The Financial Crisis Of 2008 In United States Of America

The Financial Crisis Of 2008 In United States Of America

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The theoretical perspective

Moreover, when we look back at what happened in the year 2008 which made many people lose their houses leaving much homeless. Many banks apart from the Lehman Brothers broke down due to bankruptcy. The level of crime during this period was of the corporate individuals who have been placed in the high positions to lead the people. Moreover, the crimes were touching very highly trusted persons in the society and not even one parson could understand what was they have done to the people to create such a kind of an environment with financial difficulty.

Unfortunately, the people who took the mortgage loan and could not afford to pay were deprived of their homes. The terms were not as foretold before; the people felt deceived as it was not said that when you fail to pay, the house will be recovered back to the institution. The deal was not a deal this time around as the housing corporation decided to improve all the houses from the individuals who could not pay their debts. Many people complained about the issue, but it was a calculated and arranged theft based on the lies that they said just to get the little money the society had at that point. Moreover, the banks suffered the same as they were allowed to borrow and borrow more even beyond what they could pay the restrictions and the loans governing the loaning were not being applied during the period.

Unfortunately, when the time for paying the loan matures, the stakeholders will not understand the situations of the banks and will demand the payment. The primary role of the fraudsters was to allow the investors to grab the chance and get as many homes as possible to rule over the law class people in the society. Many individuals in the community tried to raise the alarm for the stakeholders to consider the rates since there was a lot of money in the economy leading to inflation.

The Ethical issues

The ethical issues refer to the situation where someone or organization needs to choose between the doing the right things that can be appreciated by many people. The major ethical issues will try to outline the major question that comes up from the activities of the people who contributed to the financial crisis that almost paralyzed the United States of America. The government institutions that are supposed to implement the revolutionary strategy to drag the financial crisis back from the brink of collapsing and making sure that the victims are punished according to the law of the country.  The issues include;

The personal ethics

The factors that led to the financial crisis can be traced to be from some behaviors from persons.it has been said that the cause of the crisis was greed and selfish acts to get some money from the society which is more than what is needed. However, a separation should be made between the vice and the economic rationality which usually takes advantage of the opportunities that might come on their way such as buying commodities when the prices are ultimate law and selling them when they are high. The case happened in the crisis as people who are selfish and thinks only of themselves moves ahead to control the economy which in return affects the people globally. Most of the people lost their jobs as banks were closing up and not able to open up again due to much debt. You may ask yourself where the people who were working in the banks and other financial institutions and depended entirely on the job (Chari, Christiano & Kehoe, 2008).

Mr. Madoff is being jailed for 150 years after cheating the public and getting some money from them without a dubious means which are unethical in the sight of the society. The damage was so severe to the society; or rather the public and they were unable to forgive him for that fraud.

The ethics of the organization

The organizations that might have been used to cause the crisis are the commercial and national banks, the monolines, the rating agencies, supervisory bodies, central banks and the governments. The bad governance of the organizations has led to the crisis. For example, if the rating agencies would have worked out the interest rates well, then the crisis would have not been there or would have been minimized since the ratings would not have encouraged the people and the banks to borrow the money at that rate (Chari, Christiano & Kehoe, 2008).

 Moreover, the bad governance or rather lack of organization ethics has made the teams indulge in various activities that have affected the society a great deal. The banking institutions had bad management and without business ethics and corrupt. The open doors to take loan does not mean that now the institutions should just open up and apply for the money without looking at the future effects of the activities (Chari, Christiano & Kehoe,2008). The bank’s management was also not in a position to have proper planning that can guide the firm to move and operate in a better way.

Response by the law enforcement agencies

The United States government moved very first to try to end the crisis that has eaten up the economy of the country. The government enacted or formed some agencies to look up and solve the crisis. Among the ones developed was The Troubled Asset Relief program that was set by under the emergency economic stabilization act in the year 2009, the role of the law was to come up with the best strategy to destroy the economic problem that had visited the Americans at that time. The other response was the creation of Federal Reserve acts that was responsible for the creating of the discount window for the commercial banks (Erkens, Hung & Matos, 2012).

