Statement of the Problem
1. Indulging to all sorts of Fraudulent
Practices.
Fraudulent Practices means a regulations legally. Be updated from
misrepresentation of fact in order to
influence the execution of a contract to the
detriment of the employer and include
collusive practice among applicants /
bidders (prior to or after its submission)
designed to establish bid price at artificial
non - competitive level and to deprive the
employer of the benefit of free and open
competition.
2. Loans were extremely complex, and
the terms of agreement were hidden
from borrowers.
Most standard loan applications are
approved according to a strict set of
criteria, but what are known as ‘complex’
loans are more flexible. Many specialist
lenders will approve complex or non-
standard loan applications, and a broker
able to find an alternative lender in such a
situation.
3. Low teaser rates that automatically
reset to much higher payments after
a few months.
Teaser rates are often an interest rate or
price used as a marketing tactic to
convince you to sign up for a particular
product. An example of a teaser rate is a
variable interest rate loan that has a low
initial rate. After a short, specified period
Recommendations Courses of Action to be Taken
To Banks and Institution – be properly They must have their own regulations.
regulated and follow the rules and Regulation is used to make it less likely
people will take out their money
government laws. Do not practice any unexpectedly. There is a deposit guarantee
fraudulent acts because even if you dodge scheme that ensures that even if a bank
the first offense it will still haunts you at a fails all deposits under £85,000 will be
later time. All the problems with banks is protected. Banks also have to hold cash
that they are not properly regulated and (or assets that can be sold very quickly) to
reckless investing to some properties with cover unexpected withdrawals. Banks
unknown information -a toxic asset. may also have annual supervision and
examination by the government. Bank
To The Investors- They must read the supervision and examinations are
terms and conditions of the property they designed to evaluate an institution’s
want to invest. Always do your own soundness, risks, and compliance in an
research, what one person recommends to attempt to prevent bank failures.
invest in might be a completely different
risk profile than what interests you. And Well behind the big short, “Strike while
always doubt things if these are too good the iron is hot” To make most of an
to be true. You may experience the opportunity or favorable conditions while
goodness of that investment in early time one has the chance to do so. That one man
so you decided to invest more, but failed in Iceland bought a land for 9 billion
at a later date. So as an investor, we must kroner but sell it almost 16 billion kroner
be wise and not recklessly trusting a just for keeping it 1 year and a half. Well
company giving you lots of benefits. if you have the opportunities to do an
investment like in the big short then do it.
To Regulators and Politicians – Just But don’t recklessly investing and saying
properly regulate those firms. “I’m a risk taker” and rally in the street
later if you fail.
From Critics – a recommendation when
large banks or other institutions fail. Assess their operation activities and the
Critics see the policy as legality of their contracts given to
counterproductive, and that large banks or customers and investors. Give supervision
other institutions should be left to fail if
of time, the rate adjusts upward. The
speed at which the rate can adjust upward
will vary by lender and loan product. The
maximum amount the rate can rise will
also vary.
4. Unsophisticated Buyers.
Some sellers look to the unsophisticated
buyer as an opportunity to infiltrate a
company, bypassing the purchasing
department and gaining direct access to
the customers. The new "buyer" may just
assume gifts (or more) are considered
business as usual, given the traditional
reputation of the purchasing agent.
5. Qualifications of borrowers did not
matter at all.
When a buyer cannot or does not
complete an agreement without cause the
buyer will be responsible for making the
seller “whole”. This means that the seller
is entitled to be put in the same position as
the seller would have been had the buyer
completed the transaction as scheduled.
The buyer is liable to the seller for the
difference between the original contract
price and the price that the seller
ultimately sells the home for, or, if the
seller does not sell the home, the market
value of the home at the time of the
breach of the agreement by the buyer, plus
any related costs incurred by the seller,
such as legal, carrying, moving or
accommodation costs etc.. The seller’s
their risk management is not effective. support especially to those bigger firms
Some critics, such as Alan Greenspan, and conduct examination quarterly or
believe that such large organizations annually in every firm. Be strict with
should be deliberately broken up: "If supervision and regulation. If they fail to
they're too big to fail, they're too big." accommodate those terms then they must
Some economists such as Paul Krugman follow the equivalent punishment, no
hold that financial crises arise principally favoritism involves like “Too Big To
from banks being under-regulated rather Fail” theory.
than their size, using the widespread
collapse of small banks in the Great Ethical governance must emphasize and
Depression to illustrate this argument. put into practice in government offices
and every business.
Ethical Governance - I think that all
these problems are because of almost no
ethical governance or rather taking lightly
of it.
