Role Of Corporate Governance And Laws In Global Financial Crisis

Analysis of the Issue

The financial crisis of 2008 is the worst economic disaster that has taken place, since the Great Depression of 1929 (Taylor, 2009). This happened, despite the continuous efforts of the Ministry of Finance or the Federal Reserve. This led to a big recession. At that time, real estate prices fell by 31.8%, more than the fall in prices during the depression. Post two years of the recession, unemployment still exceeded 9%. There are several laws and laws that lead to the emergence of this crisis, which is initially spent in the evaluation of the person. The banker bought the risk of assets for profit from unreliable pension funds, which made their portfolios risky.

Mortgage lenders not only track loans but also have the opportunity to receive monthly checks from the mortgage owner (Martin, 2011). Mistrust of the banking sector was the main cause of the financial crisis of 2008. In 2008, the world economy experienced its worst crisis since the Great Depression of the 1930s. The infection, which began in 2007, when housing prices in the United States finally fell, quickly spread, especially in the whole financial sector of the United States. In addition, a large-scale crisis is observed in the financial markets abroad. The largest insurance company, two companies that have approved the state of the mortgage. Death is not limited to the financial sector and companies that are heavily affected by the selective survey and the agenda for the future (Francis, Hasan, and Wu, 2012). Globally, there is a large-scale financial crisis that caused problems and investment losses for various investors. The purpose of this study includes the financial crisis and the relevant business laws.

The analysis of the causes of the problem leads to the first sign that the economy was slipping into a trouble period in 2006. Then, house prices began to continuously fall. It was thought that the overheated housing market would be able to return to a more sustainable level. The brokers did not know there were too many homeowners with bad credit (Campello, Graham, and Harvey, 2010). Many have criticized EU investment law for the crisis. It encourages banks to invest in high-risk areas, but that’s not the underlying cause. Gramm-Rudman Act was the real villain that led to the appearance of the situation. This is allowed for banks. These mortgages require soft loans. The production of unsustainable demand for more and more mortgage loans. The Federal Reserve has estimated that hypocrisy subprime would be limited to the residential area. The big officers did not know how far the damage would have spread. They understood the true causes of subprime hypocrisy only later.

Figure 1: US Housing Prices

Securities and other financial institutions throughout the world hedge funds lending. The effects were also seen in investment funds, pension funds, and operating procedures. The coast guard had sold the original arc passages (Crotty, 2009). This year was derived from promises they do. And I thought to be produced this year in the insurance credit default swaps at the end of the name of the ridges. A traditional insurance company, the American International Group, sold swaps goal. For when you were being the derivations of the value of her loss, AIG is not enough cash to meet all the troubles. That, when they say they began to be astonished by the bank of the losses of their own example. The successive stages and stopped lending. Opposite bank, and violent behavior, their untruth and not under a pledge, be laid out. When this was done, dignity is increased, interbank funding, the name of the Libor expired. These bank loans, Fannie Mae and Freddie Mac were often sold to the two government agencies who hire Performance Simply put, to borrow money to buy and build. Fannie Mae and Freddie Mac mortgages can sell investment banks, which would be a hundred miles or other securities in itself provide a safe guarantee that it includes a monthly income source is the sum of all mortgages (coffee, 2009). Then, the security may be reduced to a tiny 1,000 products sold to customers, often wrongly regarded as a low-risk investment. US auto industry, which calls for federal help, and on the verge of collapse. Stock prices fell to a community in the world, the Dow Jones average in the US.

Figure 2: US Household: Debt vs. Income

Real estate is a global crisis of the economy of the United States threatened to shoot. It started with the unfavorable conditions of the mortgage for borrowers that are often family, you who do not have the right to, the Ordinary mortgages. As stated in the higher-risk, low initial interest rate mortgage loans in the early years, and arrived at an interest rate that is double the number in years. As the penalty for some of them did was innovative and with a projection. The insurance industry on a server in treating of insurance substitutions, and stipulate that insurers accept in exchange for insurance losses for a mortgage for the classroom. The insurance consideration, which it passes to the credit of financial institutions bought and sold goods because they do not have to swap. In 2003, Warren Buffett, a well-known American investor, and CEO of Berkshire Hathaway said that a finance arms of extinction. These derivatives are delivered about $ 900 billion in 2001, but the total revenue reached $ 62 billion in early 2008 (Baker & Milhaupt, 2008).

