Mark Carey, OC ’80, is a senior policy advisor for the U.S. Office of Financial Research, focusing on research in corporate finance, credit risk, risk management, employee compensation, and financial institutions. He has also acted as a policy advisor for the Federal Reserve Bank of Cleveland, co-president of GARP Risk Institute, and associate director of the Federal Reserve System Board of Governors. He returned to Oberlin this week as the 2025 Distinguished Finance Speaker and gave a lecture in the Hallock Auditorium Wednesday.
This interview has been edited for length and clarity.
How did you decide you wanted to go into policy rather than private equity or investment banking?
Research came into my mind at Oberlin because I was interested in ideas. I was interested in the world and how to affect what was happening in the world. I was never focused on making a lot of money, but I did not want to spend my life doing a minimum wage job. I never gave a moment’s thought to working for an investment bank. I became a finance person by accident because when I got to the board in 1990, a recession was underway. I wanted to think about the link between the overall economy and the conditions in the financial sector, so I started doing research on financial stuff. And after a while I wasn’t a macro economist anymore, I was a financial economist.
How did Oberlin influence your career pathway?
Risk management was not a thing when I was at Oberlin. What influenced me toward economics was that it seemed interesting and they were talking about important things. I spent my first two years here taking courses in a variety of departments, and it’s just as helpful to learn what you don’t like as it is to learn what you do like. Then I ran away to California for a year, where I worked minimum-wage jobs and decided that I did not want to do that for the rest of my life. So I came back and decided to be an economics major. I was influenced by a couple of the faculty. I was not sure that I wanted to go get a doctorate. So I took a research assistant job in Washington at a think tank, and then I moved to two different consulting firms, and then it was time to go get a doctorate. But just as at Oberlin, I did not have a specific thing I was interested in. I wrote a dissertation, which was guaranteed to be controversial. Due to certain ideologies within economics at the time, the dissertation was going to be liked by one half of the ideology and hated by the other half.
I ended up at the Federal Reserve Board, and that was really lucky because I have an unusual mind among economists. I’m much better at inductive stuff than the typical economist, and the Federal Reserve is dealing with a changing economy and has to make important policy decisions. Inductive reasoning is important for understanding the context in which the policy decision is being made. The group I was working in was responsible for this change in the regulation, and we were all doing a lot of pioneering stuff in risk management.
Could you talk a little more about your research on balancing risk and value creation in finance?
In late 2008, the public had been angered by the practice of paying a substantial portion of annual pay in the form of a bonus that comes early the year after the performance year. The economy was in a horrendous shape. Yet in early 2009, financial services employees got paid $20 billion in bonuses. It just did not look good that they had imposed a lot of harm on the economy and were getting a big reward for it. I happened to be the person who got assigned to work on what, if anything, needed to be done to reform bank pay practices. I spent five years on it, and it was extremely interesting. The problem was pretty simple. Bonuses were tied to the cash flow or to earnings. So, at that time, if you took more risk one day, you got more reward that same day. And the bankers had copied the pay practices of the non-financial sector. However, it’s exactly the opposite from the financial sector, so the bankers had copied the exact wrong thing. There needed to be some consideration of the risk taken to get the earnings today so that the compensation system did not incentivize them to take too much risk. It turns out that getting everybody to agree that it would be a good thing to do and to agree on how to do it is quite difficult. That’s why I spent five years on it.
How did a liberal arts education shape your ideologies?
I took classes in all kinds of things. At Oberlin, there were smart, interesting people thinking about a lot of different things seriously. That’s the liberal arts component of it. That helps one look beyond a narrow lane, right? A master’s of quantitative finance program is going to be focused very much on mathematical techniques for measuring and assessing risk. In my opinion, if people come out of that program without any other training, they’re not well prepared to rise up to be Chief Risk Officer because the Chief Risk Officer has to talk and think about a wide array of risks that their financial institution might suffer from or get involved in unintentionally. Having a broad vision is very important and helpful, so Oberlin was the right school for me.
What are some things in the future that you’re excited to look at in terms of research?
I am a credit risk person, so I’m still doing research on credit risk topics. I’m doing research because I like to do research. I can’t tell you what research I’ll be doing five years from now. Mostly, I’m interested in corporate credit risk. There are various ways to think about the chance that a corporation is going to default. How is it going to decide when to default? Who decides when it defaults? What will the losses be when it defaults? And what do all of those considerations mean for its ability to finance itself well before it defaults? There are all kinds of questions. The answers that are out there are subject to improvement.
What’s some advice that you would like to give Oberlin students?
The advice I would give to any student in any department is that when you are working on something — and that could be your formal job or a degree — think about what your big goals are and how you can better conform to them. Think about how to do the right thing because it’s more satisfying, and it’s going to be helpful. People are going to see that you think broadly and you’re trying to do the right thing. Not everybody does that. And in my experience, people who think broadly and try to do the right thing just have more opportunities. So think broadly, and try and do the right thing.
