CountryWide was a financial corporation the gained notary through sub-prime lending. CountryWide gave out great loans to individuals who wouldn’t be able to get a loan under any other circumstance. Some individuals did the adjustable mortgage rate or balloon payments at little upfront money in order to become homeowners. Subprime lending was a big deal back in the early 2000’s. CountryWide made a significant amount of profit from subprime lending. In late 2007, is when the mortgage crisis hit. Many people defaulted on their loans and banking institutions was failing. The investors felt the pinch of this crisis. CountryWide CEO Mozilo, knew that it would end badly but kept pushing his team to bring in those sales. They even went after
The company was taking the big risks of financial. Due to the firm was started winding down after collapse of the Bear Stearns hedge fund. The firm also had accumulated a very large commercial real estate portfolio. The CEO of the firm believed that it had sufficient funds to tackle the problems after borrow money from the federal reserved investment.
According to Ferrell et al., (2011) the key facts and critical issues of the Countrywide Financial Meltdown were due to several different mishaps. In this case study, I have read that this organization was established to aid consumers with the ability to make purchases without a set criteria amount of revenue at their disposal. The issues came about when the customer would begin the repayment process. They start to claim they were unaware of the interest-rate because would be prudent onto the loan; they would fault the lender for late fees, excessive fees attached to their loans, and other default issues. Although these were some significant acquisitions, the institutions were permitted to rebuttal their claims. However, “another financial
The year 2008 was a very scary one for anyone involved in the US stock market. Due to subprime lending, and cheap mortgages, the housing market became grossly overinflated. Naturally, as with a balloon that’s filled too much, it “popped”. The resulting collapse of the housing bubble had severe implications for the rest of the US economy, housing, and related industries such as lumber, construction, and realty all came crashing down, and the people employed in those fields soon found themselves out of work. As with the stock market crash of 1929, fear of the economic instability caused people to pull their money out of any investments they had. This can be a problem for a healthy bank, being unable to supply the money people are requesting if it’s tied up in loans. However, this would prove to be an even bigger problem if the money never existed in the first place, and would take down one of the largest scams in American history.
Many people today would consider the 2008, United States financial crisis a simple “malfunction” or “mistake”, but it was nothing close to that. Contrary to what many believe, renowned economists and financial advisors regarded the financial crisis of 2007 and 2008 to be the most devastating crisis since the Great Depression of the 1930’s. To make matters worse, the decline in the economy expanded nationwide, resulting in the recession of 2007 to 2009 (Brue). David Einhorn, CEO of GreenHorn Capital, even goes as far as to say "What strikes me the most about the recent credit market crisis is how fast the world is trying to go back to business as usual. In my view, the crisis wasn't an accident. We didn't get unlucky. The crisis came because there have been a lot of bad practices and a lot of bad ideas". The 2007 financial crisis was composed of the fall of many major financial institutions, an unknown increase in mortgage loan defaults, and the derived freezing up of credit availability (Brue). It was the result from risky mortgage loans and falling estate values (Brue) . Additionally, the financial crisis of 2007 was the result of underestimation of risk by faulty insurance securities made to protect holders of mortgage-back securities from risk of default and holders of mortgage-backed securities (Brue). Even to present day, America stills suffers from the aftermaths of the financial crisis.
The Sub-Prime Mortgage Crisis of 2008 has been the largest financial crisis to take place since the end of the Great Depression. It was the actions of individuals and companies that caused this crisis. For although it could have been adverted, too much money was being made by too many people in place of authority to think deeply on the situation. As such, by the time actions were taken to attempt to rectify the situation, it was already too late. Trillions of dollar of tax payers’ money was spent trying to repair the situation that was caused by the breakdown of ethics and accountability in the private sector. And despite the government’s actions to attempt to contain the crisis, hundreds of thousands lives were negatively affected before, during, and after this crisis.
Each country has its own culture, with subcultures inside the dominant culture (Schaefer, 2009, p.69). “Culture is the totality of learned, socially transmitted custom, knowledge, material objects, and behavior” (Schaefer, 2009, p.57). Values, artifacts, and ideas are also part of culture (p57). With globalization there is the integration of these cultural aspects, as well as language, social movements, and ideas throughout the world (Schaefer, 2009, p.20). Internationalization helps with this integration. Internationalization is the process of planning and implementing products and services so that they can easily be adapted to specific local languages and cultures (Linfo, 2006). Numerous American retail firms have expanded to other countries. Many have been quite successful due to their internationalization. However, failure to study the culture, retail practices, and consumer market of the country they intend to expand to can be quite costly. Although Home Depot is one of the world’s largest home improvement stores, their expansion to Chile cost them enormous financial loss, resulting in their divestment (Bianchi & Ostale, 2006, section 1, para3). This paper will look at successful international expansion of Home Depot stores, analyze what mistakes were made in Chile, and make suggestions of what could have been done differently.
In December 2007, the U.S. entered the third longest recession in its history. According to Britannica, the crisis in the American housing market eventually caused the entire economy to collapse. Mortgage dealers issued mortgages to unqualified families with unfavorable terms (Havermann, n.d.). Companies like Moody’s came into the picture when it was time to rate these mortgage-backed securities. If housing prices continued to rise,
June 13, 2007 is the day that Richard C. Cook claims in his article, “It’s Official: The Crash of the U.S. Economy Has Begun.” In the past couple of years, months, and weeks, the United States economy and stock market showed significant failures and inefficiencies to the world. Perhaps the greatest evidence signaling the recent economic meltdown is the subprime mortgage problems that started a little over a year ago. The burst of the U.S. housing market bubble was caused by a combination of risky lending and borrowing practices and higher interest rates coupled with dropping housing prices, making refinancing more difficult. To deepen the drama, Wall Street’s excessive debt and unsustainable practices became more and more transparent. There was and still is tremendous turmoil amongst the Wall Street mammoths and the drama is certainly no longer entertaining or cheap.