Figure 3: Global Financial Crisis

While house prices continued to rise, everyone has benefited. Mortgage owners with inadequate sources of regular income can be borrowed in proportion to their growing social capital. The agencies that classify the securities on the basis of their security (paid by the issuers of these securities and not by the customers) generally evaluate values ??of the value of the mortgage value relatively certainly. When photographing in the residential area, more and more mortgage owners did not pay the loans. At the end of September, approximately 3% of the leasing loans were in excess, representing a 76% increase in just one year. Another 7% of the owner’s mortgages lasted at least one month due to payments, up 5.6% per year. In 2008, a slight fall in the price of apartments started in 2006 has become a free fall in some places  (Underhill & Zhang, 2008).

Figure 4: Dow Jones Industrial Average Decline

For those who have examined the 2008 financial crisis, it is clear that there are short-term gains after a private action (Kemp and Martin, 2010). More than 84% of mortgages were issued in 2006, a loan issued by individuals. I think we are close to finding the largest of the six and the risk of heavy bronze and private companies, 83 83 subprime creditors, one of the largest in 2006 there was only one in a common arch matter, the laws and regulations. We get over $ 2 billion in mortgage lending and mortgage lending through the bank. Borrower exempted from federal regulations. In the financial crisis of 2008, in 2008, Barry Ritholtz’s history was filled with a selection of Washington Post articles (Vähämaa penis, 2012). Of course, low-interest rates and the Fed after the dotcom boom collapsed in 2000, Fed | A rate of 1% under his jurisdiction was no longer possible at any time. This is not a spiral that has led to oil, the price of the dollar and gold as a residential or credit card with a liquid stock such as shares. Ding managers have been looking for new ways to make money and lead to low-interest rates. Instead, they silenced the elevations of a train head. Moody rating agencies S & P AAA rating, the value of fish and waste for work is set and was not safe in the hands of US Treasuries. Do not let the earnings have the diligence of their own administrators, do not buy or the manager does not understand the dangers. Total derivatives have unregulated financial instruments of non-regulated financial instruments. Make sure you inform our colleagues about the condition of free requirements and this elementary exception (Boddy, 2011). $ 3 billion in AIG allowed these derivatives to show exactly zero dollars for future requirements.

The SEC requirement for capital adequacy was introduced in 2004, the Securities and Exchange Commission changed the rules for delivery of only five banks on Wall Street. The influence of Borderline 12-1 activation in 1977. It is an unlimited influence by Goldman Sachs, Morgan Stanley, Merrill Lynch, now part of the Bank of America, Lehman Brothers and Bear Stearns to get to one side or JPMorgan Chase Permit. These banks have increased the influence of 20, 30, even 40 leave little room for error against the first extreme use (Demirguc-Kunt, Detragiache & Merrouche, 2010). In 2008, only two of the five banks survived, and the two managed to reduce. The federal government has abrogated the anti-dictatorial laws of the state. In 2004, the Law Office Controller and banks affirm that domestic mortgage mints are regulated, including their laws against ruinous credit cards, with lower prices and foreclosure. As the result of this change, the main creditors of these increasingly risky lending countries will be (Ahmed, 2009). Soon, their standard and screening rates rose sharply. Reward game reward system: WAR compensation system based on Wall Street, and still rely on short-term, maximum performance and leadership. This creates incentives to take too much risk. The bonds are very high and continue 135 billion dollars in 2010 for the 25 largest institutions and after the fall.

Private sector lenders need demand: that these loans sold to the securitization of loans from these institutions make it possible for them to have loans in the near future. This has allowed them to have standards that are accepted by traditional lending calculations such as income, credit history and repayment loans (Claessens, Dell’Ariccia, Gypsy & Laeven, 2010) to finish. Innovative credit products are expected to reach more subprime borrowers. 28.02 woven adjustments include interest rates, interest-free loans, and savings accounts while knowing the underlying loans and capital lines and negative depreciation increases the borrower’s monthly debt. These loans have steadily decreased compared to traditional mortgages of 30 years in a disproportionate amount. Commercial banks have hoped: traditional banks came to play to track new authors. Employees are compensated for the basic loan, not for quality. Derivatives exploded uncontrollably: CDO delivered the first infinite market. At the level, derivatives have taken into account the global economy three times (Dallas, 2011).

