Georgia State University News & Events

University Relations Tip Sheet - September 29, 2008

Bailout could still spell bank losses
While Congress debates a $700 billion plan to buy up bad mortgages and shore up the nation’s largest financial institutions, Georgia State University Law Professor Ron Blasi worries about the effect on bank capital if tax deductions are not allowed on mortgage loan losses. The difference between the book value of the mortgage loans and what they are actually worth now – what the government would pay for them – could mean huge losses for banks that may not be fully deductible because of limitations on deducting operating loss, says Blasi, an expert in federal taxation of financial institutions and a former banking committee chairman for the American Bar Association. In addition, he says that the losses on the investments that the banks had in Fannie and Freddie stock also may not be deductible because of limitations on the deductibility of capital losses. “If no deduction is permitted for these losses, bank capital will be devastated. This seems to be contrary to what the Treasury Department is trying to accomplish with the bailout,” he said. To speak with Blasi, contact Michael Davis at 404-413-1361 or mdavis6@gsu.edu.

Learning from our mistakes
Each spring as companies release their annual financial statements, there is public backlash over executive compensation, says Steve Olson, director of the Center for Ethics and Corporate Responsibility at Georgia State University. But the outcry quickly subsides. Now that Washington is discussing a bailout of Wall Street, the thought of rewarding its failures has some politicians scrambling to limit executive pay and do away with so-called “golden parachutes.” “The idea that a firm could get bailed out by the government, and executives could still walk away with eight figures is appalling to many people,” says Olson. Arguing that modern views of firm performance emphasize the importance of learning from mistakes and adapting, Olson says government bailouts of business are often only “symptomatic solutions and leave the root cause in place.” To speak with Olson, contact Michael Davis at 404-413-1361 or mdavis6@gsu.edu.

Despite mortgage turmoil, commercial loans are sound
While mortgage lenders lowered standards for home-loan borrowers, underwriting controls were still strong on the commercial side, says Georgia State real estate expert Julian Diaz, making commercial-backed securities a safer bet than the panic would indicate. “There’s this panic that all real estate has got the same problem, but that’s not the case,” says Diaz, the chair of the Robinson College of Business’ Department of Real Estate. “Commercial loans were securitized a lot, but the underwriting was still very, very good. The commercial side is being tarred with the same brush” as residential mortgage investments, he said. To speak with Diaz, contact Michael Davis at 404-413-1361 or mdavis6@gsu.edu

Happenings at Georgia State University:

Guest lecturer to speak on Bush legal strategy in terror war
Discussing the Bush Administration’s legal strategy in the war on terror, law professor John O. McGinnis will deliver the 43rd Distinguished Henry J. Miller Lecture at Georgia State University’s College of Law. McGinnis is the Stanford Clinton Sr. Professor of Law at Northwestern University School of Law. The lecture and lunch will be from 12 p.m. to 1:15 p.m. Oct. 23 in the State Ballroom of the Student Center, 44 Courtland St., Atlanta. For more information, visit http://law.gsu.edu/events/index.php?id=2141.

Lincoln Center president to discuss nonprofit work
The Andrew Young School of Policy Studies’ third annual UPS Lecture on Nonprofit Leadership, Governance and Economic Stewardship will be delivered by Lincoln Center for the Performing Arts President Reynold Levy. The lecture will be from 3 p.m. to 4:30 p.m. Oct. 16 at the Andrew Young School of Policy Studies, 14 Marietta St. For more information, visit http://aysps.gsu.edu/nsp/2355.html.

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