Professors Lend Out Expertise

How much were the U.S. Treasury Department’s stock warrants in Capital One worth? Are mortgage loan modifications feasible? Can the federal government bail out the commercial real estate industry?

When The Wall Street Journal, The New York Times, CNBC or Bloomberg need these sorts of questions resolved, their reporters frequently rely on the expertise of two Louisiana professors: Joseph R. Mason, associate professor of finance at LSU, and Linus Wilson, assistant professor of finance at the University of Louisiana at Lafayette. (The answers are $227 million to $376 million, no and no).

In the last two years, Mason has been quoted by 168 media outlets on topics including cap and trade, financial ratings agencies’ independence, and using the central bank to lend money to private enterprises. Wilson has been quoted by 57 media outlets, mainly in regard to The U.S. Treasury’s Troubled Asset Relief Program.

“I consider it part of what I do: education and community service to help the media get the story right,” Mason said. “Also, if I can’t explain my topics of expertise to the public, I can’t very well explain them in class. That said, professors need to be aware that the media will eat them alive and spit them out if they do not defend themselves carefully.”

Wilson doesn’t consider himself a pundit.

“I do study the Troubled Asset Relief Program, and I have written several papers on it,” he said. “But there are often things that are relatively technical and somewhat difficult for a media outlet to come at in terms of the calculations or to find a source in a timely manner. If somebody asks me to do something, I’ll try to do it if I have the time.”

Mason and Wilson took different paths to becoming go-to sources for the world’s financial media.

Before coming to LSU, Mason taught finance at Drexel University in Philadelphia. While there, he made a lot of contacts with media outlets on the East Coast, LSU spokeswoman Wendy O. Luedtke said.

Mason said he can’t remember the subject of either his first print media interview or his first television appearance.

The article appeared in BNA Banking News, an industry newsletter, he said.

Before appearing on a local cable news show, Mason asked what he needed to know for his first time on camera.

“The university media contact had already told me prepare three talking points, but I needed camera tips,” Mason said. “He told me never to look away from the lens.”

Mason has long since ceased being camera-shy. He has appeared frequently on CNBC and Bloomberg Television, as well as NBC News and CNN Headline News. He’s testified before the Senate Judiciary Committee; the Senate Committee on Banking, Housing and Urban Affairs; the House Financial Services Committee; the Congressional Joint Economic Committee, European Parliament, and the Federal Reserve Board. He’s also been asked for advice from members of the British House of Lords, the Government Accountability Office, and the Federal Deposit Insurance Corp.

In addition to The Wall Street Journal and The New York Times, Mason has been quoted in BusinessWeek, Forbes, Fortune, Bloomberg Magazine, die Zeit, Neue Zurcher Zeitung and hundreds of other publications.

When asked for his media highlight, Mason cites two: an early 2008 interview with CNBC’s Carl Quintanilla in which Mason explained financial crises, and a Buttonwood exclusive in the Economist magazine, because it is read by so many economists and others.

“Of course, my career isn’t over yet, so the best may be to come!’ Mason said.

Wilson, while a newcomer to media commentary, is gaining a reputation. A Treasury Department spokesman immediately recognized Wilson as a critic.

Wilson is among those who believe Treasury is not getting taxpayers a good-enough deal when it comes to selling the stock warrants the agency received for bailing out banks. The Treasury auction of the Capital One warrants generated $146.5 million in December. Wilson estimated the warrants were worth $227 million to $376 million.

Wilson said he began researching TARP because there were a lot of unanswered questions about how best to save the financial system and how lawmakers could do so at the lowest cost.

Once he researched the subject, he believed it was his duty to make that information available to a broader audience, not just his fellow academicians, because so much was at stake in the $700 billion bailout.

In early April, he noticed a number of stories about the warrants and their value, with some articles saying if the warrants were exercised today, they would be worthless. Wilson, who spends a lot of time teaching students that options are valuable, found that distressing.

The strange thing about the TARP warrants is that they had so much “time value,” 10 years to mature, Wilson said.

“To look at where they are today is not what’s important. You need to look at where they’re going to be in 10 years,” he said.

That’s when people usually exercise options, before the last dividend the holder would receive, or on the day the option expires, Wilson said. He also worried the American Bankers Association would succeed in its effort to convince Treasury to cancel the warrants.

“I thought that’s not really fair because the banks signed an agreement with Treasury, and I thought they should follow their contracts,” Wilson said.

Wilson began leaving comments in the online versions of the articles. He also began blogging about the issue. Several bloggers picked up his articles. Soon reporters from The New York Times and Bloomberg found him.

Meena Thiruvengadam, a reporter with Dow Jones Newswires, said Wilson has been “quite proactive” in e-mailing reporters about research and valuations pertinent to their beats.

“I got to know about him through reading his quotes in stories and through his e-mails as I began to write more about TARP and warrants,” she said.

Wilson said he took the unconventional approach to make his research known because the publication cycle for a successful article in an academic journal is typically two years.

Although academic publishing is important, the end result is that the research finds only a small audience, and the information may only be used for the next crisis, he said.

“To me, if you can save the country $100 million, that is the fruit of many lifetimes’ work,” Wilson said. “Unlike the folks in Wall Street, I think helping society is its own reward. My bonus is that my research made a positive impact.”