Too Big to Fail - During the recession of 2008, we were introduced to this new term. A large bank or financial institution that engages in illegal activity many are not severely punished or have its officials charged with criminal activity. Why? What is the reason?

Too Big to Fail - During the recession of 2008, we were introduced to this new term. A large bank or financial institution that engages in illegal activity many are not severely punished or have its officials charged with criminal activity. Why? What is the reason?

Business/Professional Ethics Directors/Executives/Acct

8th Edition

ISBN:9781337485913

Author:BROOKS

Publisher:BROOKS

Chapter5: Corporate Ethical Governance & Accountabililty

Section: Chapter Questions

Problem 21.2EC

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Fraud

Fraud in accounting is the planned manipulation of financial documents to make a false appearance of corporate financial health. Moreover, it includes an employee, accountant, or the company itself misleading investors and shareholders.

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“Too big to fail” was a common buzz phrase during the Great Recession. The idea behind it is that certain businesses are so important to an economy that disastrous consequences would result if they were allowed to fail and so government intervention is necessary. How is the concept of moral hazard relevant here?
In the last Great Recession in the early 2000s the financial system became suspect and its flaws exposed. Which of the following acts was passed in an attempt to reform the financial system? O Sarbanes-Oxley Act O Great Recession Act O Dodd-Frank Act
Except for those who actually are planning to commit fraud, every borrower who ever applied to a bank promised to pay the loan back, and planned to do that. Yet, banks always seem to have some bad debt, debt that is "non-performing." How does a bank minimize the losses from bad debt?
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The central bank intervened heavily in the credit crisis. Explain whether you believe the central bank’s intervention improved conditions in financial markets or made conditions worse.
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Which of the following did NOT help trigger the subprime crisis in 2007? Housing prices stopped climbing and actually started falling around 2006 Borrowers were offered teaser loans like 2/28 to get them into loans they could not otherwise qualify for Mortgage brokers were required by Sarbanes Oxley to personally pledge that all the loan information provided on loan applications was correct and they could be held personally responsible for any losses due to fraud Banks made loans to borrowers with very questionable income by using “liar loans”
4. Investment bank controversies Which of the following is true regarding the "revolving door" between the investment banking industry and the organizations tasked with regulating and overseeing investment banks? Check all that apply. The "revolving door" only goes one way. That is, former investment bankers often go on to work for government organizations, but government employees do not go on to work for investment banks. The "revolving door" only goes one way. That is, government employees often go on to work for investment banks, but former investment bankers do not go on to work for government organizations. The "revolving door" was largely a problem in the 1960's and does not pose any issues in today's financial industry. The "revolving door" can potentially create conflicts of interest among current and former employees of the investment banking industry.
There are claims that the central bank caused the recession, and due to them, production has dropped below the optimum level, and inflation has gone up. What would you say to defend the central bank? Explain in detail.