is 4 percent.
Analysts say that profits will be small for investors.

“Private consumption is expected to decline this year. We also expect investment to fall markedly in 2008 as construction loses steam,” Anssi Rantala, chief analyst with Nordea, said.
Rantala did put in a note of good news despite soaring inflation of prices. “We expect inflation pressures to ease gradually, as the substantial commodity and food prices increases are over now and wage hikes will be moderated by a softening labor market,” Rantala said.

There is no doubt that some people are scared. When The Baltic Times contacted local banks about how they plan to make money for their investors, they didn’t seem to want to talk.
There are mutterings that a big regional bank could go under.

“It could be a bloodbath,” one source, who didn’t wish to be named, told TBT.
But what hope is there for the investor? When the entire paradigm has been destroyed, where is the careful investor to turn?

Some analysts and financial experts believe that now is actually an excellent opportunity for investors to make money. As companies consolidate and others go to the wall, a shrewd investor could find rich pickings in funds invested in distressed capital, mergers and acquisitions and private equity funds.
“The current market condition presents an excellent opportunity to pick up assets at attractive levels,” Mattias Wallander, chief of investment at Evli Bank in Estonia, said.
Wallander said that he believed that the waters needed to clear a little before investors and their advisor would know how and where to invest.

“I still believe the best opportunities will come in 2009. For well-funded buyers, it could definitely be interesting to start looking at the Baltic region,” Wallander said.

Some say that for investment companies starting out right now, the timing couldn’t be more perfect.
Maximus Capital, which set up shop this week, said they feel that there is a number of strong arguments in favor of starting a financial services firm exactly at this very moment.

“The financial turmoil has triggered industry consolidation and there is a surge in demand for fresh capital, and significant [mergers and acquisitions] activity, primarily driven by market consolidation, is behind the strong influx of new business along the lines of investment banking services that we are offering to our clients,” said Gene Zolotarev, founder and CEO of the company.

Zolotarev believes that the personal touch of putting the customer first will become a mainstay in the future investment landscape.

“We are not offering our own funds, as we feel that might create a conflict of interest and
limit our investment horizon to the selected number of in-house products. Instead, Maximus Capital is being entirely focused on delivering absolute returns in any market conditions,” Zolotarev said.
Maximus Capital was set up by a team of financial experts who saw the potential for a fresh approach to investment opportunities.

Many of the old maxims have gone out of the window. The recent market developments have clearly shown that the size of the financial player does not mean that it will be successful.

Maximus Capital does not offer any proprietary funds and does not sell any in-house products. This gives them the flexibility to follow the market objectively and offer truly unbiased advice to the investors. Maximus point out that unlike the bigger players, they are able to provide individual service geared towards the specific needs of their clients and communicate with their clients at all times.

Maximus admits that the current economic climate does provide an opportunity for rich returns for smart investors. “We are planning to capitalize on the unique investment options present in several fragmented and somewhat distressed sectors of the Baltic and CIS region,” Zolotarev said.

“Finally, the time is ripe to capitalize on the fresh prospects that are emerging for the private equity investor — the opportunities in distressed investing have never been so lucrative. We will turn the credit crunch around and use it to offer our clients direct access to new investment options with unique profit,” Zolotarev said.
Analysts agree that the current market conditions lend themselves to companies being merged and bought up.
“The CIS region saw a lot of M and A activity recently, and the volume of this business is likely to increase in the future,” Zolotarev said.

The financial turmoil in the global markets brought about the strong consolidation tendencies among financial services providers as well as corporations. Maximus Capital believes it can to take full advantage of its broad network of industry contacts in order to further expand this business area.

“Our brokerage clients tend to be very dynamic individuals with knowledge of the markets who value rapid execution, low cost and best market pricing, while our investment clients are drawn to our network of relationships,” Zolotarev said.

Graduates Entering Investment Banking

2008-09-26T07:39:00.001+01:00

Thousands of graduates will be looking to enter Investment Banking this year. Many who are very focussed and know exactly where they want to be and those who just know they want to work within Investment Banking. There are many choices to be made but these early choices are crucial to future career development.

For those graduates who have achieved A grade "A" levels and are looking to achieve a 2:1 minimum in a financial discipline should definitely be applying direct to the banks to join a graduate scheme which will give you the experience of the different areas of the bank and allow you the choice at the end of the scheme as to where you are best suited. For those graduates who do not get one of the few places on the various graduate programmes, there are still various attractive options available.

By joining a specialist consultancy you will be able to apply to banks via your consultant utilising relationships that they have across the city in a wide range of Investment Houses. For those graduates who know they want to work in a front office role will need to have outstanding academics to get an entry level role as the majority of roles in the front office are filled by the internal graduate scheme. However there is also the option for those candidates who want to study for accountancy exams to join the middle office as opportunities exist for those again with outstanding academics to work within product control or management reporting. Lastly but by no means least Operations is a fantastic area for graduates to join. Here you will gain an excellent understanding of the products, gain invaluable training and have the choice of a career either within management, projects, middle office or alternatively front office. Again standards are very high and depending on the Bank, you will need good 'A' levels and ideally a minimum of a 2:1 or above.

Graduates wanting to enter the world of Investment Banking within Operations should be looking towards an entry level role within Fixed Income due to the increasing numbers of vacancies in that area. This is largely due to the fact that it was essentially Fixed Income, which carried equities and investment banking above the quicksands just as they were threatening to disappear last year. A not insignificant proportion of the bonuses paid to corporate financiers and equity specialists were borrowed from the debt capital markets pool.

Veteran Bond specialists do not need to be reminded that after the heady 1993 came 1994, which flattened many bond houses. During uncertain global economic times, it is equities that will suffer rather than bonds. The future is looking brighter for those looking to enter Banking Operations as confidence returns to the market.

Source: monster.co.uk

A country for old men? By Jurek Martin

2008-09-26T07:34:00.000+01:00

John McCain wants to dispel the notion that America is “no country for old men,” as last year’s Oscar-winning movie had it. But his age, at 72 he would be the oldest first time president, is generally assumed to be a handicap to his success in November.

Still, an experienced Democratic pollster, chatting over the metaphorical garden fence last weekend, wondered if, in a crisis like the present financial one, Americans might not prefer the greybeard to the relatively unknown younger quantity.

History provides a mixed guide, though on balance it is not encouraging for the Republican candidate. The age difference between Mr McCain and Barack Obama – 24 years and 340 days – is the largest ever between nominees, exceeding the 23 years and 28 days separating Bill Clinton and Robert Dole in 1996. We know who won that one.

Moreover, the country has elected eight 40-something presidents since the founding of the Republic, most recently Mr Clinton in 1992, and only one septuagenarian – and that was for a second term in office for Ronald Reagan, who was 73 in 1984.

