Expert panel discusses how to turn economy around

Amidst troubling signs that the nation’s economy is still trying to find its way—albeit, with substantial help from the American government—an expert panel of investment officers gathered at Lamberton Hall to talk about the ongoing recession.
The event Tuesday afternoon featured particular insight into the nature of distressed securities, including the stocks, bonds and other financial instruments belonging to companies that are restructuring and facing possible bankruptcy.
Brad Scheler '74 of Fried, Frank, Harris, Shriver & Jacobson; Allan Brown of Concordia Advisors; and Stephen Cooper of Zolfo Cooper, led the discussion.
Paul Brown, dean of Lehigh’s College of Business and Economics, moderated the panel.
The significance of the timing of the forum discussion was not lost on its participants, who watched Wall Street turn in another record-breaking day of activity.
Earlier in the week, the Dow Jones plummeted 251 points to its lowest closing since 1997. The Standard & Poor’s 500 index soon followed suit, registering its lowest close since April 1997. Citigroup’s struggling financial situation also took a hit, as uncertainty over the government’s expanded role in the company caused additional anxiety among investors.
It also coincided with President Obama’s first speech to a joint session of Congress, in which his administration said he sought to balance a sense of urgency with a cautiously optimistic outlook for the nation.
In most cases, the panelists shared those sentiments, though they advanced different views on how to get the economy positioned for a widespread rebound.
Much of the public’s concern about the economy has to do with perception, and how stable—or unstable—they believe the environment truly is, said Cooper, a highly regarded executive who advises companies on a range of operational and performance issues.
Even if consumers can afford to keep spending, Cooper said, they won’t until they “begin to feel that the light at the end of the tunnel is actually daylight, as opposed to an oncoming train.”

Scheler warned that Americans will have to adjust their expectations.
“The long-term American dream has been that every successive generation has had a higher standard of living than the prior generation. I think that’s about to have some brakes put on it,” said Scheler, who has worked on many of the largest and most complex transactions involving financially troubled companies in his current position as senior partner at Fried, Frank, Harris, Shriver & Jacobson.
“Whether we are in good times or in bad times is, in large part, framed out by our expectations,” he added. “We have passed on expectations that, over time, cannot be realistically sustained.”
Much of that may have to do with a business world that has become significantly more global in a relatively short amount of years. With a short exception following the Sept. 11, 2001, terrorist attacks, the panelists noted that the United States has been riding the longest period of economic growth that started—unbeknownst to most Americans—after the Vietnam Era.
It’s been a generational success story that has fostered an entitlement mentality for many Americans, particularly among the financial community, the panelists said. It’s a train of thought that, unfortunately, contributed to the current economic crisis, they added.
It’s also a mentality that was too prevalent among homeowners, who overextended themselves believing their real estate values would continue to appreciate, they said.
Brown and Scheler exchanged comments on the resulting “moral hazard,” and whether there is an obligation for taxpayers and homeowners to help the country rebound as quickly as possible by financially assisting those who may have pursued more volatile and riskier investments over the past few years.
That topic of temporary homeowner assistance to those in need is central to the American Recovery and Reinvestment Act, which was signed into law by President Obama on Feb. 17.
I do think the starting point is housing, and if we are able to put in place a program that gives homeowners at least the ability to stay in their homes and provide cash flow to the institutions holding their mortgages, albeit on a reduced amount basis, then we're starting on a path that is more efficient, said Scheler.
--Tom Yencho
Photos by Ryan Hulvat