Ethical Mistakes Of The 2008 Financial Crisis Essay

In 2008, the world experienced a tremendous financial crisis which rooted from the U.S housing market; moreover, it is considered by many economists as one of the worst recession since the Great Depression in 1930s. After posing a huge effect on the U.S economy, the financial crisis expanded to Europe and the rest of the world. It brought governments down, ruined economies, crumble financial corporations and impoverish individual lives. For example, the financial crisis has resulted in the collapse of massive financial institutions such as Fannie Mae, Freddie Mac, Lehman Brother and AIG. These collapses not only influence own countries but also international area. Hence, the intervention of governments by changing and

This paper is about how did “Shadow Banking” precipitate the financial Crises. Then discusses the impacts of the crisis on the major financial institutions.

The year was 1928 and the American economy was thriving like it had never been before. With Henry Ford’s sponsorship of the assembly line, the automobile industry was rising and vehicles were becoming more affordable. The end of World War I was also having a positive effect on the American economy. The events leading to the crash of ’29 were recognizable and now as economists look back some ask how did we as a nation not see this coming? The actual crash did not occur overnight, it lasted over the span of five days, days that America will never forget.

Ethics is defined by Hellriegel and Stocum (2011) as “the values and principles to distinguish right from wrong” (pg. 10). As we can all agree a big portion of the sub-prime mortgage crisis was caused by unethical decisions by both individuals and companies as a whole. A good example of this is BNC Mortgage where individuals put their own greed ahead of solid banking practices by trying to get as many loans approved as possible no matter the cost, even resorting to fraud in many cases. BNC had created a work environment were illegal and unethical activities were widely accepted because profits were high. When employees did not want to participate in fraudulent activities they were harassed by management and shunned by the company.

The Global Financial Crisis, also known as The Great Recession, broke out in the United States of America in the middle of 2007 and continued on until 2008. There were many factors that contributed to the cause of The Global Financial Crisis and many effects that emerged, because the impact it had on the financial system. The Global Financial Crisis started because of house market crash in 2007. There were many factors that contributed to the housing market crash in 2007. These factors included: subprime mortgages, the housing bubble, and government policies and regulations. The factors were a result of poor financial investments and high risk gambling, which slumped down interest rates and price of many assets. Government policies and regulations were made in order to attempt to solve the crises that emerged; instead the government policies made backfired and escalated the problem even further.

On September 15, 2008, Lehman Brothers filed for bankruptcy. With $639 billion in assets and $619 billion in debt, Lehman 's bankruptcy filing was the largest in history, as its assets far surpassed those of previous bankrupt giants such as WorldCom and Enron. Lehman was the fourth-largest U.S. investment bank at the time of its collapse, with 25,000 employees worldwide. The consequences for the world economy were extreme. Lehman’s ' fall contributed to a loss of confidence in other banks, a worldwide financial crisis and a deep recession in many countries. Lehman 's collapse roiled global financial markets for weeks, given the size of the company and its status as a major player in the U.S. and internationally. Many questioned the U.S. government 's decision to let Lehman fail, as compared to its tacit support for Bear Stearns, which was acquired by JPMorgan Chase & Co. (JPM) in March 2008. Lehman 's bankruptcy led to more than $46 billion of its market value being wiped out. Its collapse also served as the catalyst for the purchase of Merrill Lynch by Bank of America in an emergency deal that was also announced on September 15.

In 2008, the US experienced the traumatic chaos of a financial downturn, whose effects rippled throughout Europe and Asia. Many economists consider it the worst crisis since the Great Depression, and its alarming results are still seen today, a long six years later. Truly, the recession’s daunting size and formidable wake have left no one untouched and can only beg the question: could it have been prevented? The causes are manifold, but can be found substantially rooted in illogical investments and greedy schemes.

