Indiana State University Newsroom

Professor: Financial reform will not prevent future crisis

July 9, 2012

Reforms passed by Congress since the 2008 financial crisis do not contain measures to prevent a similar breakdown in the future, an Indiana State University professor told an international conference.

William Redmond, professor emeritus of marketing, presented "A Marketing Systems View of the US Housing Crisis" at the recent Macromarketing Conference in Berlin. In his presentation, Redmond detailed the various industries that provide services to the housing market, and how several of them - particularly with regard to mortgages - impacted the housing bubble that led to the Great Recession.

"Prior to 2007, I had heard about subprime mortgages, and just assumed they were a very minor part of the mortgage market," Redmond said. "Turns out there were hundreds of billions of dollars in them."

He also said the Dodd-Frank Wall Street Reform and Consumer Protection Act, one of the most detailed pieces of legislation passed in the wake of the financial crisis, has not dealt with the variety of issues that led to the crisis.

"It may be hoped that the Federal Reserve takes it supervisory role in the banking system more seriously and proactively in [the] future - surely one seeks to avoid making the same mistake twice," Redmond wrote in a report published with the conference proceedings. "Unfortunately, the Dodd Frank Finance Reform Act appears to offer little in the way of structural preventative measures against future abuses: the banks that were too-big-to-fail are now even bigger, leverage on collateralized debt has not been restricted, and many derivatives contracts and trading platforms remain far from transparent."

Investment banks also influenced the housing crisis, as Redmond explained that investors demanded more securitized subprime mortgages since they yielded more than fixed-income investments.

"I think some people connected to the housing market have learned something" since the crisis, said Redmond, president of the international Macromarketing Society, which hosted the Berlin conference. "I'm not sure everybody has."

The mortgage industry had previously served the function of determining which people could qualify for home loans, as financial institutions would typically deny home loans to people deemed a credit risk. However, subprime loans changed that.

"The demand for subprime securities by institutional investors was met by a further lowering of lending standards," Redmond wrote. "In this way, the mortgage market was ceasing to perform its traditional gatekeeping function."

The Macromarketing Conference is an annual event that features dozens - and sometimes more than 100 - presenters discussing topics from around the world. After Redmond gave the presentation, several attendees provided comments on how to improve his report, which he has since edited and intends to submit for journal publication this fall.

"One of the reasons I like to go to a conference before I send an article to a journal is you also get some ideas for improving it," Redmond said. "That particular conference happens to be very good at that."

He has faithfully attended the annual conference for more than two decades. He enjoys listening to some of the different presentations that focus on issues that can range from ethics to sustainability and other topics, such as his marketing analysis of the housing crisis on the US economy.

"The externalities generated by the financial system are just enormous, and so you get a crash in housing prices, unemployment and the country's debts ballooning," Redmond said. "It's amazing how many people were affected by that."

Photo: William Redmond

Contact: William Redmond, professor emeritus, marketing, Scott College of Business, Indiana State University, 812-237-2033 or

Writer: Austin Arceo, assistant director of media relations, Office of Communications and Marketing, Indiana State University, 812-237-3790 or