...MA Assignment Were business schools to blame for the financial crisis? What should business schools do to help prevent similar crises in the future? The financial crisis in 2008 involved banks with the ability to generate a large sum of money in a short space of time, causing house prices to rise and the financial market to fluctuate. The debts created from loans awarded by the banks outweighed the income costs, which backfired upon the bank, causing a financial crisis (Positive Money (BSD), 2015). There were many reasons to blame for the pandemonium within the financial market during this period of time. This paper will examine whether business schools in particular, contributed to the financial crisis and will explore what business schools could do to prevent similar crises in the future. There have been negative spotlights upon graduates entering the banking world. Jonathan Slack, representative of 114 UK business schools stated that students with MBAs achieved higher positions within the corporate world, who are found to instigate high-risk taking (The Guardian, 2009). Graduates were seen to lack acknowledgement for factors such as value and ethics at this level of high risk taking and believe they can complete the work set without consideration of these factors (Podolny, 2009). Although much emphasis is upon graduates to produce profit and developing a business to success after graduating from a business school, corporate social responsibility (CSR) is just...
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...Chia Ho Keng 9026228 Were business schools to blame for the financial crisis? What should business school do to help prevent similar crisis in the future? The financial crisis, a serious economic recession, has caused some destructive effects to many countries around the word. Now many people begin intensely to find out who should take the responsibility to this phenomenon. Some people aim their spear at business schools. Those people maintain that business schools are supposed to entail the global financial crisis. They also claim that the education of business schools in today’s world is trying to teach students how to seek the maximum personal interest instead of social interest that might lead to economic meltdown in order to increase the ranking rate of school. Others, however, hold contrary opinions. They believe that it is because of greed of individuals not due to the education of business schools. The contestation about this topic has been generally discussed as a result of the purpose of business school’s education. This article is going to point out the different views of whether business schools should be responsible to the global economic crisis and will give some suggestions of what business schools need to do to avoid the same crises that may happened in the future. There are some people who believe that it is irrelative to business schools but relative to greed. Professor Huw Morris, dean of Manchester Metropolitan University Business School, argues that...
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...Introduction With the Global Financial Crisis came the search for answers as to what led to the meltdown in the United States mortgage market and ultimately the rest of the world economy. Speculation was rife that accounting standards, in particular, fair value accounting was the prime reason for this significant meltdown. “This sparked a fierce debate with some experts believing that fair value accounting was primary cause of the crisis whilst others considered that it exacerbated it. On the other side of the debate were those commentators that believed that fair value accounting was successful in acting as an early warning system and effectively prevented more calamitous consequences.” (Pabuccu, 2011) In response to this speculation, the International Accounting Standards Board (IASB) and the Australian Accounting Standards Board (AASB) immediately took action to review this matter and implement the necessary changes to address the uncertainty surrounding Fair Value accounting. Body Due to the economic significance of the crisis, financial commentators around the world analysed the situation, made comment, pointed the finger; and laid blame for this event. Due to the speculation, a ferocious debate commenced, with many of them believing that fair-value accounting was the primary cause of this event. Bubbles and Busts have occurred throughout history and are closely linked to the periods preceding a financial crisis. According to McMahon (2011), “fair-value accounting...
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...Split Over Blame on Fiscal Ills Who is to blame for the financial status of our country? That question brought current New York City Mayor Michael Bloomberg and former Mayor Edward Koch at odds. Bloomberg, who was a very successful billionaire before running for mayor, nonchalantly kind of dismissed the question by saying “it’s entertaining to go and to blame people….but it doesn’t get better by complaining about it”. He was referencing to the protestors of Occupy Wall Street. Koch on the other hand, took a view point from the community instead by saying how “there’s something wrong with a kid who steals a bike going to jail and someone who steals millions paying a fine.” He sees how the ones doing the real damage in this city tend to get away with things that disrupt the financial state of this country, while other crimes tend to receive harsher punishment. Later in the argument Bloomberg says the banks are not to blame for the crisis, rather it should be the Congress taking the burden because they were the ones who forced certain deals to get done which are now hampering us. While Koch disagreed, saying the banks should be the taking the blame because they abused their relationship with the customers and that is the reason they have been getting fined. And again he added how a fine is not enough, and would like to see them punished criminally. In this debate, I believe both current and former mayor have good points on who is to blame for the financial crisis. Congress...