On the other hand, since 1856, the older candidate has prevailed in 24 of 38 elections. This is about the same percentage, 59 per cent, won by the taller nominee. (Mr Obama towers above Mr McCain.) Curiously, Mr McCain’s generation, born between 1925 and 1945, has never produced a president; nor has Mr Obama’s – though with fewer chances.

Elections held in a national crisis have often not been kind to incumbents. Herbert Hoover lost to Franklin Roosevelt in 1932 in the depths of the Depression, while Jimmy Carter’s Iran hostage problem helped his defeat by Mr Reagan in 1980. In 1968, with the Vietnam war going badly and turmoil in the country’s inner cities, Lyndon Johnson abandoned his re-election bid – and his vice-president, Hubert Humphrey, ultimately lost the election to Richard Nixon.

It has been different in war time. Abraham Lincoln won a second term in 1864 in the middle of a finely balanced civil war, as did FDR his third term in 1940, with battles raging in Europe, and his fourth in 1944, when the US was leading the allies to victory.

Still, this is the first election since 1952 when no sitting president or vice-president is on a national ticket – and Mr McCain has been doing his level best to distance himself, not always successfully, from his fellow Republican, the incumbent George W. Bush.

Commensurately, relative good and peaceful times have tended to favour the party holding the White House. That was the case in 1956 with Ike’s second term, 1984 with Reagan’s, 1988 when Bush the Elder succeeded Reagan, 1996 with Clinton’s re-election and even 2004, when the economy was still bubbling and opposition to the war in Iraq had not reached critical mass.

But each election has its own dynamic, to which history sometimes appears tangential, and this year is no exception. The colour of Mr Obama’s skin itself breaks the historical mould and asks America questions it has never previously had to answer. An AP-Yahoo poll released last weekend suggests his race could hurt him as much as age does Mr McCain.

The Democratic pollster may have been speaking from his gut, not from statistical empirical evidence, when he observed that Mr Obama appeared “so young” at a time when the country might be drawn to somebody who has been around the lot for as long as his opponent.

Mr McCain has not helped himself by being all over the same lot in his responses to the financial crisis, asserting that the economy was “strong” when Wall Street was leaking from every seam, first opposing the bail-out of AIG, the insurance company and then supporting it, and asserting that, as president, he would fire the head of the Securities and Exchange Commission, an authority a president does not possess.

More generally, he has taken to imitating Peter Finch as Howard Beale in the 1976 movie, Network (”I’m as mad as hell, and I’m not going to take this anymore!”). The more cerebral Mr Obama has been more deliberative and nuanced, while, like Mr McCain, not exactly covering himself in glory.

The temporary result, according to some recent opinion polls, has been to restore Mr Obama’s lead, though not necessarily to the point that he can feel comfortable. But that could change, in either direction, again – and might if Mr McCain takes the advice of some in the rightwing blogosphere and comes out, in swinging populist style, against the proposed $700bn Wall Street rescue plan advanced by Hank Paulson, the treasury secretary.

The first presidential debate, whether or not it is delayed, might reveal how Mr McCain wants to play his hand in the weeks remaining and if he wants to capitalise on his age and experience. The risk is that by emphasising these qualities he will remind everybody that he has been around for a very long time, when some not very good things were happening in Washington.

But the voting public, if not yet as mad as Howard Beale, is scared. In No Country for Old Men, Javier Bardem played the part of the young(-ish) assassin, Tommy Lee Jones the ageing sheriff. Neither really won in the end.

Everyone is paying price for share buy-backs By William Lazonick

2008-09-26T07:32:00.000+01:00

During the stock market boom of the 1980s and 1990s the argument that “maximising shareholder value” results in superior economic performance dominated corporate governance debates. Economists argued companies should disgorge their “free cash flow” to create value for shareholders, rather than horde cash or invest in productive capacity that was not insufficiently profitable.

Traditionally companies distributed cash to shareholders through dividends. Increasingly, however, the payouts of US companies have taken the form of stock repurchases – total repurchases surpassed total dividends in 1997. Over the past five years, stock buy-backs have increased at a remarkable rate. Combined, the 500 companies in the S&P 500 index in January 2008 repurchased $120bn in 2003 and $597bn in 2007; in 2007 repurchases represented 90 per cent of their net income, while dividends were another 39 per cent.

These buy-backs are a measure of the grip that shareholder value ideology has on corporate America. Economists argue that among all stakeholders, only shareholders are risk-bearing “residual claimants”. The returns they get depend on what is left over after other stakeholders have been paid for their contributions according to guaranteed contractual claims. However, it is not true that all stakeholders receive guaranteed returns. Workers, for example, supply their skills with an expectation of long-term rewards such as promotion, but without these being contractually guaranteed. Governments often subsidise businesses without guaranteed returns to taxpayers. The shareholder-value perspective provides a simplistic answer to a complex problem: how to reward stakeholders so that their contributions raise living standards and provide economic gains that can be shared equitably.

Cash dividends are fundamentally different from stock repurchases. Dividends provide a return to those who hold stock, and hence maintain a commitment to the company. Yet executives have become enamoured by stock repurchases. Their abundant stock options give them an incentive to do buy-backs to boost stock prices even if this undermines long-term value.

The adverse impact of these decisions goes beyond the unseemly explosion in executive pay. The crisis in the US financial sector offers one example. Having spent billions on stock repurchases, some of the oldest Wall Street banks find that the subprime crisis has left them in need of cash to stay afloat.

In November 2007, the $7.5bn equity investment that Citigroup secured from the Abu Dhabi Investment Authority was almost as much as it spent on buy-backs in 2006 and 2007. Merrill Lynch did more than $14bn in repurchases in those two years, but by January 2008 had given up a 12.7 per cent equity stake to raise $9bn from foreign investors. Morgan Stanley, which did over $7bn in buy-backs in 2006-07, traded a 9.9 per cent equity stake with China’s sovereign wealth fund for $5bn. It has now agreed to a takeover. Lehman Brothers, which repurchased more than $5bn in 2006-07, is now bankrupt.

The taxpayer is also paying the price of buy-backs. When the US government bailed out Bear Stearns, by assuming the risk of $29bn of its subprime mortgage assets, there was almost $6bn less cash on Bear’s balance sheet because of buy-backs during 2003-07. So too with the government takeover of Fannie Mae and Freddie Mac, the government sponsored housing entities. They have spent $10bn on repurchases since 2003, including $4bn in 2006-07.

The crisis in the US financial sector demonstrates that the so-called “free cash flow” distributed as buy-backs was not really free. Wall Street banks could use that cash now to avert financial crisis rather than turn to foreign governments and the US taxpayer for a bail-out. Cash spent on buy-backs could also find better uses in other sectors. Leading pharmaceutical companies do buy-backs that sometimes exceed their R&D budgets even as they argue in Congress against the regulation of US drug prices contending they need to pump their profits into drug research.

