On the evening of 8 April, the AHI in conjunction with the Hamilton Chapter of  Alpha Delta Phi sponsored a presentation by Nicholas D. Rockwell on “Securitized Mortgages and Liquidity in Financial Markets.”

Mr. Rockwell, a brother of ADP and a student in Professor James Bradfield’s seminar in financial markets, presented an analysis of the Bear Stearns collapse to a lively audience of about thirty persons.  Mr. Rockwell began by providing a brief review of the recent crisis of illiquidity at Bear Stearns and then followed with a discussion of the action undertaken by the Federal Reserve to reduce the likelihood of a cascading collapse of the financial markets.  He discussed the tradeoff faced by the Fed in providing immediate liquidity without either triggering an acceleration of inflation or creating a moral hazard by encouraging excessive risk-taking by investors who might come to expect that the Fed will always bail them out. To facilitate discussion, Mr. Rockwell developed an analogy between banks in a small local community and the situation faced by Bear Stearns.

In the ensuing discussion, which lasted for more than an hour, Mr. Rockwell engaged multiple questions about the arcane nature of the credit instruments that contributed to the Bear Stearns collapse and about the role of government in preempting future crises.  A spirited debate occurred over whether the Fed’s injection of liquidity actually constituted a use of taxpayers’ funds.