Countrywide Financial Case

The public was uneducated in how the process worked but seemed not to be bothered because it got them into the house. They don’t want a mortgage, they want a home. A home they can raise a family, build equity, build a life, have a sense of freedom. That “boom” market gave it to them. The lenders probably told them to just sign here for now and we’ll get your mortgage down to where you really want it and in a couple of years and we’ll figure out the rest. When you have no idea that the market would crash as it did, are you prepared? No, because who is thinking that your home is losing value, that people are going to lose their jobs or that the economy would turn into a recession. Not the banks or the public thought that. The perception was that the market was going to go up or stay steady, so the homeowners were going to be able to refinance and get rid of their current payment. People were going to make more money, they were going to get a raise in a couple years at their jobs and everything would be better. So when the homeowners refinanced their loan they would get a fixed rate mortgage for 30 years. But that never happened.

One of the most prominent aspect of the Great Depression was that the people of United States lost confidence in the banking system and the banking crises of the 1933 followed. Until 1930s, unregulated banking system existed with the notion that increased competition would make the market more efficient increasing the consumer choice base and thus would promote resource allocation and growth. Since people at that time weren’t too supportive of centralization, there was division of power and all the states and regions had their own banks to mobilize resources and carry out investments. This led to increasing competition to attract the same resources which escalated the rates offered to depositors and induced lenders to invest in high return, high risk areas. As a result, the financial system became fragile and there were frequent mortgage

The Federal Government needs to make sure to enforce strict guidelines on who can and cannot be accepted for a home loan, and not allow big investors to borrow excessive money at low interest rates to inflate the investor’s financial advantage. If the government starts allowing lower standards on mortgages, we are going to end up in the same catastrophe once again. In an article written by U.S. News and World Reports entitled Should the Federal Government Provide Support to the Mortgage Market?, the Federal government and the President attempted to get involved with the housing market. The passage implicated that Obama wanted to do away with federally funded conglomerates Fannie Mae and Freddie Mac and implement another type of government assisted program ("Should the Federal Government"). The program would prevent the mistakes made by Fannie and Freddie which created the original “housing bubble burst” ("Should the Federal Government"). One of the Senate bills suggests the government create “a new agency, the Federal Mortgage Insurance Corporation to replace Fannie and Freddie” ("Should the Federal

The turmoil also led to an adjustment of the banking system in the country in 1934. This period witnessed the creation of a new agency known as the Federal Housing Administration popularly known as the FHA. The primary purpose of the agency was to control terms, requirements, and the interest rates on home loans. The company bought mortgages and then insured them, helping lenders along with other such lending institutions with their mortgage loan

After the tragic Stock Market Crash of 1933, America had plunged into a deep depression. Over 9,000 banks nationwide were closing their doors. After the Stock Market Crash, President Herbert Hoover was in office working ceaselessly to fix what was left of the economy. However, his effort did not seem to be enough. In the election of 1933, Franklin D. Roosevelt won by a landslide. Roosevelt stated, “This nation asks for action and action now,” and he did just that.(Barbour, 82) He saved countless families from poverty that was spreading like wildfire across the U.S. Federal Deposit Insurance Corporation (FDIC) is a portion of the New Deal formulated by Franklin D. Roosevelt to help save America from poverty caused by bank failures. “Roosevelt’s New Deal preserved the American democratic capitalist system.” (Schlesinger 137)

This power helped white families considerably in gaining ownership of houses, but severely crippled home ownership ability for African American families. The role of the HOLC was to provide low interest loans and refinance homes to prevent foreclosure; the role of the FHA was to guarantee mortgages from default. Both of these organizations worked to minimize the risk of home loans for banks, making it easier for families to obtain loans and mortgages to buy homes. This resulted in an explosion of home ownership from the 1930’s to the 1960’s, “In 1930, only 30 percent of Americans owned their homes; by 1960, more than 60 percent were home owners.”