The $1,700bn that S&P 500 companies spent on buy-backs in 2003-07 represents a huge manipulation of the stock market. US executives who allocate corporate resources to them reap the benefits as they exercise stock options. In the 1980s, executives learnt that greed is good. Now, their mantra could be “in buy-backs we trust”.

The author is a professor at the University of Massachusetts Lowell. A paper, The Quest for Shareholder Value: Stock Repurchases in the US Economy, to appear in Louvain Economic Review, is available at www.uml.edu/centers/CIC

We need a new Global Monetary Authority By Jeffrey Garten

2008-09-26T07:30:00.000+01:00

Even if the US’s massive financial rescue operation succeeds, it should be followed by something even more far-reaching – the establishment of a Global Monetary Authority to oversee markets that have become borderless.

Washington recognises that the crisis has become global. Hank Paulson, Treasury secretary, has said that foreign banks operating in the US will be eligible for federal assistance and he is urging other nations to fashion their own bail-out programmes. Central banks have also been synchronising injections of funds into markets. These should be steps to a more comprehensive international response designed not just to extinguish the current fires, but to rebuild and maintain the capital markets for the longer term.

The current global institutional apparatus is woefully incapable of overseeing the financial system that is evolving. The International Monetary Fund is irrelevant to this crisis, the Group of Seven leading industrial countries lacks legitimacy in a world where China, Brazil and others are big players, and the Bank for International Settlement has no operational role. The US Federal Reserve is too besieged to act as a global central bank.

That vacuum at the centre is dangerous for everyone. The US’s dependence on massive inflows of foreign capital, roughly $3bn (€2bn, £1.6bn) a day, will surely increase now as Uncle Sam acquires $1,000bn in new obligations from current bail-outs. For years to come, Wall Street and Washington will be unable to manage without strong co-operation from other markets.

Beyond that, the international dimensions of finance are mind-boggling. Global assets have increased from $12,000bn in 1980 to nearly $200,000bn in 2007, far outstripping the growth of gross domestic product or the expansion of trade. An increasing amount of this capital now resides in Asia and the Gulf, not the US or Europe. A US company such as AIG sold more of its credit default swaps and insurance policies outside the US than within it. UBS employs 30,000 Americans, is listed on the New York Stock Exchange and owns Paine Webber. The capital markets will evolve in the context in which emerging market economies will be growing twice as fast as the rich nations and will, by mid-century, probably account for almost two-thirds of global GDP.

Globalisation will now also create a clash of philosophies. Most governments and investors outside the US never shared the American system of cowboy capitalism. Now they have good reason to demand that some fundamental changes be made in the way the US manages its financial institutions. This can happen with a conscious, negotiated modification in the US financial model, or it could result from foreign investors shifting their funds elsewhere.

All of these considerations point to the eventual need for a new Global Monetary Authority. It would set the tone for capital markets in a way that would not be viscerally opposed to a strong public oversight function with rules for intervention, and would return to capital formation the goal of economic growth and development rather than trading for its own sake.

A GMA would be a reinsurer or discounter for certain obligations held by central banks. It would scrutinise the regulatory activities of national authorities with more teeth than the IMF has and oversee the implementation of a limited number of global regulations. It would monitor global risks and establish an effective early warning system with more clout to sound alarms than the BIS has.

It would act as “bankruptcy court” for financial reorganisations of global companies above a certain size. The biggest global financial companies would have to register with the GMA and be subject to its monitoring, or be blacklisted. That includes commercial companies and banks, but also sovereign wealth funds, gigantic hedge funds and private equity firms.

The GMA’s board would have to include central bankers not just from the US, UK, the eurozone and Japan, but also China, Saudi Arabia and Brazil. It would be financed by mandatory contributions from every capable country and from insurance-type premiums from global financial companies – publicly listed, government owned, and privately held alike.

In terms of US and international politics, a Global Monetary Authority is probably an idea whose time has not yet come. That may change as today’s crisis evolves.

The writer is the Juan Trippe professor of international trade and finance at the Yale School of Management

Do not exaggerate investment banking’s death By Philip Augar

2008-09-26T07:26:00.000+01:00

Did the eight days between Sunday September 14 and Sunday September 21, 2008 mark the death of the investment bank? Lehman Brothers went bust, Merrill Lynch gave up and Goldman Sachs and Morgan Stanley became regulated banks. It was part of the most catastrophic shift among investment banks since the event that created them, the Glass Steagall Act of 1933. In future, familiar terms such as the bulge bracket, the tag for elite US investment banks, will need to be redefined, end-of-year league tables will have a different look and clients and executives will need to adjust to new ground rules. But despite these changes and provided they survive the current crisis, it is likely that investment banks will exist as recognisable entities within their new organisations and investment banking as an industry will emerge with enhanced validity.

In one sense not much will change. The firms we regarded as investment banks had already become large financial conglomerates. Morgan Stanley ceased to be a stand-alone investment bank in 1997 when it merged with the consumer finance company Dean Witter. Goldman broadened away from investment banking when it expanded its trading and principal investment activities after it went public in 1999 and by 2007 less than 15 per cent of its pre-tax profits came from investment banking. The truth is that pure investment banks ceased to exist long ago. The absorption of some famous old names into banks and the redefinition of some others will make little difference to client service or market dominance. In respect of their performance as investment banks it is a matter of semantics whether such financial conglomerates include or exclude banking alongside their many other businesses.

The disruption in the market will, however, give an opportunity for other institutions to move into the investment banking space. In recent years there has been a convergence of financial services involving private equity firms, hedge funds and investment banks. Goldman Sachs, with its private equity and hedge fund businesses, is no more an investment bank than Blackstone, with its advisory experts and alternative investment funds, is a buyout firm. The blurring of such distinctions has already led alternative investment firms into investment banking territory. Firms such as Blackstone, KKR and others coming from the hedge fund end of the spectrum will no doubt see further opportunities as the existing investment banks readjust.

Much depends on the regulators’ response to the investment banks’ problems. The bail-out is so large and public opinion is so inflamed that new rules are inevitable. However, it is unwise to underestimate the industry’s powers of survival. The last time Wall Street was in the mire was between 2001 and 2003 when the dotcom bubble burst. President George W. Bush pledged “to end the days of cooking the books, shading the truth and breaking our laws”, but instead a patsy settlement with the investment banks was reached in 2003 that imposed trivial fines and minor rule changes but left their business model intact. What happened then was the industry argued that the investment banks were essential to oiling the wheels of global capitalism. They will be hard-pressed to use such arguments this time round but Washington and Whitehall are still pro-market and the investment banks, whether independent or part of larger financial conglomerates, may yet receive more lenient treatment than seems likely today.

