German Business Students Get Crash Course
LIANE HANSEN, host:
People around the world are thinking about what the financial crisis means for them personally. In Berlin, Germany, students at a business management school asked their professors to explain how the crisis developed and how it might play out. They were curious about what it reveled about the world banking system. And as business students, they also wondered how it might affect their own careers. Their professors immediately scheduled a special seminar on the crisis, and they let NPR's Tom Gjelten sit in.
TOM GJELTEN: The European School of Management and Technology in Berlin is an elite business school, among the top in Europe. This year, it has just 31 MBA students from applicants across the globe. This year's class comes from 14 countries. The school language is English. This past week, three faculty members offered a special lunch hour presentation on the financial crisis. Jan Hagen explained how bad loans originate with the banker letting people borrow money even when they are in no position to repay the loan. The banker will do that, Hagen points out, because he doesn't intend to keep the bad loan in his own portfolio.
Dr. JAN HAGEN (Head of Practice Group Financial Services, ESMT Customized Solutions, ESMT Faculty Professional): So what he is now trying to do is to offload the money. And he turns to Wall Street and says, well, take my loan portfolio. And this is where we enter the field of high finance, and this is where I'd like to pass on to Jorg and see what happens to the loan portfolio.
Dr. JORG ROCHOLL (Associate Professor, ESMT): Thank you, Jan. As Jan already said...
GJELTEN: The students hung on every word. And at the first opportunity to ask questions, hands shot up around the room. Artie Buksie(ph), a 32-year-old student from India, wanted to know whether a corporation with a cash reserve these days should invest the money, deposit it in a bank, or just hold on to it.
Ms. ARTIE BUKSIE (MBA Student, ESMT): Or is there some way for an organization to have a relatively safe...?
GJELTEN: The question prompted a little disagreement between her professors. Jorg Rocholl took the conservative view, stressing the importance of liquidity.
Dr. ROCHOLL: If banks should really not be able to finance again investments, it would be much more important for the corporations to just keep the cash and be able to be more flexible when an investment opportunity arises.
Dr. HAGEN: Maybe one more addition to...
GJELTEN: Jan Hagen, however, made the argument that the U.S. government's refusal to bail out Lehman Brothers was a onetime only event, and that banks are now relatively safe.
Dr. HAGEN: Unsecured, what's next? And I think what the central banks have realized, and the supervisory authorities, is that they cannot afford a second Lehman Brothers case. So if you are a corporation, I think it's fairly safe to invest money in the banks of industrialized countries. I think that's clear...
GJELTEN: For these European business school professors, the global financial crisis is a golden opportunity to explain some pretty arcane concepts - like securitization or moral hazard - using illustrations from the dramatic news developments. Jorg Rocholl.
Dr. ROCHOLL: Sometimes you have the issue when you go into more theoretical classes in the MBA program that students may think, oh, why is this relevant? Why should we care? And now we know exactly why they should care about these concepts. And they will be great case examples for future classes.
GJELTEN: Fabian Banash(ph), a 27-year-old business student from here in Germany, says the financial crisis now gripping the world is more complicated than other business crises and therefore requires more careful explanation.
Mr. FABIAN BANASH (MBA Student, ESMT): In some other crisis, you know, you could always clearly identify the cause of things and how it developed and what was behind it. And with the financial markets, there's a lot of, you know, there's a lot of structures that are kind of aloof for normal people. You don't get to see it. It's a little bit like nuclear energy or something else. If you don't understand it, it scares you. And you have a hard time to assess it.
GJELTEN: The student who pushed hardest for this special class was 30-year-old Marco Zagonel(ph) of Brazil.
Mr. MARCO ZAGONEL (MBA Student, ESMT) Well, we are reading Financial Times every day, and every day we see the world is collapsing. And then we're having classes about how to grow business or how to start a new business, and that's a bit contradictory. So we're really concerned what can happen, which proportion this crisis can reach, and how it will affect our future careers.
GJELTEN: Marco himself came into this program expecting to get a job in an investment bank after graduation. Now, he says, that's not an option. Tom Gjelten, NPR News, Berlin.
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