Question.2547 - Numerous corporate scandals occurred in the decade leading up to the financial crisis that began in 2007 and lasted into 2009. Pick a specific event (e.g., a scandal or a collapse) and analyze the key players (i.e., corporations and regulators) involved. Give a brief overview of the situation, who was involved, what laws/regulations were broken, how it affected people, and whether you felt it was right or wrong and whether the punishment fit the “crime.” Use the specific companies, people, and regulating parties involved. To find a specific event and its details, try the following Google search terms: financial crisis 2008, financial scandals, accounting scandals, or accounting fraud cases. In response to your peers, provide your thoughts regarding how regulators responded to the events they identified and what, if anything, regulators could have done differently before or after the incident.
Answer Below:
One of the most famous financial crisis of the year 2008 was Lehman Brothers Scandal. Lehman Brothers was considered to be one of the largest investment in United States. The major reason which lead to the fall of Lehman Brothers was that it had made huge investment in securitized mortgages over the past years but the danger was exposed when housing market began to crash and they had to succumb as they did not have sufficient capital backup and their share price was also constantly falling The laws and regulations which were broken by the firm was that they concealed approximately around $50 billion in loan and camouflaged them as sales. The main people who were involved in the scandal were the executives of the firm and the auditors of the company who were Ernst & Young . The Lehman Brothers Scandal had a major effect on the US economy. Due to this scandal, the stock market got affected on a global basis, the U.S economy got affected in a very negative manner. Thousands of people involved in financial services became jobless. It was a huge setback for the banking and financial sector. One of the interesting facts about this scandal this that since it was a private investment company, the government regulators did not have any authority to save it. Even the Treasury Department did not have any role to play in it. The organization did not face any severe penalties for the scandal as even though it was declared the largest bankruptcy in the history of United States Due to lack of evidence, the Lehman brothers did not face any kind of prosecution. In my opinion this was completely wrong because even after being declared bankrupt due to concealment of loans , they did not face any charges due to loophole in the laws and regulations("Lehman Brothers", 2021) References Lehman Brothers. (2021). Retrieved 14 September 2021, from https://corporatefinanceinstitute.com/resources/knowledge/finance/lehman-brothers/More Articles From Finance
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