Far from bringing about its downfall, the beating that the investment banks have taken in the market could even restore investment banking to what it once was. In the past decade advising clients on corporate finance and investment matters has been subsumed in a dash for profit involving principal investing and proprietary trading. In the hurly-burly of the bull market investment banks got mixed up between what they were doing for themselves and what they were doing for clients. While they are licking their wounds, the investment banks may well eschew some of the more esoteric structured finance products that have caused them such problems and refocus on what they used to regard as their core business. While we may have seen the death of the investment bank I would be very surprised if we have seen the death of investment banking as an industry.

The writer was group managing director securities at Schroders and is the author of The Greed Merchants and other books. His new book Chasing Alpha will be published by Bodley Head in the new year

The Future of Investment Banking by Lisa Novak (New York City)

2008-09-26T07:23:00.000+01:00

In an interview on Bloomberg in July, Nouriel Roubini, a professor of Economics at the Stern School of Business at NYU and Chairman of RGE Monitor, had some dire predictions about the economy. Foreseeing no end to the current financial crises, he warned, “It’s a vicious circle between a contracting economy and greater credit and financial losses feeding on the economy.”

Roubini further prognosticated that, “in a few years’ time, there will be no major independent broker dealers as their business model…is bust and the risk of a bank-like run on their very short term liquid liabilities is a fundamental flaw in their structure…”

Starting with the fire sale at Bear Sterns earlier this year and culminating this week with the shocking news of the Lehman bankruptcy and rush sale of Merrill Lynch, Nouriel Roubini’s prophesies seem to be coming true before our eyes. Now, only two of the five largest independent brokers–Morgan Stanley and Goldman Sachs–remain standing. With reports this week that Morgan Stanley is considering a merger with Wachovia, many in–and out–of the financial world are questioning the future of investment banking.

Some, like John Gapper, believe that investment banks are not going to disappear in the future, “but they will be smaller, specialized institutions, like the merchant banks of old. There are plenty of advisory firms, hedge funds and private equity funds and this Wall Street crash will create more.” Gapper, associate editor and chief business commentator of the Financial Times further commented “all of the unemployed financiers will need something to do.”

An example of this type of firm is Jefferies Group Inc., a full-service global investment banking and institutional securities firm headed by Richard B. Handler, an ex-junk bond trader, formerly of Drexel Burnham Lambert. Third-market trading companies like Jefferies, which trade over-the-counter securities not listed on a stock exchange, are less affected thus far by the financial crisis because they haven’t been involved in subprime mortgage loans.

On September 2nd, Reuters reported that Jefferies hired 25 ex-Bear Stearns bankers. One cannot help but wonder whether this is a sign of things to come and whether all the newly-jobless Merrill and Lehman people will hop into the same lifeboat as the Titanic sinks.

However, others argue that Bank of America’s acquisition of Merrill Lynch and the possible acquisition of Morgan Stanley by Wachovia portend an opposite trend: the re-absorption of investment banks into the fold of traditional banking institutions as in the pre-Glass-Steagall Act era. The law, which was enacted following the Great Crash of 1929, banned commercial banks from underwriting securities, avoiding a conflict of interest and forcing banks to choose between being simple lenders or brokerage/underwriters.

It remains to be seen whether the investment bank as we know it will, as is predicted, fade away or whether rumors of the death of the investment bank are greatly exaggerated. In any case, we can expect that any action will be accompanied by an institutionalized code of ethics for the banking industry to stave off a future breakdown of this nature and scope.

Manasseh Pridefully Rebelling against the Lord with Hoekstra

2008-09-25T07:30:00.000+01:00

Manasseh . . . did evil in the sight of the LORD, according to the abominations of the nations whom the LORD had cast out before the children of Israel . . . And the LORD spoke to Manasseh and his people, but they would not listen. Therefore the LORD brought upon them . . . the army of the king of Assyria, who took Manasseh with hooks, bound him with bronze fetters, and carried him off to Babylon. (2Ch_33:1-2, 2Ch_33:10-11)

Manasseh was another king who walked in prideful rebellion against the Lord. "He did evil in the sight of the LORD." His pride was even more shocking than Nebuchadnezzar's (who ruled in Babylon), since Manasseh ruled in Jerusalem and had been raised by a godly father, King Hezekiah.

Manasseh was heavily influenced by the remaining presence of the godless nations that dominated the land before God gave it to Israel. His evil was "according to the abominations of the nations whom the LORD had cast out before the children of Israel." The spiritual behavior of these Canaanite nations was abominable in God's sight. They indulged in licentious worship of idols on the hills and mountains. Manasseh "rebuilt the high places which Hezekiah his father had broken down; he raised up altars for the Baals, and made wooden images; and he worshiped all the host of heaven and served them" (2Ch_33:3). Manasseh also brought idolatry into the very Temple of the Lord in Jerusalem. "He also built altars in the house of the LORD, of which the LORD had said, 'In Jerusalem shall My name be forever' " (2Ch_33:4).

The nations that preceded Israel in the land were even engaged in sacrificing their children and seeking demonic guidance. Shockingly, Manasseh also "caused his sons to pass through the fire in the Valley of the Son of Hinnom; he practiced soothsaying, used witchcraft and sorcery, and consulted mediums and spiritists" (2Ch_33:6). Actually, Manasseh brought more evil into the land than his abominable predecessors. "So Manasseh seduced Judah and the inhabitants of Jerusalem to do more evil than the nations whom the LORD had destroyed before the children of Israel" (2Ch_33:9). Lovingly, the Lord reached out to this pridefully rebellious king. "And the LORD spoke to Manasseh and his people, but they would not listen." The ultimate result of this persistent resistance was humiliating and painful captivity. "Therefore the LORD brought upon them the captains of the army of the king of Assyria, who took Manasseh with hooks, bound him with bronze fetters, and carried him off to Babylon."

Let's pray;

Heavenly Father, please guard me from the seductive influence of this godless world. I am already too familiar with the bondage that worldly indulgence brings. Please nurture to fullness every godly seed ever planted in my life, for Your glory, Amen.

Nebuchadnezzar Exemplifying God's Grace for Humility with Hoekstra

2008-09-24T07:13:00.000+01:00

And at the end of the time I, Nebuchadnezzar, lifted my eyes to heaven, and my understanding returned to me; and I blessed the Most High and praised and honored Him who lives forever . . . He does according to His will in the army of heaven and among the inhabitants of the earth . . . At the same time . . . I was restored to my kingdom . . . Now I . . . praise and extol and honor the King of heaven . . . and those who walk in pride He is able to abase. (Dan_4:34-37)

When Nebuchadnezzar exalted himself, he exemplified God's opposition to pride. "Is not this great Babylon, that I have built for a royal dwelling by my mighty power and for the honor of my majesty? . . . a voice fell from heaven . . . 'the kingdom has departed from you' " (Dan_4:30-31). When he humbled himself, he exemplified God's grace for humility. "God resists the proud, but gives grace to the humble" (1Pe_5:5).