Moreover, many institutions were enacted by the government and law enforcement agencies. The other department was for the investigation purposes for the corporates that were responsible for the crisis at that time. An intelligent team was set up under the federal law to look up to the individuals who were responsible for the creation of the crisis (Cecchetti, 2008). Most of the suspects like Bernard Madoff was arrested and arraigned in court (Ciro, 2010). He was found guilty and sent to prison for cheating people to get their money for his selfish gain. Moreover, various laws were issued to the suspects no matter the social class of the individual. Consequently, the government tried to seek out the individuals who had lost their homes and were staying in the streets after the failure to pay the mortgage. The banks or any other financial institution which could be helped was assisted in reducing the number of banks closing up and increasing the number of the unemployed people in the society (Taylor, 2009).

In addition to the above, the first thing to be done was the formation of the financial crisis inquiry commission to ascertain the cause of the problem since you cannot solve something without first knowing the course of the problem. The report was drafted in 2011, where it was said that the crisis was due to the human actions and some inaction from some organization who would have prevented the crisis if they could have performed their duty (Taylor,2009). It was said in the report that the crisis is not from any other factor but the hands of the humans. It was stated that head of the financial sectors in the nations failed to hide the warnings from the government but instead went on with their unethical ways. The management failed to control the risks but instead succeeded to take risks to the public by allowing them to enter the traps of the loans that were being given at low-interest rates so as to access more from the public.

The challenges to the criminal justice

When handling the crime, it is very clear that it involves the corporates and big institutions in the nations. Unlike any other crime committed by an individual in the society, the corporates ones prove to be somehow different since the police to not just deal with a person but an institution with some legal entity. These show that there are some legal procedures to be followed to allow the police to take actions on the corporates. Despite being appreciated by the people, they are also wealthy and can influence the case using money buy either buying the judges or tampering with the evidence. Most of the case of this kind has been a problem with the legal authority to take action. Some of the cases have gone to the court without only evidence from the witness to add some weight to the case. In most cases, the evidence has been tampered with, or the witness is brought to kill the case. Additionally, the victims of the crisis use a high intellectual capability to get to the point of robbing the society, and yet the societies still esteem and love them fully not knowing that they are the enemy of the community. Most of these people have gained sympathy from the citizens, and these makes the policy to find out very tangible evidence to nail the person (Ivashina & Scharfstein, 2010).

References

Baker, D. (2008). The housing bubble and the financial crisis. Real-world economics review, 46(20), 73-81.

Baily, M. N., Litan, R. E., & Johnson, M. S. (2008). The origins of the financial crisis. Initiative on Business and Public Policy at Brookings.

Benson, M. & Simpson, S. (2015). Understanding White Collar Crime: an Opportunity Perspective. Chapter 4. (e-book).

Cecchetti, S. G. (2008). Crisis and responses: the Federal Reserve and the financial crisis of 2007-2008 (No. w14134). National Bureau of Economic Research.

Chari, V. V., Christiano, L., & Kehoe, P. J. (2008). Facts and Myths about the Financial Crisis of 2008. Federal Reserve Bank of Minneapolis Working Paper, 666.

Ciro, T. (2010) The Global Financial Crisis, chapter 2 (e-book).

Erkens, D. H., Hung, M., & Matos, P. (2012). Corporate governance in the 2007–2008 financial crisis: Evidence from financial institutions worldwide. Journal of Corporate Finance, 18(2), 389-411.

Financial Crisis Inquiry Commission, & United States. Financial Crisis Inquiry Commission. (2011). The financial crisis inquiry report: Final report of the national commission on the causes of the financial and economic crisis in the United States. PublicAffairs.

Ivashina, V., & Scharfstein, D. (2010). Bank lending during the financial crisis of 2008. Journal of Financial economics, 97(3), 319-338.

Murphy, A. (2008). An analysis of the financial crisis of 2008: causes and solutions.

Schularick, M., & Taylor, A. M. (2012). Credit booms gone bust: monetary policy, leverage cycles, and financial crises, 1870–2008. The American Economic Review, 102(2), 1029-1061.

Taylor, J. B. (2009). The financial crisis and the policy responses: An empirical analysis of what went wrong (No. w14631). National Bureau of Economic Research.

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