Europe Crisis Rescue Begins With MIT Men as a Matter of Trust

As financial turmoil in Europe threatened to overwhelm the region’s banks last November, Bank of England Governor Mervyn King arranged conference calls with the world’s top central bankers to decide what steps to take.

The result: Six leading monetary authorities agreed to make it cheaper for financial institutions outside the U.S. to borrow dollars in emergencies. The funding squeeze on European banks eased and stocks worldwide rallied.
The Nov. 30 plan could be created and announced quickly because “we trust each other,” King told reporters the following day in his role as chairman of the bankers’ group.

For some, that trust has a common source: three of the six banks are led by economists who studied or taught at the Massachusetts Institute of Technology in the late 1970s and early 1980s. Then, as now, the emphasis was on what former MIT professor and now Bank of Israel Governor Stanley Fischer describes as “economics about the real world.”

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