CORRECTIONS APPENDED

Two days after the U.S. economy was officially declared to be in recession, five individuals proposed to members of the Federal Reserve in Washington, D.C. that they cut the federal interest rate by half a percent. The advisers were not world-renowned economists but rather members of the Harvard College Fed Challenge Team.

The team won the national competition for the second year running on Wednesday.

“It was really exciting for all of us on the team that are monetary policy geeks, which is a rare breed of geek,” said the team’s captain, Colin J. Motley ’10.

Motley was joined by Troy C. Murrell ’09, Akeel Rangwala ’11, William C. Schaub ’11, and Anna Y. Zhang ’10 to make up the winning team.

In the first part of the competition, the team members gave a 20-minute presentation on what they believe current monetary policy should be.

The students recommended that the Federal Reserve lower its rate to .5 percent from its already historically low 1 percent.

According to team president Stephanie H. Lo ’10, the Harvard squad suggested that the Fed lower the Commercial Paper Funding Facility (CPFF) rate and that the CPFF take trade credits as collateral.

Using trade credits for collateral “is an extremely novel idea,” Lo said. “Everyone talks about the Fed funds rate...and I think they were looking for a deeper understanding of the economy.”

In the second part of the competition, three judges questioned the team about its proposal and tested the contestants’ understanding of general monetary policy.

“The big issue for the policy makers in the Fed is that interest rates are low but it is clear that our economy is still in trouble,” Motley said. “Their main tool is interest rates. Now that they have done almost all they can with that, the question is what is left to do.”

NYU took second place and Northwestern took third in the competition, which is in its fifth year.

“Northwestern won the first three, so they had literally an empire, and we took that away when we won last year,” Lo said. “I think they were really hoping to get back their crown.”

The Harvard team won the regional competition on Nov. 17, beating teams from both Dartmouth and Yale and qualifying to head to the national round along with other top teams.

“As per tradition, the Fed Challenge Team has been very independent and very student-run,” Lo said.

Economics professor Benjamin M. Friedman ’66, the team’s faculty advisor, agreed.

“I listen for what they say, I sit back, and I applaud what a good job they are doing. The content is theirs, the initiative is theirs, the talent is theirs, all the credit goes to them,” he said.

Last year, the team started a tradition of doing a final run-through of its presentation the night before the competition while wearing bathrobes provided by the D.C. hotel where they stay.

“[It is] pretty funny to sit around in bathrobes talking about monetary policy,” Motley said. “I think that shows how close the team is, that we can have fun talking about monetary policy even with the crisis as it is and the competition being as hard as it was.”

CORRECTIONS

The Dec. 5 story, "Students Defend Fed Challenge Title," misstated one of the people on Harvard's Fed Challenge Team. Anna Y. Zhang '10 was on the team, not Scott R. Vautour ’10. In addition, the story omitted the word "funds" from the "Fed funds rate."