The financial scandals in early 2000s caused the Sarbanes-Oxley Act of 2002 to be created. Enron, WorldCom and the accounting firm, Arthur Andersen, to intentionally mislead their shareholders by exaggerating their profits and understating their expenses. The scandals had raised the importance of internal control for enhancing corporate governance. Therefore, the government established the SOX to protect the interest of the investors and employees and to monitor the companies and auditors.
Government action and inaction in determining whether the 2008 financial crisis was avoidable The global financial crisis of 2008 is one of the largest crises ever experienced. The scale and gravity of it can only be compared to the great depression of 1929 (Almunia et al., 2010). While it has been recorded that economies have gone through financial crises at least since the 1880s, the frequency and severity of financial crises has more or less doubled in the 28 years between 1972 and 2000 compared to the period of time of 91 years between 1880 and 1971(Bordo et al., 2001). Therefore financial crises are getting more and more recurrent as economic systems develop further.
The Fall of The Lehman Brothers What would you do to keep your business alive if it was on the brink of bankruptcy. Over the years there has been speculation on what happened to cause the fall of The Lehman Brothers. Through this research I will discuss the actual timeline of events; from long before to include any stressors to cause all the way to long after to the aftermath this fall may have caused. It will identify who had any key role to play in the collapse, and what they did to help, or hurt the process.
The Great Depression The Great Depression was one of the United States’ worst economic times. Lasting about ten years the Great Depression is also American’s longest economic downfall. The Great depression left millions of Americans unemployed, and caused nearly half of the county’s banks to fail. There were many factors that caused the Great Depression.
The Crippling of a Country Have it all one moment, the next day you have nothing. That's how millions of Americans felt during one of the biggest economic challenges the United States has ever faced. There are several reasons for the downfall of the great depression.
The New Deal was successful because of gave jobs to many jobless people and ending the banking crisis. A newspaper article said that U.S banks are unstable. People go to the bank to get their money. The banks don’t have enough money to give to everyone. Police are called in to keep peace.
Evaluate to what extent rising income inequality was one of the triggers of the subprime mortgage crisis in the U.S in the 2008. The United States have suffered two major economic shocks in the last century, in 1929 and in 2008. In both cases, the pre-crisis stages had one common feature, a sharp increase in income inequality, followed by a sharp increase in households debt leverage. Between 1983-2008 there was a rapid increase in the United States’ debt-to-income ratio, this increased the probability of the economy facing a financial crash, such as the one experienced in 2008.
Bank crisis. Differences in banking structure US economy in the 1920s: There were two ways in which commercial banks could be characterised, i.e. nationally chartered banks and banks that were chartered by states. As branching was strictly forbidden by national regulators and most state regulators, this led to a majority of banks being unit banks. Unit banks were a serious problem in the twentieth century Great Depression especially, as it was “a system of banking in which the government restricts or does not permit a bank to open branch offices”.
When the Financial Crisis hit in 2008, Fannie Mae encountered many financial problems because they held about $47 billion in subprime mortgages which were not backed by the federal government. When the subprime mortgages defaulted, they were left with property that held a low value and they were unable to issue bonds to. By the second half on 2007, Fannie Mae and Freddie Mac combined a net loss of $8.7 billion (Frame, Scott W., et al, 32). As you can imagine, investors became concerned with the amount of money they had in Fannie Mae. The government urgently proposed a plan which included passing the Housing and Economic Recovery Act.
An illusionist economy, it is essential to the modern, prosperous economy. This illusion is given through the issuing of credit. Credit is issued through banks in the form of loans, be it for a house, car, or even your groceries. Larger loans usually require a large application, and long time commitment, while the smallest loans are given based off of your reputation. As Americans, we simply call them credit cards or credit lines.