R.E.A.L. Learning in Action: Econ Students Learn about 2008 Financial Crash from Inside Sources
At Avon Old Farms School, there is no shortage of unique learning opportunities. Most recently, economics students had the chance to discuss the 2008 financial crisis with two primary sources—individuals who were working on Wall Street at the time. These sources shared insight that no textbook or worksheet would be able to replicate. Economics teacher and history department chair Mike Murphy called it “one of the coolest learning experiences I have been a part of in my 13 years of teaching.”
On Tuesday, May 6, students met with the two experts over Zoom. One of them is no stranger to Avon. Brett Jefferson ’84, the most recent Avon Distinguished Alumnus and current Board member, is the founder of Hildene Capital, a mortgaged backed, securities-focused hedge fund. Before founding his own company in 2008, Brett started at Smith Barney, working as a banker in a new asset class focusing on packaging complex credit instruments. In 2002, he joined Marathon Asset Management, becoming a pioneer in structured credit. Through these roles he became very familiar with the eventual causes and effects of the 2008 market crash.
Brett was joined by Jason Schechter, the current head of capital markets at Hildene Capital Management. Prior to joining Hildene, he served as the global head of CLO origination and US CLO trading at Jefferies and held a similar role at UBS. Most relevantly, Jason was employed at Lehman Brothers leading up to and during the firm’s collapse, the most pivotal moment in the 2008 financial crisis.
Mr. Murphy explained that no economics course could teach students more about the ’08 crash than a brief conversation with Brett and Jason. “Instead of reading a dry history on the subject, they get to see, hear, and feel from two guys that were involved in it. Through some of the first-hand stories that Brett and Jason shared from that time, the boys were able to actually understand what it felt like.”
Brett and Jason began their discussion with students by providing a history of what led up to the 2008 crash, specifically the role that mortgage-backed securities and collateralized debt obligations (CDO’s) played, and how the initial federal response to the crisis only made things worse. “The same thing that happened in 1929 occurred again: there was a panic. People didn’t realize how bad it could be,” Brett shared.
Jason also explained how poor leadership at Lehman Brothers created an environment where this disaster became possible. “Too many people are focused on climbing the ladder. No one was interested in rocking the boat or questioning anything. They weren’t worried about doing a good job, they were worried about getting their next job.”
Many students, like senior Colman O’Connor, did not realize the scale of the collapse. “I didn’t know a lot of what they shared, especially how big of a role Lehman Brothers had played. It was even more interesting to hear it all from an inside source.” Colman hopes to pursue a career in real estate investment, so the opportunity to learn from professionals is always welcome. “I thought overall it was really cool.”
Students were given the opportunity to ask several questions of Brett and Jason. These ranged from questions specific to the 2008 crisis to general advice for students hoping to pursue a similar career path.
In response to a question about whether or not a similar crash could happen again, Brett responded positively. “There are way more regulations in place now to prevent that type of thing. Plus, people haven’t forgotten. For people who work on Wall Street, this is always something on their mind that they don’t want to happen again. I do hope everyone has learned from the mistakes that were made.”
When asked if any lessons from the crash have affected their current trading strategy, Jason provided students with an important piece of advice. “You have to stop yourself from getting caught up in the euphoria when things are going well. Prices don’t just always go up. You have to really understand the driving factors behind prices. That also goes for when things aren’t going well. You can’t ever panic. There’s opportunity even in distress.”
Finally, Brett was asked what he might do differently if he could go back in time. This question brought him back to his time at Avon. “Avon teachers were great. I needed people to help me and tell me what to do at times. My teachers at Avon did that for me. I also had a really great class. Being around so many motivated people motivated me.”
For Mike, who says he learned just as much from the experience as his students, he hopes the boys are able to look back on Tuesday night’s Zoom discussion as an impactful example of experiential learning. “This will have a substantial positive effect on their learning in this course, but also how these Avon boys view their own future and being successful no matter what endeavors they choose to pursue after Avon. The boys will remember this night well into their own time in college and beyond.”
This special event was just the latest successful component of the new “Global Security Pathway,” one of several ‘pathways’—similar to a ‘focus’ in college—that represent co-curricular, real world experiential learning for Avon students to develop essential critical and creative thinking and action skills. Mike explained that the 2008 crash made it clear the role economics can play in global security. “The world would not be secure today if the global financial system had melted down in 2008. There can't be global security if individual family's finances around the world don't have some degree of security through some form of gainful employment. For better or worse, the global banking system is a foundation of this. Tuesday's session showed how close we came to losing on both those counts in 2008 and the Great Recession, and the steps taken to try to prevent this from happening again.”
He added that he is looking forward to involvement from any other alumni interested in sharing their expertise with current students. “Bringing Avon alumni doing unique work in a variety of industries or endeavors, like Brett, into Avon classes is a key element of the experiential learning that is the foundation of an Avon education.”