The subprime mortgage crisis was the initial cause of the 2008 financial crisis, which then led to the worst recession since the Great Depression. (2) Many Americans felt the pain when those introductory adjustable rate mortgages reset to reveal higher payments that they could no longer afford. Banks, also, felt the stress as the word spread about the sheer volume of defaulted loans. As home prices continued to decline, without any hopes of a market turn around, both home owners and financial institutions where in a poor situation. In a proactive approach to the foreseeable future, on December 20, 2007, former President Bush signed into law, the Mortgage Forgiveness Debt Relief Act of 2007.
Occupy Wall Street Movement January 27, 2013 Occupy Wall Street (OWS) began their movement September 17, 2011 in Zuccotti Park (formerly known as Liberty Park) in lower Manhattan, NY and has been adopted in other states as well as other countries. The primary issues the movement is concerned about are the following: social and economic corruption expanding through inequality, greed, and influence throughout corporations and government officials. This comes on the heels of the great bail out of banks, mortgagers, insurance companies and many other financial institutions to a tune of $1.6 trillion in 2008 and $142.2 billion in 2009 (Nankin, 2009). OWS activist perceive the rich or the 1% have obtained their wealth dishonestly at the expense
The accounting practices created a scandal in which the companies were able to hide information from investors. This allowed the stock prices to remain high even when the company was struggling. When the companies collapsed, investors became worried about the overall securities markets. The Sarbanes-Oxley act is a response to the corruption with the attempt to improve business accounting regulations. The act is considered the most extensive increase in regulations since the Security and Exchange Act of 1934.
These scandals cost investors billions of dollars when the share prices of affected companies collapsed, and shook the publics’ faith in the security markets. When examining the SOX act you can see that since 2002 many things have changed in the past eight years. Corporate governance is one of many things that have changed; Public companies must now have a totally separate audit committee composed of entirely independent directors and must contain one financial expert. Security fraud now has much more extreme punishments for those who commit or conspire to commit fraud. Since the introduction of SOX auditors of public companies must keep documentation of an audit for seven years, destruction of any documentation or evidence that someone has committed fraud is now punishable by jail time and fine.
Recently, the market is on an uptake with its improving stocks & bonds. The light in a year-plus-long tunnel is bringing both hope and realization. The market improvement is also shedding a truth on a troubling facet of the economy, the 401(K). The realization Stephen Gandel, of “Time Magazine”, has highlighted in his article “Why It’s Time to Retire the 401(k)” focuses on the sad truth that 401(K) is not effective and thus can not be relied on. 401(K) has become ineffective because of the corruption of big business, the misunderstanding of and as a result a mishandling of the 401(K) accounts, and its correlating dependency on the market’s success.
6, 2008. In an already tumultuous market the preferred stock of the two firms tumbled to below a dollar. September 2008 was the month that saw the fall of many financial institutions. Banks termed too big to fail. Lehman Brothers file bankruptcy, Merrill Lynch was bought out by Bank of America, and AIG, an insurance company that sold insurance to investment banks to cover the downturn of investments, was on the brink of financial distress along with so many other failing financial institutions.
“Because and swaps—are instruments for speculation as well as hedges bonuses on Wall Street are tied to transaction volume, this creagainst a drop in an asset’s value. They can be used to bet ates an obvious problem.” that the price of an asset will go up or down. Derivatives also One fear is that losses in the trading department of a large can have more of an effect on a portfolio than simply buying bank, say, could cause a meltdown of the financial system, a or selling a stock or bond because of the leverage involved. scenario that has sometimes prompted calls for stricter regulaLast November, for instance, an investor could buy nearly $1 tion. Critics of government meddling note that these dire million in futures contracts on the Standard & Poor’s 500 In- warnings have never
As Occupy Wall Street targets the antiquated policies of the richest 1% of the nation, they are exposing the imbalance in the global economy that is controlled by the mentioned demographic. It may have only begun a few years ago in an upsurge of the middle class, but many citizens have been feeling this mistreatment for decades (Occupywallst.org,
Bernanke indicated that current monetary policy is directed toward easing and reversing the effects of a “weak economy.” Chairman Bernanke also credited a “deteriorating global credit boom” caused by a housing bubble in the U.S. and other countries, and worsening mortgage markets that led to “deteriorating asset values and credit conditions.” In the U.S. the financial crises was progressively worsening by the failing of some of the larger banking institutions. The Fed had to respond to the threat of a world financial collapse an event that would have severely damaged the global economy (Bernanke,
in 2008. The term financial crisis emphasized a number of situations in which the financial market suddenly lost a large part of its value. The financial crisis has caused the world economic downturn to the point of melt down and flooded, “The World as We Know It Is Going Down”, (Pitzke, 2011). Many people have suffered with the panic and fear of the financial crisis because it has caused many people to lose their growth of income, wealth and their home. There are a number of central causes for the striking financial crisis, serious challenging effects that caused the whole world to be under pressure and critically affected