The boom and the bankruptcy have traveled all over the world. Big Lie interpreters ignore the global nature of the residential area and the bust. A report from the McKinsey Global Institute recorded a significant increase in global home business between 2000 and 2007. Fannie and Freddie jumped at the end of the game to protect their profits, non-bank credit exploded 2001-2007, along with Fannie’s securitization and private Freddie was darkened under their arms. Most of the subprime mortgages are at the center of the global crisis, signed by private, unregulated companies (Claessens, Dell’Ariccia, Gypsy & Laeven, 2010). These were the creditors who sold most of the mortgage on Wall Street, not Fannie or Freddie. In fact, these companies do not have deposits, so they are not covered by the Federal Deposit Insurance House or the Savings Bank. Market shares Fannie Mae and Freddie Mac were rejected. Relevant market gains Fannie Mae and Freddie Mac fell 57% of new mortgages in 2003-37%, while bubbles developed between 2005-06. Over 84% of subprime loans in 2006 were issued by private creditors. Companies sponsored by the government wanted to lose market share to create private creditors (Saunders & Allen, 2010). Fannie and Freddie were looking for profit and were not trying to meet the goals of low-income loans.

The compatibility of GSE mortgages had less profitable rules than new ones (Ivashina and Scharfstein, 2010). Private Fannie and Freddie securities rose from a market share of 10% in 2002 to almost 40% in 2006. As a percentage of the total securitization of private mortgage loans increased by 23% in 2003, with the private sector 56 %. The occurrence of these events suggests absurdly that the Bloomberg Congress forced everyone to lend to the highest people. Many players have obviously participated in this story. Some of them belonged to the public sector, and some belonged to the private sector. The authorities acted, however, according to private sector instructions (Karanikolos, Mladovsky, Cylus Thomson, Basu Stückler & McKee, 2013). This is not a church that wakes up, thinking about it or whether SEC has had a brilliant spontaneous idea to relax capital requirements of investment banks. The auditors’ office had its own free will to prepare government laws to protect borrowers. These authorities knew exactly what would be useful for the financial sector, its managers and traders. Behind it, it was an impetus for short-term benefits.

In 2004, the Bank of England, Andrew CFO gave a good and eloquent warning to the next event, the London School of Economics. Speeches were published on the bank’s website, but it was not disclosed. There was no seminar or questionnaire or newspaper. Sir Andrew continued with the same figures and confirmed for another two years that the system did not last (Taylor, 2013). In an interview, Gordon Brown was excited about the dangers of excessive lending. In January 2006, Sir Andrew handed over: He retired before leaving. In 2005 Raghuram Rajan, chief economist Raghuram Rajan said in Jackson Hole, Wyoming, the world’s leading banks and financiers, as well as Larry Summers and Alan Greenspan. He argued that technical development, institutional movement, and liberalization made the entire financial system highly unstable. Encouraging short-term benefits has led to the introduction of risks that are catastrophic in sight. In 2006, Nouriel Roubini warned lenders at the IMF in New York. The current network fell opposition momentum for forthcoming collapse 2008 Beria Ritolca’s blog contains three truths concern is a psychological crisis occurs when belief systems fail or lack of evidence philosophy treatment (Markham, 2015). There are countless people who do not respect legitimate information and intelligent studies. They are mathematically illiterate and weakened their ignorance. Political manipulators who feel cynically what they are singing are not sensible, but I do things because they are effective. These people are more dedicated to their ideology and bonuses than to the welfare state. Barry Ritholtz finds that reality is a problem like Colombo Galileo at the moment, the reality is always at the end of a triumph, but soon has very real financial costs. Giving social benefits to the financial sector is the reality behind the fact that the huge financial sector as a whole will not promote real growth in economic growth. Gerald Epstein, an economist at the University of Massachusetts (Erkens, Hung & Matos, 2012).