Government Regulations - I think that
all trades and markets must be regularly
regulated and there should be laws, rules
and regulations in every transaction.
damages must be reasonable and
foreseeable and the seller has an
obligation to mitigate the amount of
damages suffered, but the buyer is
responsible for paying the seller these
damages.
6. Insider Trading
Insider trading refers to the practice of
purchasing or selling a publicly-traded
company’s securities while in possession
of material information that is not yet
public information. Material information
refers to any and all information that may
result in a substantial impact on the
decision of an investor regarding whether
to buy or sell the security.
By non-public information, we mean that
the information is not legally out in the
public domain and that only a handful of
people directly related to the information
possessed. An example of an insider may
be a corporate executive or someone in
government who has access to an
economic report before it is publicly
released.
7. Security Fraud
Securities fraud is an illegal or unethical
activity carried out involving securities or
asset markets in order to profit at the
expense of others. This type of fraud is a
serious crime usually involving the
investment world. Examples of securities
fraud include Ponzi schemes, pyramid
schemes, and late-day trading.
8. Free Market and Free Market
Principles
Free Market is an economic system in
which prices are determined by
unrestricted competition between
privately owned businesses. The absence
of governmental influence allows both
companies and individuals a wide range
of freedom. Given that a person owns
some property, he has the right to
exchange it for another person’s property,
provided that the other person agrees to
the exchange. When both parties agree to
the exchange, then it is voluntary, which
is the key characteristic of the free market.
9. Irresponsibility of the Broker,
Lender, Securitizer, and Market
Maker.
They view that they had no responsibility
for the product they were moving along in
the system.
10. Light Touch Regulation
‘Light-touch regulation’ is one of those
euphemisms that governments invent to
disguise what they are really doing. Light-
touch regulation can be described as
simpler and more descriptive phrase as
‘deregulated.’
11. Giving Bankers a Free Hand
They give complete freedom to bankers to
do what they want in their operations.
12. Bonus System
Example: Garant Anderson- having
$300000 annual salary and $700000 for
his annual bonus.
13. Reckless Financial Planning
There can be many hidden fees, like
annual fees, late payment fee, forex fee,
cash withdrawal fee, etc. when borrowing
from a Lending Company. Many people
get trapped in debts with all the alluring
benefits offered by Lending Company,
leading to financial stress. So many
people rallied around the world because of
their losses.
14. Interconnectedness was not realized
until the very last moment.
New York did not believe that they were
involved in that financial crisis until the
doom haunts them.
15. “Too Big To Fail” belief of
Government
"Too big to fail" (TBTF) and "too big to
jail" is a theory in banking and finance
that asserts that certain corporations,
particularly financial institutions, are so
large and so interconnected that their
failure would be disastrous to the greater
economic system, and that they therefore
must be supported by governments when
they face potential failure.
16. This case's most important moral
trouble is the banks' lack of ability
to provide loans with inside the
 shape of mortgages.
This is basically because of the reality that
those packages had been now no longer
supposed to enhance the lives of
purchasers however as a substitute to
advantage the business.
17. The authorities turned into
compelled to apply tax payer cash to
keep agencies like AIG from
bankruptcy.
These issues might also additionally were
preventable if the proper in-vestment
channels have been used. Mortgages that
had been logical and practicable might
also additionally were issued with the aid
of using Bear Stearns. Thus, the
requirement for collateralized debt
obligations (CDOs) could now no longer
have arisen (The Economist, 2013). Also
contributing to the economic disaster
turned into using the shadow banking
machine in the course of this time.
Corporate institutions need to understand
that long-time period investments are
greater critical than short-time period
profits, and that long-time period
investments are greater critical than short-
time period profits.
18. Negligence of people who have
knowledge and authority.
Those who have the power to stop the
financial meltdown stayed silent even
after all the signs.
19. Less to no Government Regulations.
With almost no government regulations,
trading toxic assets which came from the
fraudulent mortgage loans it became a
system of buying and selling with fees
charged on each transaction.
20. Foolishly Greedy Financial
Regulators.
Financial Regulators who are driven by
greed or goal to be the no. 1 in the
financial marker, did everything they
could. Like removing almost all the
restrictions that protect the financial
market just to attract investors, privatizing
government properties, erecting useless
buildings,
21. Deceptive Business Techniques
In order to increase their earnings, several
mortgage lenders engage in dishonest
behavior. Through complicated loans,
terms that the borrowers are unaware of,
teaser rates that reset to much higher rates,
and targeting the underprivileged and
underrepresented groups.