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During the economic crisis of 2008, many of the largest U.S. banks were accused of having provided mortgages to marginally qualified borrowers. Such loans, called 'sub-prime" and "Alt-A" loans, were made to earn mortgage fees. When the borrowers were unable to pay their mortgages, the banks incurred large losses on defaulted loans. These losses were so large that the U.S. government had to provide money (TARP funds) to many banks to bail them out of their financial distress. During the middle of the crisis, the FASB voted to provide banks more flexibility in applying fair value accounting for bank assets, such as defaulted loans. These FASB rule changes allowed banks to minimize the impact of their defaulted loan write-downs and improve their earnings. Some criticized the FASB as succumbing to political pressure and reducing overall financial statement fairness. Source: lan Katz, "FASB Eases Fair-Value Rules Amid Lawmaker Pressure," Bloomberg, April 2, 2009.

During the economic crisis of 2008, many of the largest U.S. banks were accused of having provided mortgages to marginally qualified borrowers. Such loans, called 'sub-prime" and "Alt-A" loans, were made to earn mortgage fees. When the borrowers were unable to pay their mortgages, the banks incurred large losses on defaulted loans. These losses were so large that the U.S. government had to provide money (TARP funds) to many banks to bail them out of their financial distress. During the middle of the crisis, the FASB voted to provide banks more flexibility in applying fair value accounting for bank assets, such as defaulted loans. These FASB rule changes allowed banks to minimize the impact of their defaulted loan write-downs and improve their earnings. Some criticized the FASB as succumbing to political pressure and reducing overall financial statement fairness. Source: lan Katz, "FASB Eases Fair-Value Rules Amid Lawmaker Pressure," Bloomberg, April 2, 2009.

Principles Of Marketing
Principles Of Marketing
17th Edition
ISBN:9780134492513
Author:Kotler, Philip, Armstrong, Gary (gary M.)
Publisher:Kotler, Philip, Armstrong, Gary (gary M.)
Chapter1: Marketing: Creating Customer Value And Engagement
Section: Chapter Questions
Problem 1.1DQ
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Integrity, Objectivity, and Ethics in Business Loan Loss Woes During the economic crisis of 2008, many of the largest U.S. banks were accused of having provided mortgages to marginally qualified borrowers. Such loans, called "sub-prime" and "Alt-A" loans, were made to earn mortgage fees. When the borrowers were unable to pay their mortgages, the banks incurred large losses on defaulted loans. These losses were so large that the U.S. government had to provide money (TARP funds) to many banks to bail them out of their financial distress. During the middle of the crisis, the FASB voted to provide banks more flexibility in applying fair value accounting for bank assets, such as defaulted loans. These FASB rule changes allowed banks to minimize the impact of their defaulted loan write-downs and improve their earnings. Some criticized the FASB as succumbing to political pressure and reducing overall financial statement fairness. Source: lan Katz, "FASB Eases Fair-Value Rules Amid Lawmaker Pressure," Bloomberg, April 2, 2009.
Transcribed Image Text:Integrity, Objectivity, and Ethics in Business Loan Loss Woes During the economic crisis of 2008, many of the largest U.S. banks were accused of having provided mortgages to marginally qualified borrowers. Such loans, called "sub-prime" and "Alt-A" loans, were made to earn mortgage fees. When the borrowers were unable to pay their mortgages, the banks incurred large losses on defaulted loans. These losses were so large that the U.S. government had to provide money (TARP funds) to many banks to bail them out of their financial distress. During the middle of the crisis, the FASB voted to provide banks more flexibility in applying fair value accounting for bank assets, such as defaulted loans. These FASB rule changes allowed banks to minimize the impact of their defaulted loan write-downs and improve their earnings. Some criticized the FASB as succumbing to political pressure and reducing overall financial statement fairness. Source: lan Katz, "FASB Eases Fair-Value Rules Amid Lawmaker Pressure," Bloomberg, April 2, 2009.
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