He began falsifying the books to give the impression that WorldCom was doing well. This resulted in Ebbers also pressuring other employees to commit account fraud. Without a these loans and a direct tie to company performance, Ebbers may have been under less pressure to ensure the company continued to perform well may not have had the incentive to commit this kind of accounting fraud. When stock prices declined and Ebbers received margin calls, instead of Ebbers selling his stocks which would have further crashed the price of WorldCom stocks, the compensation committee approved Ebbers loans and guarantees that exceeded $400 million. Even when the Board learned about the loans to Ebbers, because the loans needed to be disclosed in the company’s third quarter 10-Q report, the Board ratified and approved the compensation committee‘s actions.
The people who were spending money were the poor more often than the rich; the poor were getting poorer and the rich were essentially becoming richer because even though there was no money to make, they were not spending. In the 1980s and 90s, economists argued that the Federal Reserve had caused banks to decrease their willingness to loan money, which lead to a severe decrease in consumption and in investment because no one had any money to spend. (Szostak 2003). Many people also blamed Hoover for the recession. Hoover was the president at the time.
Another effect this unethical behavior had on these organizations been they agreed to pay a penalty of over $1.43 billion dollars as compensation to the victims. Citigroup was fined over $400 million dollars for their part in this scheme. One of the conditions of the settlement was for Citigroup to separate the investing department from the research department; this way there would be no undue influence on the researchers to show a positive profit margin where there is none. There was also a ban on the allocations of Initial Public Offerings (IPO) to executives and directors of public companies. As part of the settlement none of the executives will face
Failure Analysis and Change Strategy LDR531 September 2, 2013 Failure Analysis and Change Strategy Failure and Success Indicators One of the causes of the economic downturn that the United States experienced was individuals defaulting on mortgage loans that they either could not afford or had little intention of actually paying for in the first place. However, the reason they were able to secure these loans in the first place was because of banks like Countrywide decided to approve everyone they deemed willing to make a mortgage payment, regardless of their credit history. In fact, the former co-founder and CEO, Angelo Mozilo, even described his company’s loan approval process as “arduous […] and cumbersome,” especially where the manual approval process was concerned (Englund, 2008). The truly disturbing thought process which should have portended failure was that Mozilo states that many people are approved through the manual process because the “human underwriter, has analyzed non-traditional factors such as the borrower’s rent and utility payment history” (Englund, 2008), but he wants to do away with the human underwriters in favor of an entirely automated system that would have to have inherently lower standards for approval. Ultimately, what caused Mozilo’s, and subsequently Countrywide’s downfall can be attributed to greed and other unethical behaviors.
Many people decided at one point to withdraw money from the bank. But the problem was that the bank didn’t have any because they took loans out. This event showed the United States that control of imaginable money is hard to handle, and that if treated incorrectly, it could be the demise of a successful economy. The Great Depression: The Great Depression occurred as a result of the Stock Market crash of 1919. This was the year where Franklin D. Roosevelt made a huge effort to restore the economy.
Illegal Aliens are harming our economy and are taking American jobs contrary to what you are led to believe. "Over the past 10 years, more than 2 million low-skilled American workers have been displaced from their jobs and each 10 percent increase in the immigrant workforce decreases U.S. wages by 3.5 percent" writes CNN financial analyst Lou Dobbs (Grigg 1). Current president George W. Bush and his political allies assure the public that illegal immigrants are doing jobs that nobody else wants. However, Steve Camarota of the Center for Immigration Studies, points out "what they really mean is that they are doing the jobs that they as middle- and upper-class people don't want" (Grigg 1). Agriculture has many other instances of employers switching to immigrant workers whether they are legal or not to increase their profits.
Employee feedback was discouraged. Critique of Lehman’s corporate policy was not tolerated, and questioning of its risky business practices snubbed or worse, as in the case of Lehman’s “whistle blower” Matthew Lee. According to Andrew Clark of the Guardian (2010), Lee “a worried accounting executive at Lehman Brothers raised alarm about what he saw as dubious number-crunching at the doomed Wall Street Bank” (para. 1). Just one month after alerting auditors to his findings, Lee was dismissed from his role as senior vice president of the financial division citing workforce reduction.
These institutions borrowed billions of dollars to purchase companies they weren’t experts in, allowed no money down mortgages, and used financial devices to calculate exactly how much they could lose if things went wrong so they needed little money on hand in reserve. However, in 2007 and 2008 when interest rates began to rise, asset prices fell, and borrowers couldn’t pay off debts the “Dumb Money era” crashed and burned and took the American economy down with it. The government and taxpayers are now responsible for paying off the $700 billion bank and financial institution bailout, along with many companies needing to shut down and lay off thousands of workers as well. Alan Greenspan appeared before congress in 2009 to discuss that after reevaluating his theories on which the “Dumb Money” era was based on (low interest rates, unregulated markets, and the ability to use debt instruments to manage risk) he found an error in his judgment. Gross believes that if we continue to listen to people like Alan Greenspan, another “Dumb Money” age may
After this recession there was a long period of growth lasting from 1991 to 2000. Then in Spring 2000, the stock market took a huge dive, without recovery, followed by terrorist attacks on September 11, and shortly after the NBER declared the US was in a recession. The NBER stands for National Bureau of Economic Research, it is a private, non-profit, non-partisan research organization that officially declares recession. The federal reserves first priority is taming inflation, so none of these things happen. The Federal Reserve can prevent inflation by changing the interest rates on money that banks and business borrow.
But what was the cause of it all? Many economists argue on what the highest contributing factor to the crash was, but most agree that it was America’s lack of leadership in the global economy. There were many ways that the United States government went wrong that were the root of the downfall, such as; the misuse of the Gold standard, the trade restricting tariffs and protectionist policies that were imposed in the 1920’s, and the number of American banks and the bankruptcy crisis all were major factors to the Great Depression. America gained control of the global economy from Britain after the war, and were unable to keep a constant flow of gold and stability in their country, and consequentially lead to the Great Depression. The gold standard was developed to have a steady exchange rate of currencies, as well as a way to back up domestic currency reserves.