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...ASIAN FINANCIAL CRISIS Reading this article brings me back to the unpleasant memories which occurred 15 years ago in the month of July. That time Peso suddenly depreciated by more than 10 percent in a single day and the depreciation further continued in the days to come. Panic suddenly gripped the financial sector and days later the panic spread like a domino effect into other sectors such as the property sector and import sector. The last time the peso depreciated by double- digit percentage was during the political crisis of the Marcos era which began when the late Senator Benigno Aquino was assassinated. What was so unusual about this economic crisis was that it was not limited to a specific country but it spread like wildfire from one country to another within the Southeast Asian region. I remember this crisis began in Thailand and that I was reading the business section of Manila Bulletin and one of the headlines was the sudden depreciation of Thailand Baht against the USD. Little did everyone know that a few days later our Philippine Peso would suffer the same fate. Had I known I would have converted all my pesos into USD. Many of the leaders in the Southeast Asian countries, notably the then Malaysian Prime Minister Mahatir Mohammad blamed the Asian financial crisis to currency speculators. Mahatir specifically single out US financial wizard George Soros as the one who was to be blamed for the crisis contagion. Allegedly, Soros speculated heavily against the Malaysian...
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...11:00 Financial Meltdown It was only a few short years ago that Wall Street came to a halting stop. The world paused and watched as one of the greatest financial crisis of our time took place in front of our very own eyes. While some of us may have not seen this crisis upon us, but downfalls such as the one we experienced aren't built in a day. So we may ask, what could have caused this financial meltdown. According to frontline, "It all started one sunny afternoon in Florida while the employees of JPMorgan conducted meetings on how they can manage and lower risk. They concluded that separating the risk from the loan by credit default swaps would ultimately make the financial system safer for not only them but for everyone involved ("Money, Power and Wall Street")." JPMorgan was the first to execute this plan when the infamous Exxon crisis took place a few short years back. They decided to take Exxon under their wing and help them out of the crisis but instead of setting aside the capital needed they went and found a company in London to take on the risk of Exxon's loan. This event allowed companies to create more credit and allowed them to give out more and more loans. This marks only the beginning of the downfall to our financial system that occurred in 2008. While JPMorgan was the spark and brains behind the start of our crisis, who is really to blame in this situation? The bankers and regulators who lent out subprime mortgages to the American people are to blame. They...
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...Enough!!! Who is responsible for the Financial Crisis? Everyone who tries to answer this question just points fingers, and the ones who are being pointed to, react by saying: “Hey, it wasn’t me or my company, I trusted the system,” or “I relied on somebody else’s judgment.” Some people blame the consumers for spending too much; some blame the banks for their lending practices, while others blame the credit agencies for their vague ratings. But by now, we are completely sure of one thing; the housing bubble was one factor that generated this financial crisis. So, who is to be blame for creating the housing bubble? According to John Taylor’s article, “How Government Created the Financial Crisis,” lax policies implemented by the Federal Reserve (Fed) caused the financial crisis. As a response to John Taylor’s opinion, Alan Greenspan’s article, “The Fed Didn’t Cause the Housing Bubble”, defends the Fed’s policies and places the fault on mortgage rates, such as long-term or fixed mortgages, as the real cause that triggered the Housing bubble. Even though John Taylor’s, a professor of Economics at Stanford, and Alan Greenspan’s, a former chairman of the Federal reserve, opinions are strongly supported by facts, I’m truly fed up of hearing excuses and finger pointing about the current financial crisis. The fact is that both the Fed’s policies and the rates on mortgages initiated the housing bubble, and I can’t reject either explanation. However I believe that it is time...
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...Tom Fernandez Professor James Terry HIST-102-H1 25 April 2013 The 2003-2007 real estate boom which led to the eventual 2008 meltdown of the U.S. financial markets unfortunately was not contained to the big banks and investment firms based mostly in New York City. By the time bailouts were implemented by the United States government, the effects of the financial crisis were exported to Europe. States similar, but not limited to Portugal, Ireland, Italy, Greece, and Spain (PIIGS) have each been in the media spotlight in recent years as attempts to rescue their respective financial markets are implemented. Unfortunately, many efforts made by Eurozone member states and other international actors have failed in alleviating the financial stresses of the region. Considering this, then, is there really a permanent solution that can not only relieve financial markets but also prevent the crises from spreading? To date, the European Unions’ collective response up to this point has been insufficient in order to curb the further slide into Europe’s second recession. I contend, then, that Europe and the Euro would greatly benefit from following many if not all of Germany’s internal budgetary constraints in order to fix the overall problem of debt and spending. One of original intentions of the euro when it was established in 1992 was to limit the amount of budget deficit a sovereign member state could have. Furthermore, the euro was designed to prevent a “bailout” should a state be...
