Time for Action, But What Kind?

Policymakers in Washington rolled up their sleeves over the past week to develop a strategy for addressing the credit crisis. GSB professors continued to be at the heart of the debate with Steven Kaplan, Neubauer Family Professor of Entrepreneurship and Finance, writing an op-ed for the Wall Street Journal and John Cochrane, Myron S. Scholes Professor of Finance, sitting in on an interview for National Public Radio. Kaplan focused on the drawbacks of a bailout package that limits executive pay at companies participating in the bailout, stating "As a philosophical matter, it is generally not a good idea for the government to limit pay. Anytime the government sets the prices of something below market value, it is sure to reduce the supply of that something." On NPR, Cochrane questioned whether the current situation warranted a $700 billion bailout as proposed by Fed chairman Ben Bernanke.