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MIT Sloan trek shows MBA students opportunities to work in policy — Valerio Riavez

See the original article on the MIT Sloan Experts Page>>

If you’re interested in policy work at an institution like the World Bank, the Federal Reserve, or the IMF, a PhD is required. At least that’s what MBA students have long thought. However, a recent MIT Sloan career trek to Washington, D.C. revealed that this is no longer the case.

As these institutions don’t typically participate in on-campus recruiting, it can be challenging for business school students to learn about policy jobs. That’s why the MIT Sloan Finance and Policy Club organized a trek for 25 students to Washington, D.C. We wanted to learn more about job options for MBA and Master of Finance (MFin) students, make connections, and get a glimpse of what living in D.C. is like.

We began the trek at the World Bank Group. Most MBAs are familiar with the IFC, which is the private sector development arm of the WB and an active recruiter of business students. However, during this visit we learned that the World Bank Group is also increasingly hiring people without PhDs. The World Bank has an elite program called the Young Professionals Program (YPP) through which it hires and forms the next generation of WB leaders. We were particularly surprised to learn that the majority of YPP hires actually do not have a PhD.

In the afternoon, we headed over to the Federal Reserve where we visited the boardroom and participated in a Q&A session with a senior economist. We sat around the very table where Janet Yellen, Ben Bernanke, and Alan Greenspan made some of the most significant monetary decisions in the history of global economics. For a policy fan, I must admit it was pretty cool.

A takeaway at the Fed was that jobs are mostly reserved for U.S. citizens. Foreign students are generally ruled out unless they are transferred from another central bank through an exchange program. There is a fierce screening process for all jobs at the Fed because it is a central bank and its activities are at the core of national interests.

We also learned how after the financial crisis, the Fed began looking more to private-sector practitioners to work on unconventional monetary policy endeavors to get the economy back on track. When central banks had to design and implement their quantitative easing, they had to rethink how to intervene in financial markets. To do that, they brought in people with experience in the private sector and exposure to financial markets. For students interested in finance at a policy institution, that is an untapped recruiting resource.

In addition to that good news, we saw that this trend seems to extend to other central banks and financial policy institutions, which are increasingly interested in people with business acumen – meaning a PhD is not always required. The governors of central banks still have PhDs, but the world is changing and private sector experience and exposure to financial markets today are crucial for these institutions. As a result, departments involved in quantitative easing are increasingly comprised of MBAs.

We ended our trek with visits to many landmarks in Washington, D.C., including the Library of Congress, the Washington Monument, the Lincoln Memorial, and the Kennedy Center. On our final night, we visited the Saudi ambassador’s home where we enjoyed a traditional Saudi reception and a great discussion about the economy in the Middle East with the ambassador and members of the Washington diplomatic community.

As most of us are still exploring opportunities for after graduation, meeting with MIT alumni in D.C. also helped us have a better grasp of what life is like in the city. After seeing all of the great policy opportunities available to MBA graduates and touring the city, it’s definitely a place to keep on the radar.

Valerio Riavez is a native of Italy and dual degree student at MIT Sloan and the Harvard Kennedy School. He holds a Master’s Degree in economics and previously worked in both the public and private sector in finance. He is co-president of the MIT Sloan Finance and Policy Club.

Tackling the challenges of governments as financial institutions

From the MIT Sloan Newsroom:

Governments not only regulate the private financial marketplace, they also own and operate some of the world’s largest financial institutions. Government agencies make trillions of dollars of loans, insure large and complex risks, and design new financial products. Yet their leaders often lack the analytical support and rigorous financial training of their peers in the private sector, and transparency is often lacking.

 

The MIT Center for Finance and Policy officially launched this month to address those gaps, along with other challenges facing financial policy makers.

“This is a big unmet need,” said Professor Deborah Lucas, director of the center. “To have an academic center devoted to the broad swath of government financial policies that have such an enormous effect on the allocation of capital and risk in the world economy.”

“What we want to do is to promote research that policymakers, practitioners, and informed citizens can turn to as an objective source of information when they’re thinking about these policy issues. That information often isn’t available now,” she said.

Research endeavors so far include, among others: the production of a world atlas of government financial institutions, an effort helmed by Lucas to catalog, compare, and evaluate governments’ financial involvement worldwide; a project led by Professor Andrew Lo to develop a dashboard that measures systemic financial risk; a study of the effects of algorithmic and high frequency trading, led by Professor Andrei Kirilenko; and a study of policies on retirement finance led by MIT Sloan professor and Nobel laureate Robert Merton.

Lo, Kirilenko, and Merton are all co-directors of the center.

Along with the research work, Lucas said there is also an educational mission for the center. In many cases, the center’s leaders say, financial problems could have been avoided, mitigated, or at least predicted had public sector workers had an education on par with that received by many private sector finance professionals.

“The idea is to provide the people who are working on finance within a government context with the same skillset as their peers in private industry,” Lucas said. “One reason you see a lack of finance education is because it’s tended to be a rather expensive education. And people going into the public sector may not even realize that finance is what they will need to know.”

At MIT Sloan, work at the center has already led to the creation of Kirilenko’s new course—Core Values, Regulation, and Compliance—as well as a student club on financial markets and policy.

The center began sponsoring events in October 2013, but officially launched Sept. 12-13 with the inaugural MIT Center for Finance and Policy Conference in Cambridge, Mass. More than 120 people attended the invite-only event, which featured discussions on the cost of government credit support, the costs of single-family mortgage insurance, and contagion in financial markets. Peter Fisher, senior director at BlackRock Investment Institute and a former undersecretary at the U.S. Department of the Treasury, gave a keynote talk.

The conference also included a panel discussion on improving government financial institutions, which addressed the need for government agencies to improve how they manage credit portfolios and monitor program risk levels over time. Panel members also discussed ways to raise red flags when there are problems in government credit programs.

The outlook was not entirely dire. “The move toward embracing risk management concepts across the federal government has been impressive in recent years,” said Doug Criscitello, a managing director at Chicago-based audit, tax, and advisory firm Grant Thornton and the former CFO of the U.S. Department of Housing and Urban Development. “We’ve seen the rise of independent risk management offices … that are housed outside the credit extension department.”

Lucas said she believes MIT’s depth in finance, economics, policy, and systems thinking make it the ideal place to study governments as the world’s largest and most complex financial institutions.

“I think an important reason that more academics haven’t taken on these issues—despite their importance—is that they are extremely complex,” she said. “Making progress takes a big investment in understanding institutions and laws and motivations. The problems are inherently interdisciplinary. And MIT is this great institution in terms of having the horsepower and energy to go after it and say ‘We can hit this question from a lot of different dimensions.’”