Lords of Finance Author Addresses the Smith School’s
Incoming Full-time MBA Students

Many in the world of finance and banking have compared the current recession to the Great Depression of the 1930s, hoping that leaders of today and tomorrow might learn from the mistakes of the past. With great clarity, Dr. Liaquat Ahamed, author of Lords of Finance, conveyed the same historical analysis to the incoming full-time MBA class at the University of Maryland’s Robert H. Smith School of Business.

Dr. Ahamed delivered his address as the keynote speaker for the new students’ weeklong orientation activities in August 2009, explicitly telling his audience that he was not at Van Munching Hall to discuss his book, but to discuss the similarities and differences found in comparing the economic turmoil of the ’30s with the economic crisis today.

In a direct comparison of events triggering each respective economic crisis, Dr. Ahamed acknowledged each began with a bubble: the stock market in 1929, and the real estate market present-day. Each bubble burst, prompting a banking crisis. And in each, the Fed’s policy for reform relied upon keeping credit cheap.

Perhaps one of the most interesting similarities, as Dr. Ahamed said, is how “[e]very period of economic turmoil throws up its signature crook.” Yes, even the 1930s had their own Bernie Madoff. Ivar Kreuger was a Swedish man who had achieved status as the third wealthiest man in the world by 1929 through the “financial skullduggery” and lending money he would raise in New York to financially strapped nations such as Ecuador, Peru and Greece. As the market continued to plummet, Kreuger’s lending practice also began a downward spiral, but was miraculously saved by Italian government bonds that appeared in his safe. Only after he died in 1932 did the world come to find that all $100 million of those bonds were forged.

Moving to draw more comparisons, Dr. Ahamed painted Kreuger as an even more affluent villain than Madoff, as Kreuger’s fortune would be worth $18 billion by today’s standards, with Madoff’s worth a lesser $16 billion.

In closing, Dr. Ahamed left the MBAs with a few more facts to mull over throughout the orientation activities, and moreso throughout their business studies at Smith. He identified three major mistakes made in the 1930s. The Fed allowed the banking system to go under; taxes were raised in a country who had no money to pay them; and interest rates were raised, making cheap credit impossible; likening these measures to the 18th century belief that by letting blood, one could cure an ailing patient.

Dr. Liaquat Ahamed is a director at Aspen Insurance Holding Limited in Hamilton, Bermuda. He is also an adviser to the Rock Creek Group, a Washington, D.C., investment firm.

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