Should bonuses be paid to employees of companies which almost went bankrupt but didn’t because the company took bailout money from the government? Most bankers say yes, yet to the general public, this seems to be absolutely inexcusable. I decided to look into this topic further to satisfy my curiosity. The large banking businesses are in many ways at blame for the current recession. They lobbied for, and got, the relaxation of rules limiting how much debt they could have.
The crisis has contributed to the failure of key businesses, substantial financial commitments incurred by governments, declines in consumer wealth estimated in the hundreds of billions of US dollars and a significant decline in economic activity. Many different causes have been suggested by financial experts howev... ... middle of paper ... ...tility. The banks seemed to be happy with the fair value accounting method when it was producing profits however as soon as the markets collapsed and the banks began losing money, accusations began to arise that the method was not worth the problems it had caused. The fair value method did not directly cause the crisis however its weaknesses where highlighted due to the declining market. The FCAG are in the process of investigating and improving the current accounting method which should once again restore the confidence in the markets.
Ethical corporate behavior has been a recurring issue of public policy. Recent events have brought this issue into sharp focus beginning with the Enron scandal in 2001 and more recently the financial crisis of 2008. Subsequent regulation such as the Sarbanes-Oxley act seem to be in reaction to the public clamoring for government action in the wake of painful economic outcomes. A deeper examination of the events leading up to Enron and the financial crisis both seem to indicate that government agencies were asleep at the switch. Policy such as Sarbanes-Oxley in the wake of Enron have not prevented the more recent financial crisis of 2008.
Office of Government Commerce. (2007d). OGC Gateway Process Review 3: Investment Decision. Retrieved from http://www.ogc.gov.uk/documents/cp0007.pdf. Office of Government Commerce.
A great panic was caused in the Stock Market, resulting in job losses and companies going out of business. Mortgage was unable to be paid, thus causing foreclosure on many houses. The foreclosure crisis has not only caused the banking industry to lose Trillions of dollars; it has also played a role in decreasing home value on an international level. Despite the Obama Administration and Congress having taken many steps to stabilize the economy, like the Emergency Economic Stabilization Act of 2008, Wall Street Reform and the Consumer Protection Act of 2009, America has not seen many concrete results. But we must not lose hope.
In 2008, The United States economy was bombarded with a severe recession because of a lack of regulations on Wall Street and investment in general. This lack of regulation caused many risky loans to be passed, leading to many of them defaulting. Most major investment banks like Lehman Brothers and Goldman Sachs were dealt crushing blows, forcing them to either file for bankruptcy or take capital injection from the government. The economy fell into a free fall because people simply wanted to make easy money. “How an Economy Grows and Why It Crashes” does a tremendous job in explaining the crash of 2008 in layman’s terms, while still being extraordinarily accurate and full of knowledge.
What at first seemed to be an economic slump turned into a brutal crisis, and all eyes looked to the Government and Federal Reserve to help the economy. With the large amount of debt the economy faced the Federal Reserve stepped in and bailed out the banks in an attempt to smooth over the financial struggles of the economy. The banks that survived took precautionary measures, making it difficult for businesses and consumers to borrow (Love, 2011). Thus leading to businesses failing and less jobs being created. The large amount of debt had also taken its toll on the job market.
Based on retail change theories, explain the failure of high street retailers. A Case Study of Comet The recent financial meltdown that started unfolding in 2008 had a massive toll on businesses and impacted economies around the world. Adversities of the economic fallout were felt by a plethora of business sectors. Starting from the financial sector, the contagion then moved to the automobile sector, and later infected a number of downstream industries that owed their business viability to easy access to cheap credit that characterised the pre-crisis macroeconomic environment of the developed world. When the world finally started to recollect what had happened, there was hardly a sector that was found spared from ill effects of the global financial crisis.
The system of banks, promotes the consumption and therefore improves the economy of the country. However, banks also hold a great risk. The Global Financial Crisis in 2008 was caused by the decline of the bank the “Lehman Brothers Holdings Inc.”, because the costumers could not repay their debt to the bank. The decline of one bank often leads to the decline of other banks, because banks interact with each other by lending and borrowing money. Therefore, when one bank is unable to pay, other banks are also unable to fulfill their duty.
By the supporting from Fannie Mae & Freddie Mac and the Federal Home Loan banks, opportunities had been... ... middle of paper ... ...e of TBTF could not protect Lehman from financial disaster, so in the future, this policy should be changed from Too-Big-Too-Fail to Too-Big-Too-Save. Even though, US government should lend a hand to pull Lehman from bankrupt, but the request had not been responded, because the intervention from US government may ruin a global financial mechanism. Therefore, a failure financial management in Lehman Brothers can be one of significant cases in this century. Based on the above, a conclusion can be drawn that misguided policies, lack of risk management and transparency regulation can strongly cause the global financial crisis. Therefore, increasing these three solutions can improve a financial foundation worldwide.