Nebuchadnezzar had been driven into the fields to live as an animal. "That very hour the word was fulfilled . . . he was driven from men and ate grass like oxen . . . till his hair had grown like eagles' feathers and his nails like birds' claws" (Dan_4:33). This season of God's opposition for Nebuchadnezzar's pride would end when he looked to the Lord above. "And at the end of the time I, Nebuchadnezzar, lifted my eyes to heaven, and my understanding returned to me." Now, with his mind enabled to think clearly, he began to give blessing and praise and honor to the Lord God Most High. "And I blessed the Most High and praised and honored Him who lives forever."

This represented a completely transformed perspective for the king. Previously, he was glorifying himself. Now, he glorified the Lord. Previously, he thought he had established himself upon his throne. Now, he saw the will of God behind his ascendancy to power. "He does according to His will in the army of heaven and among the inhabitants of the earth." The Lord then granted grace to this humbled king, who had formerly walked in rebellious pride. "At the same time . . . I was restored to my kingdom." Seated again in authority, he gave honor to the King of heaven (instead of to the king of Babylon). "Now I . . . praise and extol and honor the King of heaven." Then, he added a remark that reveals the new conviction he received during his humbling. "And those who walk in pride He is able to abase."

Let's Pray

Lord God Most High, I confess that I have had moments of success which I wrongly assumed were of my doing. Thank You for the grace You have always given when I humbly turned to honor You again. Lord, help me to keep my eyes consistently toward heaven that I might think clearly and give You all glory and praise day by day, Amen.

Isaiah Proclaiming God's Power for the Weak with Hoekstra

2008-09-15T07:46:00.000+01:00

He gives power to the weak, and to those who have no might He increases strength. Even the youths shall faint and be weary, and the young men shall utterly fall, But those who wait on the LORD shall renew their strength; they shall mount up with wings like eagles, they shall run and not be weary, they shall walk and not faint. (Isa_40:29-31)

Isaiah is another example of an Old Testament saint who lived by grace (that is, by depending upon God to work in the lives of His people). This dependence upon the Lord can be seen in Isaiah's proclaiming God's power for the weak. "He gives power to the weak . . . those who wait on the LORD shall renew their strength."
God desires to impart His power to the feeble. "He gives power to the weak." Those who are of the world cannot partake of this power, because they do not know the giver of this heavenly power. Sadly, many of God's own children do not receive this divine enabling, because they are unwilling to admit their weakness. Actually, the privileged place for receiving the Lord's empowering is to confess that we have no might at all on our own. "To those who have no might He increases strength."

In the days of youthfulness, mankind is the most convinced of possessing personal might. When one is young, weariness seems to be a distant threat. Yet, the truth is that even youthful energy eventually proves to be inadequate for the demands of life. "Even the youths shall faint and be weary, and the young men shall utterly fall." Nevertheless, there is enablement available that the most promising days of youth could never supply. It is an empowering that only God can provide.

This God-given power is experienced only by those who will wait upon the Lord. Left to themselves, old and young alike will find human might so frail and inadequate, "but those who wait on the LORD shall renew their strength." Those who place their hope in God are strengthened by the Lord Himself. They are enabled by God to live above their circumstances, looking down on life from heavens' perspective. "They shall mount up with wings like eagles." When it is time to press energetically ahead, they can do so without becoming exhausted. "They shall run and not be weary." When it is more appropriate to plod along methodically and persistently, they do not collapse. "They shall walk and not faint." All of this results from the power of God unleashed within those who wait upon Him.

Dear Giver of all true power, I have hoped in myself in the midst of so many demanding circumstances of life. My own strength has always proved to be so inadequate. Teach me to wait upon You, to place my hope in You. I desperately need and earnestly desire Your irreplaceable empowering, for Your glory, Amen

More on David Confessing the Lord as His God by Hoekstra

2008-09-13T07:30:00.001+01:00

For my iniquities have gone over my head; Like a heavy burden they are too heavy for me . . . I am troubled, I am bowed down greatly; I go mourning all the day long . . . in You, O LORD, I hope; You will hear, O Lord my God . . . Do not forsake me, O LORD; O my God, be not far from me! (Psa_38:4, Psa_38:6, Psa_38:15 and Psa_38:21)

When the battles raged with pain and cruelty, David drew upon God's grace by humbly confessing the Lord as his God. "I hear the slander of many; Fear is on every side . . . But as for me . . . I say, 'You are my God' " (Psa_31:13-14). Then David added, "My times are in Your hand" (Psa_31:15). He knew that all of his times were in the hand of his sovereign God. David demonstrated this comprehensive dependence upon the Lord in all types of situations (not only during the agonizing betrayals that he faced).

When David experienced times of personal sin and failure, he turned to the Lord, his God. "For my iniquities have gone over my head; Like a heavy burden they are too heavy for me." The guilt of David's sins overwhelmed him like mighty flood waters and crushed him like a massive weight. "I am troubled, I am bowed down greatly; I go mourning all the day long." This left David distressed, greatly pressed down, and continually grieving. Thus, with a broken and humble repentance, he confessed the Lord as his God. "In You, O LORD, I hope; You will hear, O Lord my God . . . Do not forsake me, O LORD; O my God, be not far from me! "

In other times, David confessed the Lord as his God. When he was sick and near to death, he turned to the Lord, confessing Him as his God. "O LORD my God, I cried out to You, And You have healed me. O LORD, You have brought my soul up from the grave; You have kept me alive, that I should not go down to the pit" (Psa_30:2-3). When David was humbly aware of his lack of innate goodness, he also confessed the Lord as his remedy. "Preserve me, O God, for in You I put my trust. O my soul, you have said to the LORD, 'You are my Lord, my goodness is nothing apart from You' " (Psa_16:1-2). On the other hand, when David was joyously abounding in the goodness of the Lord, he also confessed the Lord as his God. "Many, O LORD my God, are Your wonderful works which You have done; And Your thoughts which are toward us cannot be recounted to You in order" (Psa_40:5).

Dear Lord, You are my God as well! Yet, I know that in many situations, I have not confessed You as my God. Lord, teach me to confess You as my God in every circumstance — when I have sinned, when I am sick, when I am abased, when I am abounding. Wherever I am, whatever comes my way, may I see You as my God, lovingly and powerfully handling my times, in Jesus name, Amen.

