Faculty & Research—Stephen M. Ross School of Business

Thought in Action
M.P. Narayanan	Congress Passes the Bailout -- Now What? Wall Street is breathing a collective but qualified sigh of relief this week after the House of Representatives passed an amended version of the $700 billion “bailout” package they originally rejected. Opposition from Main Street continues, despite arguments by leading economists that the rescue is needed to save the nation’s system from a severe downturn. Professor M.P. Narayanan, chair of the finance area at Ross, says the bailout is needed because Wall Street's problem is Main Street's problem. In a Q&A, he lays out how the process should work and what moves are needed after the markets stabilize. Read Q&A.
H. Nejat Seyhun	Insider Trading: Another Glass Ceiling? Martha Stewart notwithstanding, female executives who legally trade on inside information make nice, tidy profits--but not as much as men in the same positions, say researchers at the University of Michigan's Ross School of Business. In a new study, "Are Women Executives Disadvantaged?" U-M finance professors Sreedhar Bharath, M.P. Narayanan and H. Nejat Seyhun found that female top executives, board directors and other senior officers earn about half as much as their male counterparts when trading on inside information. Over a 50-day window after an insider purchase, male executives earned 19 percent on an annualized basis after adjusting for market movements whereas female executives earned 9 percent. Read more.
Robert Van Order	Why the U.S. Took Control of Fannie Mae and Freddie Mac The U.S. government, in a historic move September 7, 2008, took over mortgage giants Fannie Mae and Freddie Mac, ousting the CEOs of both companies and laying out plans to invest up to $200 billion in capital to shore up their finances. Both companies, which were privately held but were government sponsored enterprises chartered by Congress, struggled of late as home values crashed and the value of mortgages they held plummeted. Treasury Secretary Henry Paulson, after saying in July there were no plans to act on the authority, felt it was time to move in this month as investor nerves continued to rattle. Ross School of Business Professor Robert Van Order, a former chief economist at Freddie Mac, talks about why Secretary Paulson took action now and the implications for the future of the two companies. Read Q&A.

Nightmare on Wall Street

Wall Street was rocked this week as Lehman Brothers Holdings Inc. filed for bankruptcy, Merrill Lynch & Co.
sold itself to Bank of America Corp. and insurer American International Group Inc. saw its shares plummet as
it scrambled to raise billions to stay afloat. Watch Ross Professor Amiyatosh Purnanandam explain how the investment banking world got to this point, and what the future holds for the industry and regulators.
Purnanandam, assistant professor of finance, also outlines how this Wall Street crisis affects average Americans.

Listen to Ross Assistant Professor of Finance Sreedhar Bharath's take on how America got into such a financial mess.

Listen to podcast.