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...What role did the Accounting profession play in the recent subprime mortgage crisis? What could they have done differently? There were many factors that led to the subprime mortgage crisis; low interest rates, greedy asset managers, and a booming housing market, to name a few. None were, in my opinion, more responsible for the crisis than the banks (lenders) and buyers (borrower). The banks approved loans for buyers who, one could not afford the loan, nor did not have the credit history to get the loan. Subprime borrowers were tricked into innovative mortgage products such as, 12/24 month adjustable-rate mortgages, interest-only loans, piggy-bank and the notorious negative amortization loans (Denning, 2011). These loans proved to be the catalyst that fueled the crisis in 2006. Accounting professionals played a role in the crisis, however, I feel that it was a small one. I say small due to the fact that, while they are professionals, they are still people. People with families, bills, and other obligations. I think that the pressure of having an employer pay them more because they are making more was a deciding factor for not blowing the whistle on questionable financial practices. The text speaks of ethics and unqualified, or clean opinions. “An unqualified opinion is not a clean bill of health about either the current financial condition or future prospects of the entity”. Knowing this we can surmise then even if the accounting professional did raise the flag on the risky...
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...Reserve System & Financial Crisis Alejandro Cuervo Wilmington University Abstract As we go into our research on the financial crisis of 2007, we will try to answer some questions about what actually cause of the failure of our financial system, which almost collapse the dollar. While there are plenty of faults to go around on what cause this crisis, there was never a clear path on how to reverse the demand that was cause by repealing the Glass-Steagall Act of 1933. Although there has been other regulations and acts pass since the repeal of the Act of 1933, the ability to restore and strength our dollar has been an uphill battle to take control of it. What was known within our economic system to readjust and rebuilt had not worked to establish balance playing field on the world stage or our domestic economy. As we look forward toward corrective action though the Dodd-Frank Act, Sarbanes-Oxley Act or the Global Legal Settlement of 2002 which reduced the conflict of interest as did the Sarbanes-Oakley Act. These conflicts encompass “underwriting and research in investment banks, auditing and consulting in accounting firms and credit assessment and consulting in credit rating agencies.” (Sanati, 2009) So while we have had a slow and diosmose recovery from this crisis, I will try to answer some of the questions presented to us today on our ability to fully recover and instill some preventative measures to ensure a worst and more devastating financial crisis from taking hold...
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...play in the recent subprime mortgage crisis? The accounting professions played a critical role, and somehow were pointed fingers at mostly, in the recent subprime mortgage crisis. According to Chapter 1 of our book, the accounting professions analyze financial statements, which provide information that is relevant to make rational investment, credit decisions, and other informed judgments to users such as, investors, creditors, and financial advisors. However, accountants and auditors were not the only ones liable here. The subprime crisis was a big disarray, and everyone starting from the lenders, to the homebuyers, and to the investors had got to have a share to the blame. The lenders should be responsible for it because they were the ones who loaned monies to people with poor credit. The homebuyers should be as guilty as well for buying houses that they could hardly afford. Finally, the investors were to be held accountable since they were purchasing collateralized debt obligation (CDO) at low premiums instead of taking the rating at face value. Nonetheless, things happen – no one could have predicted the crisis, and sometimes it is inevitable. Yet, I believe the accounting professions could have prevented it because their job is to be independent, objective, competent, and most especially truthful with the information they evaluate. What should (could) they have done differently? Like I said above, the subprime crisis was inevitable, but it could have been...