Berlin University of Applied Sciences - MIDE Programme

2008-09-12T07:52:00.000+01:00

The Course Programme

First Semester

Second Semester

M19 Thesis

The Berlin University of Applied Sciences - Masters in International Business

2008-09-12T07:44:00.001+01:00

The Department of Economics I (Business Administration) at the FHTW, the largest University of Applied Sciences in Berlin, offers an 18-month full-time Masters degree in International Business (MIB)*. MIB, which is taught entirely in English, prepares its students for a career in multinational companies.

The programme is directed at students with a background in business or economics. Its major objective is to help students supplement or extend their professional and academic knowledge in the field of international business.

The programme seeks to achieve the following goals:

To prepare the students for challenging positions in various areas of international management or research. The necessary skills will be taught in a context with globalisation and European integration.
Along with courses related to international business several extracurricular courses will also be taught. The cognitive methods will help in developing the problem solving competences in the interdisciplinary context.
To foster a better understanding of different cultures and hone the skills required for successful intercultural communication.

Course Programme

Click on the module for more information!

First Semester
Modul	SWS	ECTS
Global Business Strategy and Supply Chain Management	4	5
International Economic Environment and Policy	4	5
Intercultural Management	4	5
1st Elective	4	5
- Quantitative Approaches to Management
- Contemporary Management Issues I: Project Management
Global Financial Markets and Multinational Business Finance	4	6
Humanities Programme		4
- German Culture and History	2
- Foreign Language	2
Second Semester
Modul	SWS	ECTS
International Accounting and Reporting	4	6
International Taxation in an Integrating World	4	5
Selected Aspects of International Business Law	4	5
2nd Elective	4	5
- The Economics of European Integration
- Contemporary Management Issues II: Leadership and Change Management
Marketing in International Business	4	5
Negotiation Skills	2	4
Third Semester
Modul	SWS	ECTS
Masterarbeit		25
Masterarbeit begleitendes Seminar und Kolloquium	1	5

The Most Precious Promise of Shared Life

2008-08-25T06:54:00.000+01:00

By which have been given to us exceedingly great and precious promises, that through these you may be partakers of the divine nature . . . Christ has redeemed us from the curse of the law . . . that we might receive the promise of the Spirit through faith. (2Pe_1:4 and Gal_3:13-14)
Here, we get at the heart of God's "exceedingly great and precious promises." By means of promise, the Lord has made it possible for us to share in His life: "that through these [God's promises] you may be partakers of the divine nature."

What a remarkable prospect this is — that man could participate in the divine nature. Yet, the promises of God make this available to man. Of course, this does not mean that man becomes divine (as many false religions and some aberrant theologies espouse). God alone is, and will ever be, divine. "I am God, and there is no other; I am God, and there is none like Me" (Isaiah 46:9). Nonetheless, man can share in the life of God, even though he will never become "a god" himself. This is accomplished by Jesus Christ coming to dwell within the lives of those who believe in Him. The Lord Jesus died for us that He might give life to us. "Most assuredly, I say to you, he who believes in Me has everlasting life" (Joh_6:47). This life that Jesus wants to share with us is His own life. "Jesus said to her, 'I am the resurrection and the life' . . . Jesus said to him, 'I am the way, the truth, and the life' " (Joh_11:25 and Joh_14:6).

The Apostle Paul taught this great truth extensively. "Paul, an apostle of Jesus Christ by the will of God, according to the promise of life which is in Christ Jesus" (2Ti_1:1). He understood that his apostolic ministry was not only anchored in God's will, but it also depended upon the life that God promised. Thus, he confessed Christ as his very own life: "Christ who is our life" (Col_3:4). Paul was not the source of the daily Christian life that he lived. "It is no longer I who live, but Christ lives in me" (Gal_2:20). The Lord Jesus was Paul's life source.
This is what the promise of the Spirit is about. "Christ has redeemed us from the curse of the law . . . that we might receive the promise of the Spirit through faith." At new birth, the Holy Spirit also comes to indwell those who believe. The Spirit reveals these truths to us through the word of God. Then, the Spirit pours forth the life of Christ through every humble, dependent child of God. "It is the Spirit who gives life" (Joh_6:63).

Lets pray;

Lord Jesus, thank You for making Your life available to me. What a precious promise that is! Teach me to walk according to Your Spirit, that Your life might be expressed through my life day by day, Amen.

Birds and Fish by Turning Point

2008-08-23T09:52:00.000+01:00

If you diligently obey the voice of the Lord your God...your God will set you high above all nations of the earth.
Deuteronomy 28:1

Recommended Reading
Genesis 22:1-1

Greatly loved Bible teacher, Henrietta Mears, once said to a classroom of students, "A bird is free in the air. Place a bird in the water, and he has lost his liberty. A fish is free in the water, but leave him on the sand and he perishes. He is out of his realm. So, young people, the Christian is free when he does the will of God and is obedient to God's command. This is as natural a realm for God's child as the water is for the fish, or the air for the bird."

Notice Mears did not say obedience is "easy" for God's child, but natural. In other words, it is where we belong and thrive. When we resist being obedient, we put ourselves in bondage to sin and take ourselves out of God's blessing. But when we decide to obey, we are free in Christ Jesus, knowing we are exactly where we are supposed to be.

The next time you feel like a fish out water in your relationship with the Lord, thrust yourself back into the waters of obedience and flourish with His blessing!

The degree of blessing enjoyed by any man will correspond exactly with the completeness of God's victory over him.
A.W. Tozer

Read-Thru-the-Bible
Ezekiel 24:1 - 27:36

"Unpopular" Promises Regarding Sowing and Reaping

2008-08-22T08:05:00.000+01:00

Do not be deceived, God is not mocked; for whatever a man sows, that he will also reap. For he who sows to his flesh will of the flesh reap corruption, but he who sows to the Spirit will of the Spirit reap everlasting life. (Gal_6:7-8)
We now revisit the category of "unpopular" promises. This set of promises concerns the absolute certainties of the reaping and sowing process. "Whatever a man sows, that he will also reap." In a world that often rejects accountability, these promises are very "unpopular."

Many people are deceived on this matter. They wrongly assume that they will not have to face the consequences of the "daily seeds" they are planting. To hold such an inaccurate perspective is actually a mockery against God, who established this principle. "Do not be deceived, God is not mocked." The pattern of planting and harvesting is clearly demonstrated in the case of physical seeds. Whenever a farmer sows corn, he always reaps corn. He never reaps wheat. This pattern is just as certain in the realm of spiritual seeds. Every person is sowing spiritual seeds every day of their lives: either, seeds of "his flesh" or seeds of "the Spirit." The harvest for each person is thereby determined: either, "corruption" or "everlasting life."

