Over the past few decades the amount of corporate fraud that has occurred in the business world has been astounding. Financial collapse, serious jail time of company executives, and disintegration of shareholder equity are all aspects involved in these scandals. The main ones that stick out in people’s minds are the highly publicized accounting scandals of the early 2000’s: Enron, WorldCom, HealthSouth, Tyco, etc. Although we would have hoped that with recent increased regulation, such as Sarbanes-Oxley, scandals would have cooled-off, they haven’t. As, teaser rates, and loans with no down-payments to entice under-qualified people into risky loans, and low and behold the housing bubble burst and seemingly overnight people began to default on their loans and foreclose on their houses. There is no use in pointing fingers, for the fact of the matter is there is a laundry list of who are to blame for this debacle, but in my opinion the underlying factor is greed.
First, to understand this issue a sub-prime loan must be explained. A typical “prime” loan is given to individuals who possess a low amount of risk and a high credit rating. Typically these individuals will have a steady job and be of higher income with the ability to put down a sizeable down payment. Contrary to this, sub-prime loans are
Over the past few decades the amount of corporate fraud that has occurred in the business world has been astounding. Financial collapse, serious jail time of company executives, and disintegration of shareholder equity are all aspects involved in these scandals. The main ones that stick out in people’s minds are the highly publicized accounting scandals of the early 2000’s: Enron, WorldCom, HealthSouth, Tyco, etc. Although we would have hoped that with recent increased regulation, such as Sarbanes-Oxley, scandals would have cooled-off, they haven’t. As, teaser rates, and loans with no down-payments to entice under-qualified people into risky loans, and low and behold the...