The 2008 financial crisis can be traced back to two factor, sub-prime mortgages and debt. Traditionally, it was considered difficult to get a mortgage if you had bad credit or did not have a steady form of income. Lenders did not want to take the risk that you might default on the loan. In the 2000s, investors in the U.S. and abroad looking for a low risk, high return investment started putting their money at the U.S. housing market. The thinking behind this was they could get a better return from the interest rates home owners paid on mortgages, than they could by investing in things like treasury bonds, which were paying extremely low interest. The global investors did not want to buy just individual mortgages. Instead, they bought

Ethical issues have greatly transformed in our lives since the great Enron, Xerox and other huge corporations proposed big profits showing earnings of billions of dollars and yet in reality facing bankruptcy. These corporations faced great trouble with the federals and state for manipulating financial statements. But not only corporations can be blamed on this, accounting firms were involved in this as much as the corporations were. With the business stand point, ethics comprises of principles and standards that guide behavior. Investors, traders, customers, and legal system determine whether a specific action is ethical or unethical. Ethical issue is a vast subject, but we will look at the niche

Just after ten years of Asian financial crisis, another major financial crisis now concern for all developed and some developing countries is “Global Financial Crisis 2008.” It is beginning with the bankruptcy of Lehman Brothers on Sunday, September 14, 2008 and spread like a flood. At first U.S banking sector fall in a great liquidity crisis and simultaneously around the world stock markets have fallen, large financial institutions have collapsed or been bought out, and governments in even the wealthiest nations have had to come up with rescue packages to bail out their financial systems. (Global issue)

There was a vast number of ethical issues raised in the movie “Enron-the Smartest Guys in the Room” but the four I am going to focus on are listed below. Art Anderson, Ken Lay and all of the other executives did a number of unethical things which ultimately brought down Enron and affected thousands of employees and their futures. The bottom line was that each and every one of them acted out of greed for the almighty dollar.

Financial Crisis between 2007 and 2009 was the worst economic crisis after the Great Depression in 1930s. This crisis was a worldwide crisis as it affected the financial system globally and led to collapse in economy. Financial intermediation is a process of banks that take funds from the depositor and lend them out to the borrower. In the financial transaction, financial intermediary acts as the middleman between two parties. Commercial bank, investment banks, pension funds are the example for financial intermediation. This kind of financial intermediary usually provide mortgage to the lender.

In 2008, the world experienced a tremendous financial crisis which is rooted from the U.S housing market. Moreover, it is considered by many economists as one of the worst recessions since the Great Depression in 1930s. After bringing a huge effect on the U.S economy, the financial crisis expanded to Europe and the rest of the world. It ruined economies, crumble financial corporations and impoverished individual lives. For example, the financial crisis has resulted in the collapse of massive financial institutions such as Fannie Mae, Freddie Mac, Lehman Brothers and AIG. These collapses not only influenced own countries but also international scale. Hence, the intervention of governments by changing and expanding the monetary

It seems like business morals and ethics are being whisked to the side in lieu of the ever growing demand of higher stock prices, rising budget goals and investor profits. Despite the increased regulation of corporations through legislation, such as, Sarbanes-Oxley, some corporations still find themselves struggling to maintain ethics and codes of conduct within the workplace. In reviewing the failings of the Enron Scandal, one can heed the mistakes that both individual and organization malaise, such as, conflicts of interest, lack of true transparency and the sever lack of moral courage from the government, executive board, senior management and others, contributed to the energy giant’s downfall.

Enron's entire scandal was based on a foundation of lies characterized by the most brazen and most unethical accounting and business practices that will forever have a place in the hall of scandals that have shamed American history. To the outside, Enron looked like a well run, innovative company. This was largely a result of self-created businesses or ventures that were made "off the balance sheet." These side businesses would sell stock, reporting profits, but not reporting losses. "Treating these businesses "off the balance sheet" meant that Enron pretended that these businesses were autonomous, separate firms. But, if the new business made money, Enron would report it as income. If the new business lost money or borrowed money, the losses and debt were not reported by Enron" (mgmtguru.com). As the Management Guru website explains, these tactics were alls designed to make Enron look like a more profitable company and to give it a higher stock price.