Political debates during a company law crisis and how to improve law firms that alleviate future financial crises. The commercial law is the key to a direct response to the crisis (Djankov, La Porta, Lopez-de-Silanes & Shleifer, 2008). In particular, the critical regulatory instrument used in many crises, Regulatory through the Mission, where healthy companies acquire inadequate businesses. For example, during the 2008 financial crisis, the Fed and the United States. Ministry of Finance (Treasury) regularly stores inadequate financial companies to combine a healthy company or companies employ directly inadequate. Examples, JP Morgan favored the purchase of Bear Stearns, AIG purchased from AIG, Vachovia acquired Merrill Lynch and Citigroup’s Bank of America at the end of bankruptcy (Grove, Patelli, Victoravich & Xu, 2011). Similarly, the replies of previous financial crises are mergers. The motivation of government sponsors during the crisis is that some jobs are causing great damage to external finance and the economy. By regulating regulations, regulators often have considerable time and effort to save their efforts in accordance with the Companies Act.

Significant M & A activities were analyzed during the financial crisis in 2008 through an external framework. The aim is to assess whether the law firm has been effective during the financial crisis and is investigating how to reform the company’s law to mitigate future financial crises (Brammer, Jackson & Matten, 2012). The core of your thesis is that normally assumptions about company law become insurmountable during the financial crisis, however, the company applies at different times of the financial crisis at regular times is systemically important because it is not an offense company. The real shareholders of these companies must be reduced during the crisis. Priority of shareholders and company law requires shareholders to remain candidates (Aebi, Sabato & Schmid, 2012). In normal times, it is clearly an immediate obligation for the government to maximize the shareholder’s assets as a shareholder carrying the remaining risks. However, the financial crisis of the entire economy marks the residual risks of corporate events, as the disturbances of the society’s system play significant negative externalities. And unlike creditors or employees, the economy as a whole can negotiate the protection of the contract. The Companies Act on the basis of a shareholder’s priority prerequisites does not allow shareholders to internalize this external damage due to the failure of their company. In order to reconcile company law with the financial crisis, we propose that the shareholder rights for key target companies be systematically frozen (Fan, Wei & Xu, 2011). For example, when JP Morgan tried to take over and save Bear Stearns, the deal exploded into a major hurdle, Bear Stearns shareholders were dissatisfied with the offer price of $ 2 per share. They wanted to vote for the rejection of the agreement. Bears shareholders know that the failure of Bear Stearns would cause serious damage to the economy, allowing them to handle more difficult exchanges. The voting rights of the target audience gave the shareholders financial hostages priced higher than $ 10, caused uncertainty and high risks for the buyer, and caused uncertainty to other entities in the system (Chen, Chen & Wei, 2009). The danger of a crisis is particularly serious as a difficult company must suffer very quickly so as not to lose its value quickly while obtaining a traditional position can take at least thirty business days. The imbalance between times leads to uncertainty when the uncertainty is very high. In short, the shareholder’s privilege, which is reflected in the casting power, should simply not apply in this context when the economy is in danger. Instead of voting on voting rights, we protect the interests of shareholders after the conclusion of the contract in accordance with Section 262 of the Delaware Corporation Law for the right of redistribution. Our proposed evaluation criteria would estimate the company’s long-term value, assuming that it will not be saved (Young, Peng, Ahlstrom, Bruton & Jiang, 2008).

Conclusion

The CEOs and employees, whose managers and executives have the duty and coherence, should systematically commit the shareholders of the key target companies that were unsuccessful in the crisis to give these managers and officials more economic access wide. In some jurisdictions (not in Delaware), there is a parallel idea in which managers are asked to consider the interests of creditors and shareholders in the bankruptcy area. For example, Lehman (in the opinion of many observers) participated in several negotiations for the merger, where he had chicken with the Fed and the Ministry of Finance to obtain a higher selling price. The CEO of Lehman had the obligation of the creditors to ask their shareholders to charge a high price, which had little to do with the underlying value of Lehman. Lehman knew that Bear Stearns had been fired to avoid financial panic. Lehman’s peak price, which Lehman was unable to apply, did not limit the value of Lehman, but the government’s appreciation instead of saving Lehman instead of preventing bankruptcy. The channels led to the collapse of Lehman and had catastrophic effects on the financial markets and the economy in general. The Lehman disaster could have been avoided if Lehman’s positions of trust and leadership had referred to the economy in general and not to Lehman shareholders. In summary, trade regulation is a necessary instrument for financial crises and is governed by company law. Regular corporate rules should not be applied during the financial crisis, as the shareholders of target companies who systematically fail in financial crises deviate from ordinary company law.

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