“Jeez,” Stockman replied, half kidding, “I don’t have the patience to write a book, but I’ll write the paper if you help me with it.”

Hansen agreed, and the pair co-authored “The 100 Year Flood: An alum’s perspective on the subprime mortgage crisis,” which appeared in the Fall 2008 issue of Tuck Today magazine. In it, they discussed the mistakes and warning signs that led to the subprime crisis, made clearer by hindsight, and offered a few lessons for posterity.

The collaboration gave Stockman another idea. “You should make a course out of this, Bob,” he said. “And I tell you what: if you teach it, I’ll help you.”

This friendly repartee spawned Economics of the 2007 Subprime, Credit, and Economic Crisis, a Research-to-Practice Seminar that Hansen is teaching for the third time this spring. During the twice-per-week sessions, 15 students examine the nature of mortgage borrowers and lenders, penetrate the Byzantine warrens of securitization processes, and seek out the complex connections among risk management frameworks, systemic risks, banking runs, and breakdowns in modern financial markets. Overlaid on this analysis is the goal of “learning to learn”—giving students the tools to access and understand research-based literature.

Stockman visits the class a few times per semester, adding his in-the-trenches perspective and knowledge. But this term brings something new: Stockman is integrating his involvement in the course with his day-to-day role as chief risk officer at MF Global Holdings Ltd., a brokerage firm Stockman joined in January, led by former Goldman Sachs CEO, U.S. Senator, and New Jersey Governor Jon Corzine. The firm is a spinoff from Man Group, an investment business that dates back to the sugar trading company started by James Man in 18th century England. MF Global aspires to transform from a pure brokerage to a leading commodities and capital markets investment bank, and is relying on a senior team, including Stockman, to navigate the shoals of that journey.

Why did you decide to leave your capital markets and risk-management advisory practice at CQ Solutions, LLC to join MF Global?

The big picture is that it’s a really cool opportunity for someone with my skills and experience. We are a leading institutional futures and options broker and manage a magnificent client list very well. We have a CEO and a senior management team who have a vision for this thing to go from broker to broker-dealer to investment bank, and I believe in the vision and the growth strategy.

What has changed about being a risk-management professional since 2007?

Everyone’s learned a lot, including me. I try to be very thoughtful about what caused that crisis, what could have been done differently, what could I have done differently, what should firms do differently, and what were some of the key reasons market participants fell into the trap. One of the outcomes of this thinking was the “100-Year Flood” paper that Bob Hansen and I wrote. And that was really one of my interests in coming to MF Global, because I have a chance to shape this department. And I inherited a very athletic, so to speak, team. They’re open and willing to shape this for the future with the benefit of our experience.

What has been the impact of your collaboration with Bob Hansen on your professional practice?

Crafting the syllabus itself was a great learning experience, and it was really interesting. There was a lot of new stuff coming out of academia, the Federal Reserve, and practitioners, and I ended up doing some deep dive consulting work into the subprime blow-up. So everything we were working on with either the course or the paper really was helpful to me as a practitioner. I’ve personally catalogued a series of trading and business mistakes and will pass the knowledge on to my colleagues. And we’ve got plenty of evidence that the same series of mistakes have been made over hundreds of years, believe it or not. Part of my commitment is to not let those issues happen at MF Global if I can help it.

Do you see yourself as playing an antagonistic role at a firm that wants to grow quickly?

There are two sayings: “There’s no bad bonds, only bad prices,” and “There’s no bad trades, only bad entry points.” So it’s not about fear of risk, but understanding that everything has a price. But I’m also here to help build the place. So for me, personally, it was a unique opportunity.

You recently guest-lectured in Dennis Logue’s Financial Institutions course. What did you talk about?

Some of it was disasters from the past, and the art and science of what you do about it. And I folded in the common theme elements from the “100-Year Flood.” Tuck management professor Sydney Finkelstein has some great stuff on why and how smart people make bad decisions, which is part of the softer side of risk management. And then I’ve got the whole framework of how firms approach risk management.

Why is this in-depth analysis of the financial crisis important for business school students?

One of my bottom lines is: If you don’t understand what your mistakes were, you’re destined to repeat them. What happens is, mistakes get made and people wash out of the industry, or make a lot of money before a crisis and go retire, and the knowledge isn’t passed on. I think it’s a vital part of an MBA toolkit, and important for Tuck students to distinguish themselves and keep their firms and the marketplace safe.

May 2011