Throughout the world (and, sadly, in many instances within the church world) seeds of flesh are sown day by day. In word, deed, attitude, or relationship, people are planting seeds that are characterized by this fleshly list in Gal_5:19-21. "Now the works of the flesh are evident, which are: adultery, fornication, uncleanness, licentiousness, idolatry, sorcery, hatred, contentions, jealousies, outbursts of wrath, selfish ambitions, dissensions, heresies, envy, murders, drunkenness, revelries, and the like." These seeds bring forth a harvest of destruction. "For he who sows to his flesh will of the flesh reap corruption." Such seeds diminish and destroy every life that engages in them. Such seeds bring multiplied condemnation and judgment for unbelievers. When believers are caught in such carnal indulgences for a season, these seeds bring forth spiritual dryness, fruitlessness, and lack of appetite for communion with the Lord.

On the other hand, far different seeds are available for sowing, and they produce a distinctly different crop. "He who sows to the Spirit will of the Spirit reap everlasting life." The seeds that are planted by dependence upon the Spirit of God bring fruit as described in Gal_5:22-23. "But the fruit of the Spirit is love, joy, peace, longsuffering, kindness, goodness, faithfulness, gentleness, self-control."

Let Pray;

Heavenly Father, I deeply regret the fleshly seeds that I have sown. They always diminish my life and dishonor You. I desire to sow seeds of the Spirit. They always enrich my life and bring glory to You. I long to please You, not mock You, Amen.

A Precious Promise of God's Provision

2008-08-19T07:53:00.000+01:00

By which have been given to us exceedingly great and precious promises . . . And my God shall supply all your need according to His riches in glory by Christ Jesus. (2Pe_1:4 and Phi_4:19)

In recent meditations, we have looked at two differing categories of promises: "exceedingly great and precious promises" and "unpopular" promises. Both play a vital role in God's plan. The first category of promises brings encouragement, comfort, and hope. The second category warns, convicts, and awakens. Both types are equally certain of fulfillment. Both types are to be heeded and embraced. For awhile now, let's alternately consider promises from these two categories.

Our present verses contain a promise of the first type. "And my God shall supply all your need according to His riches in glory by Christ Jesus." The context of this promise concerns material provisions. "Now you Philippians know . . . no church shared with me concerning giving and receiving but you only. For even in Thessalonica you sent aid once and again for my necessities" (Phi_4:15-16). The saints at the church in Philippi regularly gave of their financial resources that the Apostle Paul might concentrate on ministering the gospel. "Indeed I have all and abound. I am full, having received from Epaphroditus the things which were sent from you, a sweet-smelling aroma, an acceptable sacrifice, well pleasing to God" (Phi_4:18). Their recent gifts left Paul abundantly supplied. This generosity was also a pleasing spiritual sacrifice in the eyes of the Lord.

As He did with Paul, the Lord promises to meet the physical needs of all of His children. We can rely on His promised care for us. We do not need to worry or fret. "Do not worry, saying, 'What shall we eat?' or 'What shall we drink?' or 'What shall we wear?' For after all these things the Gentiles seek. For your heavenly Father knows that you need all these things" (Mat_6:31-32). Our faithful and loving Father is fully aware of our material needs, and He has committed Himself to supplying them. "But seek first the kingdom of God and His righteousness, and all these things shall be added to you" (Mat_6:33). Our heavenly Father wants us to give our attention to seeking after Him, not after our needs. He wants us to be on a quest to know Him. He desires that we seek after His holy rule and His righteous ways. He will be faithful to "supply all your need according to His riches in glory by Christ Jesus." He may typically use a paycheck to fulfill His promise, but He will supply our needs. Even if we are flat on our backs and unable to work, God is our faithful source.

Lets Pray;

Dear heavenly Father, I thank You for Your faithfulness in supplying my material needs through the years. Forgive me for doubting You at times, when it looked like the provision was not coming. Help me to seek You and not my needs, Amen.

Berlin School of Economics

2008-08-17T16:25:00.001+01:00

The Berlin School of Economics is one of Germany's leading universities specialised in the business and economics expertise needed by the next generation of managers. The University is also one of the largest higher education institutions in Germany for business, offering students a wide choice of 26 programmes on all aspects of economics and related disciplines. The programmes cover a spectrum from general business administration and economics (e.g., Business Administration, Economics, International Management) to specific sectoral skills or combined related subjects (e.g., Business Law, Business Informatics or Business Engineering) and the expertise needed for tomorrow's executive managers (e.g., MBA General Management, MBA Health Care Management).

The Berlin School of Economics has two faculties and one independent central institute. The University is now located at three campuses, in the city districts of Schöneberg, Friedrichshain and Lichtenberg.

Over 5,000 students and about 1,000 graduates every year profit from the knowledge and management experiences of around 130 professors and more than 400 part-time lecturers.

The Berlin School of Economics encourages the internationalisation of its students through its

almost 80 partner universities throughout the world, e. g. in Australia, the Netherlands, Great Britain, France, China, Japan, and the United States. The Berlin School of Economics is a member of the network “UAS7 – Alliance for Excellence“.

Sources: Wikipedia

Coming to the Lord for Grace

2008-08-13T07:00:00.000+01:00

Come to Me . . . and I will give you rest. Take My yoke upon you and learn from Me... and you will find rest for your souls. (Mat_11:28-29)

Our previous meditation on Jesus promising spiritual rest provides an excellent opportunity to reflect again upon the relational aspect of living by the grace of God. God's grace does not abound toward us by means of some religious procedure. His grace flows into our lives as we walk in a developing relationship with Him. This is essential to understand, since it is "the grace of our Lord Jesus Christ" (2Co_8:9) that we are to be experiencing.

It is in coming to the Lord, in relating to the Lord, that we find His grace at work in our lives. "Come to Me...Take My yoke... learn from Me." When we first come to Jesus in humble dependence, we find His grace to forgive us of our our sin and guilt. When we yoke up with Him, walking intimately with Him each day, we find His grace to rescue us from religious, fleshly striving.

This pattern of coming to the Lord is prevalent in the scriptures. Isaiah wrote of it concerning salvation. "Look to Me, and be saved, all you ends of the earth! For I am God, and there is no other... Surely in the LORD I have righteousness and strength. To Him men shall come" (Isa_45:22, Isa_45:24). Isaiah also declared that spiritual refreshment and life from God would be available by simply coming to the Lord. "Ho! Everyone who thirsts, come to the waters... Listen diligently to Me, and eat what is good, and let your soul delight itself in abundance. Incline your ear, and come to Me. Hear, and your soul shall live" (Isa_55:1-3). Of course, Jesus restated this profound invitation concerning Himself. "If anyone thirsts, let him come to Me and drink. He who believes in Me, as the Scripture has said, out of his heart will flow rivers of living water" (Joh_7:37-38).

The Apostle Peter wrote of another significant issue for which we come to Jesus. "Coming to Him as to a living stone, rejected indeed by men, but chosen by God and precious, you also, as living stones, are being built up a spiritual house, a holy priesthood, to offer up spiritual sacrifices acceptable to God through Jesus Christ" (1Pe_2:4-5). If we are going to access the grace that edifies our lives, we must consistently be coming to Jesus Christ, the Father's chosen and precious cornerstone.