Fannie Mae and Freddie Mac, started in 1992, was a company started to subsidize LMI housing without appropriating any funds. In 1997, an urban report claimed that local lenders seemed more than happy to serve creditworthy low, moderate income, and

In the midst of the Depression, Franklin D. Roosevelt was elected in which he introduced reform laws. He introduced the Federal Deposit Insurance Corporation (FDIC) in which role is to preserve and promote public trust on the federal banking system. One of the biggest causes of the Depression was the stock market crash in which millions of people suddenly withdrew money from the banks, leading to banks not being able to provide for everyone. The FDIC was enacted in order to gain back public confidence in investing their money into banks. In addition to this, the Work Progress Administration (WPA) and the Tennessee Valley Authority (TVA) was enacted in order to provide jobs to the

The Federal Housing Administration (FHA) is a government entity established by the U.S. Congress in 1934. The FHA aims to help potential borrowers (with lower income) qualify for mortgages. The FHA became part of the Department of Housing and Urban Development (HUD) Office of Housing in 1965.

The FHA was a piece of legislation that provided a ripple effect on the economy from the bottom up. Had the legislation not been enacted, creditors would have found it harder to finance mortgages for the average American, who more than likely was suffering due to the economic downturn. The FHA managed to have a huge effect on the economy without loaning out money. The FHA largely acted as an insurance program to creditors in the case that the consumer defaulted on the mortgage. Hyman stated, “The federal government organized the FHA, but private capital paid for it and profited from it.”

Wells Fargo was established in 1852 by Henry Wells and Williams Fargo who joined a group of other investors to form a transportation and banking company. In 1849, gold was discovered in California, which encouraged a huge demand for its cross country shipping and by 1852 Wells Fargo shipped its first consignment of gold. Wells Fargo also established merger deals with Pony expresses which made them one of the pioneers of pony transportation. This company later expanded to a company that offered not just pony and gold transportation services, but also offered banking services by purchasing gold and selling paper bank drafts as good as gold. In 1905, the banking branch of the company merged with the Nevada National Bank and established its new headquarters in San Francisco. ("Wells and Fargo start shipping and banking company", 2016).

In 1934, Congress created the Federal Housing Administration (FHA) to assist citizens with their housing needs. According to “Department of Housing and Urban Development” on Allgov.com, “In July 1947, the Housing and Home Finance Agency was established to help people buy homes following World War II. Two years later, the Housing Act of 1949 was enacted to help eradicate slums and promote redevelopment in urban areas.” The Department of Housing and Urban Development Act began with the Housing Act of 1949. According to The Department of Housing and Urban Development written by John B. Willmann, “The Act of 1949 added new prestige to the Housing and Home Finance Agency by authorizing broader public housing activity.” The Housing Act of 1949 also promoted urban redevelopment and research on housing and development problems.

President Franklin D. Roosevelt’s affordable housing initiatives of the 1930s were responsible for the rapid expansion of home ownership and economic stability throughout the United States following The Great Depression of 1929 (Allen and Barth, 2012). Leading economists have viewed affordable housing as one of the key components of a healthy economy ever since. (Bluhm, Overbeck and Wagner, 2010). The Federal National Mortgage Association conceived during the time of his administration, provided an abundant amount of affordable housing through low down payment mortgages extended over a 30-Year period. In 1940 the median price of a single family home in the U.S. was approximately two times an average borrower’s median income. The Housing Cost

It would be convenient to start this research paper by stating that corruption is a challenge mainly for businesses in developing countries and that it is unrelated to the current affliction of the economy in the United States. It would also be convenient to claim corruption has declined in America as a result of awareness raising campaigns and the numerous anti-corruption laws. But none of those aforementioned statements would be true. Corruption is not the exception, but rather the rule in today’s business practices. In 2004, Daniel Kaufmann, a senior fellow at Brookings Institution and former director at the World Bank, calculated an index of "legally corrupt" manifestations which is defined as the extent of undue influence

Deutsche Bank made its entrance into the world in 1870 and it was one of the first banks to adopt universal banking as it promoted and facilitated trade relations between Germany and other overseas markets. Deutsche Bank acquired smaller banks in Germany in order to be the most prominent bank in their home base in addition to having a global reach. Following World War I, inflation took over Germany causing many borrowers to default on their loans forcing the bank to sell most of its assets in order to stay alive (however that diminished their global presence). The bank’s involvement during World War II with the transferring of the Jewish customers holdings to the German Government led to the Allied