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...The sub-prime crisis of has led to a financial crisis in 2008-2009 that impacted many countries around the world. Discuss the cause of the sub-prime crisis and the major parties responsible. A number of parties were responsible for the sub-prime crisis during the period of 2008 to 2009. This essay will be discussing the parties responsible for the sub-prime crisis and how the individual party’s action causes the others to step deeper into the problem. As define by investopedia, sub-prime is “a classification of borrowers with a tarnished or limited credit history. Lenders will use a credit scoring system to determine which loans a borrower may qualify for. Subprime loans carry more credit risk, and as such, will carry higher interest rates as well.” The US subprime mortgage crisis was the catalysis of the finical crisis and subsequently cause the recession that began in 2008. The cause of sub-prime crisis arise from sub-prime loans or also know as sub-prime mortgage, the growth of this loan started expanding during the 1990s and such load is popularly seen in auto (car) loans, home equity (housing loans) and mortgage lending. Sub-prime loans are higher-risk loans labeled “B”, “C” and D credits, where “D” being the “worst”, resulting in a higher interest rate, which also mean a higher risk to the lenders. But it seem not to be a hindering problem, from the point of view of the finical institute who lend out the money, which will be explained later in this essay. In...
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...nt went through a period of deregulation. Deregulation is a reduction of government involvement and control within an industry. Did this deregulation lead to the 2008 financial crisis? This is a hot button topic that is highly debated and causes a great deal of controversy. The financial crisis of 2008, known as the Great Recession, impacted the entire country and practically every individual citizen. Many politicians, such as Speaker of the House Nancy Pelosi, look for an easy blame or a scapegoat, for example, the deregulation by the Bush Administration. Pelosi has been quoted saying " the Bush Administration's eight long years of failed deregulation policies have resulted in our nation's largest bailout ever, leaving the American taxpayers on the hook potentially for billions of dollars" (Gattuso). The issue with that statement is that the economic deregulation she speaks of did not take place during the Bush Administration, but many years prior and the laws of that time are not controversial in today’s economic situation. Rather more recent regulatory laws are to blame for the financial crisis of 2008. Why did we Regulate in the First Place? The Great Depression is unopposed when it comes to economic downfalls in the United States. The financial hardships that took place during the 1930s rocked this country to its core. But what caused this large scale economic collapse? The Great Depression produced a sweeping ...
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...The recent subprime mortgage crisis in the United States had a devastating impact not only on the economy of the United States, but also on an international level. The only way that many of those who were involved can accept the crisis and their losses is to be able to put someone at fault, which poses the question, who is to blame? This question cannot be answered simply, and involves many complications which have been researched, examined and debated over the years to try to come up with some answers. The only substantial answer that has been formulated is that everyone that was involved in any way is to blame, each for their own reasons. The two main parties involved include the lenders (mortgage companies) and the borrowers (potential homeowners). Mortgage brokers and the US Government also played a part in the way the crisis unfolded, but fell somewhere in the middle. I personally agree that each of these four groups is, in a way, at fault. Borrowers are often seen as the victims, as they were deceived into buying loans that they could not afford, and were then forced to default on their mortgages. What most people do not know is that they are also responsible for deceiving the mortgage companies in return. When attempting to purchase a mortgage, an individual must complete forms containing information about themselves and their family, their economic history, and other information that would help to determine what kind of mortgage they might qualify for. It is fairly...
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...Inside Job Film, essay The global financial meltdown in 2008, at a cost of over $20 trillion, was the worst financial crisis since the Great Depression. It was completely avoidable. A number of things occurred to create the economic crisis, including massive accounting fraud, securitization of mortgages, credit default swaps and synthetic CDOs to name a few. During the Clinton administration the Commodity Futures Modernization Act was enacted which banned all regulation of financial derivatives. Lenders no longer carried risk; they would sell mortgages to investment banks to create complex derivatives. They were more concerned about maximizing volume and getting fee out of it. Mortgage loans nearly quadrupled and the cost of homes doubled. Leverage limits were lifted on the investment banking industry which allowed them to borrow more money. Investment banks begin using credit default swaps to bet against the same mortgage securities that they are selling as extremely safe. They preferred subprime loans because they carried higher interest rates, which lead to an increase in predatory lending. In 2007, the housing bubble burst, as the financial sector runs out of people willing to borrow and purchase more housing; home ownership reaches an all-time high, while savings rates are at historic lows. And, if that wasn’t enough, the top executives and CEO’s of firms that declared bankruptcy were allowed to be in positions that made financial decisions for the government. ...
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