Lets pray;

Dear Lord, I praise You for the grace that I find every time I come to You in humble dependence. Coming to You, I am cleansed, sustained, refreshed, and built up. I am so thankful that Your grace is accessed through relationship with You and not through religious performance by me!

Even More on God's Promises and God's Law with Hoekstra

2008-08-02T09:51:00.001+01:00

For the promise that he would be the heir of the world was not to Abraham or to his seed through the law, but through the righteousness of faith. For if those who are of the law are heirs, faith is made void and the promise made of no effect. (Rom_4:13-14)
These words from the book of Romans continue our consideration of God's promises and God's law. Abraham is again the person around whom the insights unfold.

God promised Abraham blessings beyond measure. "Also your descendants shall be as the dust of the earth; you shall spread abroad to the west and the east, to the north and the south; and in you and in your seed all the families of the earth shall be blessed" (Gen_28:14). These promises were not contingent upon Abraham's ability to perform up to the level God's holy law. "For the promise that he would be the heir of the world was not to Abraham or to his seed through the law." When God made these promises to Abraham, the law was still hundreds of years from being revealed. Likewise, these promises were not contingent upon circumcision (the sign of this covenant with Abraham). "And he received the sign of circumcision, a seal of the righteousness of the faith which he had while still uncircumcised, that he might be the father of all those who believe" (Rom_4:11). Circumcision was added after Abraham heard the promises and believed.
In these encounters with God, Abraham was being asked to put his trust and confidence in the Lord. "For the promise that he would be the heir of the world was not to Abraham or to his seed through the law, but through the righteousness of faith." When Abraham believed in the promises of God, at that moment, God declared him righteous in His sight. "Abraham believed God, and it was accounted to him for righteousness" (Rom_4:3). What gave Abraham a right standing with God and allowed him to enter into God's promises was his trusting in the Lord.

The only other option to "God-dependent faith" would be "self-dependent law performance." Such an approach to God would be totally unacceptable. "For if those who are of the law are heirs, faith is made void and the promise made of no effect." Attempting to merit God's promises by law performance says we view faith in Him as meaningless. Striving to earn what God has pledged to provide says we consider His promises as ineffectual.

Lets Pray;
Dear Lord, forgive me for my frequent attempts to accomplish by my performance that which You offer by promise. Lord, I see that this shows disdain for faith in You and for Your promises to me. Please give me a fresh new awareness of the excellence of faith and the power of Your promises, Amen.

The GRE Exam

2008-07-26T12:23:00.002+01:00

I have decided to take the GRE Exam in order to pursue a degree in Financial Economics and Finance in either Oxford or Princeton. I choose the GRE because of one critical analysis with it and that of the GMAT: The opportunity to take the paper test. The paper-based test is still used under the GRE. For a student who has worked excellently well with paper test from primary school, I believe it is the best choice for me. The paper-based test enable me to thoroughly manage the questions that I answer and do not have to worried about whether the next question is easy or hard. I can best pace myself and reduce many of the errors that might have committed if I had chose to that the computer-based test (CAT).

I believe I could score above my initial CAT score of 1100 with paper-based test, say 1500+.

Plange

MIDE Programme

Degree accreditation

Degree accreditation

Scholarships

Scholarships

Costs

Service fee

Semester Fee

Living expenses

How to apply

How to apply

Admission requirements

Admission requirements

First degree

Proof of English language ability

Admission Criteria

Applicants from the PR of China

Applicants from Vietnam

Applicants from Mongolia

The Course Programme

The Course Programme

First Semester

Second Semester

M19 Thesis

What is a "Fachhochschule"?

Still More Consequences of Accessing Grace through Faith with hoekstra

Moses Keeping the Passover, by Faith with Hoekstra

Moses Leading Israel Out of Egypt, by Faith with Hoekstra

More on Abraham's Patient, Heavenly Pilgrimage, by Faith with Hoekstra

Noah Building an Ark, by Faith

An Introduction to Private Equity

Private Equity

Student Loans

Assurance of Salvation through Faith with Hoekstra

Public vs. Private Company Managers: Which Are More Likely to Impact the Bottom Line?

Read More About...

Once More on the Source of Faith with Hoekstra

Top 10 Business Schools That Are The Toughest to Get Into

HLS JD Program

How to Get Into Harvard Law School - Can Getting Into Harvard Law School Really Be This Hard? by H. Jefferson, Jr.

B-school: nervous students and case studies by Benjamin Pimentel

Faculty Discuss Credit Crisis and Bailout Options

The financial crisis from a specific perspective by Mathijs van Dijk

The Enronization Of The Banking Industry by J. Edward Ketz, Associate Professor of Accounting (SMEAL College of Business)

Business schools and the financial market crisis

MBA Programs Prepare Business Students to Switch Gears from Financials, Explore New Options

The credit crunch and the MBA application spike. US MBAs take cover

Living by Faith Contrasted with Living by Law with Hoekstra

Growing in Grace through Living by Faith with Hoekstra

True vs. False (X) TRUE AND FALSE HUMILITY with Marc D. Carpenter

Jesus, the Ultimate Example of Humility

Harvard Business School Examines Crisis on Wall Street

5 Ways To Boost Your Recruiting Chances In A Tough Hiring Market

10 Questions I Can Answer About the Future of Investment Banking

US economy may plunge into depression if banking sector bailout fails

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Contrasting Results for Self-Exaltation and Humility with Hoekstra

Humility and the Fear of the Lord with Hoekstra

We should heed the lessons of the collapse of the ‘golden age’: a personal view

US economy may plunge into depression if banking sector bailout fails

Companies Under Pressure By MICHAEL M. GRYNBAUM

As Stocks Rally, Credit Markets Appear Frozen by MICHAEL M. GRYNBAUM

Climateer Investing: Investment Banking 2.0: Into the Future

Investment banks' future questioned By Peter Thal Larsen and Francesco Guerrera

The future of banking By Vincent Freeman

Graduates Entering Investment Banking

A country for old men? By Jurek Martin

Everyone is paying price for share buy-backs By William Lazonick

We need a new Global Monetary Authority By Jeffrey Garten

Do not exaggerate investment banking’s death By Philip Augar

The Future of Investment Banking by Lisa Novak (New York City)

Manasseh Pridefully Rebelling against the Lord with Hoekstra

Nebuchadnezzar Exemplifying God's Grace for Humility with Hoekstra

Isaiah Proclaiming God's Power for the Weak with Hoekstra

More on David Confessing the Lord as His God by Hoekstra

Berlin University of Applied Sciences - MIDE Programme

The Course Programme

First Semester

Second Semester