...lume basis. At Lehman Brothers, their own risk management department were constantly raising red flags which management overruled in order to seek more revenue. On December 12th 2013, The US Securities and Exchange Commission fined Merrill Lynch just over $130million for making false disclosures over 3 CDOs and holding inaccurate books. The banks believed the CDO machine couldn’t fail; they believed once they have sold on the toxic mortgages, it was no longer their problem. However, once the housing bubble burst, investors began to question the value of MBSs; there was a huge write down in their value, prompting huge losses in the financial sector. The long held myth that house prices do not decrease was found to be catastrophically inaccurate, and with the collapse of Lehman Brothers in September 2008, The Era of The Great Complacence was well and truly at its end.
Freddie Mac is in the home mortgage business. It is their jobs to help low income families find affordable housing. Freddie Mac has been in business since 1970. They were created in order to get more American families in to their own homes. Their mission statement says, “Our statutory mission is to provide liquidity, stability and affordability to the U.S. housing market” (FreddieMac.com, 2014). Despite this honorable mission statement, Freddie Mac was involved in a case of accounting fraud that went on from 1998 to 2002. The lack of ethics at this company started with top brass setting the tone, and the rest of the company following suit.
The "subprime crises" was one of the most significant financial events since the Great Depression and definitely left a mark upon the country as we remain upon a steady path towards recovering fully. The financial crisis of 2008, became a defining moment within the infrastructure of the US financial system and its need for restructuring. One of the main moments that alerted the global economy of our declining state was the bankruptcy of Lehman Brothers on Sunday, September 14, 2008 and after this the economy began spreading as companies and individuals were struggling to find a way around this crisis. (Murphy, 2008) The US banking sector was first hit with a crisis amongst liquidity and declining world stock markets as well. The subprime mortgage crisis was characterized by a decrease within the housing market due to excessive individuals and corporate debt along with risky lending and borrowing practices. Over time, the market apparently began displaying more weaknesses as the global financial system was being affected. With this being said, this brings into question about who is actually to assume blame for this financial fiasco. It is extremely hard to just assign blame to one individual party as there were many different factors at work here. This paper will analyze how the stakeholders created a financial disaster and did nothing to prevent it as the credit rating agencies created an amount of turmoil due to their unethical decisions and costly mistakes.
In November 2007, the housing market in the United States started to take a downward turn. With loan defaults on the rise, the loans on Citigroup’s books were overdue for a revaluation. Due to the housing market decline and consumer spending cuts, Citigroup announced they expected to post a loss of between 6 and 11 million dollars. Citigroup’s stock plummeted. (Reference)
The downfall of Countrywide Financial was a result of the company’s unethical practices. Countrywide wanted to make home loans available for consumers that otherwise would not qualify for a traditional home loan product. Subprime loans are priced higher due to the risk of the borrower.
Midway through 2007 financial markets began to collapse on news of heavy write-downs by major financial institutions. The housing market in the United States (US), which had been experiencing consistent growth since 1975, began to contract in the third quarter of that year while the delinquency rate had been rising since 2006 (Mortgage Bankers Association, 2008). Investors were uncertain how severe the losses would be but it was becoming more likely by the end of the year that a financial crisis was imminent: the amount of subprime and collateralized debt obligation (CDO) losses had surpassed US$120 billion and were expected to increase in 2008 (Gaffen, 2008). As economic conditions turned from bad to worse investors, academics and practitioners began to wonder how such a crisis could have been precipitated in the first place. Blame was placed on mortgage originators, the Federal Reserve and on the investment banks, to name a few. The credit rating agencies (CRAs), seldom in the spotlight, were also heavily criticized for their role in causing the crisis. CRAs certainly do play an important part in financial markets and Thomas Friedman, the Pulitzer Prize winning New York Times columnist, once remarked that there are two superpowers in the world: the US and Moody’s (Lowenstein, 2008). But did the CRAs really deserve blame or were they being held as scapegoats? In the past the agencies generally avoided significant criticism for their rating of corporate debt and government issues, but their role in the burgeoning structured finance market in the early 2000s was characterized by conflict of interest issues, poor risk modeling and ineffective government regulation. As a result low quality ratings proliferated the mar...
Individuals like the two young and rambunctious mortgage consultants portrayed in the film gave loans to anyone and everyone that could sign the paper, regardless of the recipient’s ability to pay the loan in full. It is doubtful that all consultants fully understood the ramifications of their actions, but undoubtedly the overall disregard for consequence was the start of the collapse. Mortgage consultants mislead and tricked people into loans they could never afford by playing on their desire to live the American dream. Distributing adjustable rate loans to individuals without jobs, without collateral is unconscionable. Unfortunately, from their perspective they were helping these individuals. In a twisted way, these consultants were acting ethically from a utilitarian point of view. The consultants won because they received utility in the form of a bonus for distributing the loans, and the loanee won because they could now afford the home of their dreams. What the consultants didn’t consider in their calculations were the long term results and utility of their actions, unethically building the flawed foundation of the housing