Countrywide Financial Corporation and the Subprime Mortgage Debacle
In 2006, the world discovered that Countrywide Financial and other lenders had been promoting mortgages practices that were not impractical, they were criminal. Countrywide was one of a number of corporations (but the one with the largest number of questionable mortgages) which followed the lead of a then recent push by the government to provide incentives to companies that offered a greater number of people home loans. These types of loans are called subprime because the people who want the loan do not qualify under the normal rules. Because of the government push, which became a push within the company, countrywide offered a greater number of loans to people who could not afford them, and many of these were structured as ARMs. An ARM is an adjustable rate mortgage one in which the rate can change over a specified number of years, once…...

Financial Plan and Conclusion 1. Financial Plan
A total of 39,500 will be committed in startup costs. The specific startup items have been described in table 1. Essentially, the flagship startup components are: lighting and studio/sound equipment, opening inventory, operating capital, fees and permits, and FFE. Lighting and studio/sound equipment are inclusive of 8 speakers, 2 amplifiers, 2 cd decks, 2 microphones, 2 switchers, 3 wash moving head lights, 1 LED DJ light, 5 DJ fog machines, 3 laser machines, 1 centerpiece effect DJ light, and other assorted lighting items. The opening inventory, on the other hand, is inclusive of all wine, beer, liquor, and other consumables (non-alcoholic drinks and beverages). The fees and permits component is inclusive of all fees we shall incur such as attorney, consultant, and accountant fees. Lastly, FFEs include, but they are not limited to, foldable chairs and tables, coolers, liquor racks, wine glasses, beer cups, etc.
In…...

Improvements in Integrity, Financial Accountability, Ethical Conduct and Corporate Responsibilities under the Sarbanes-Oxley Act of 2002
e passed Sarbanes-Oxley in the wake of the Enron scandal to try to root out financial and accounting irregularities. How could similar irregularities occur at Lehman Brothers? History has a way of constantly repeating itself. -- Joseph Grant 2010

The high-profile corporate shenanigans by Enron and Lehman Brothers have made it clear that tough legislation was needed to compel Americans businesses to clean up their financial acts. Indeed, in response to Enron's late 2001 bankruptcy, Congress enacted the Sarbanes-Oxley Act of 2002 but the Lehman Brothers' bankruptcy in late 2008 made it clear that there was still a problem in some sectors of American business. This paper provides a review of the relevant literature to determine how the integrity of corporate finance, ethics, and other responsibilities have improved, what the corporate finance industry culture has learned…...

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Works Cited

Bierstaker, James, Marshall, Kenneth K. And Greenwald, Jonathan. (2010, December).

"Strengthen Your Core: Are You Getting the Most from Your Compliance, Operations,

Risk, and Enterprise Support Functions?" Strategic Finance 92(6): 35-39.

Carter, Charles C. (2011, May 1). "Freefall: America, Free Markets, and the Sinking of the World Economy." Journal of Real Estate Literature 9(2): 492-499.

Estimation Techniques of Financial Crisis
The unquestionable ethical conducts within the corporate circle had been the major factor that led to 2008/2009 financial crisis. By studying the root causes of the crisis, it has been revealed that bad conducts among the CEOs of Bear Stearns, Lehman Brothers, Citigroup and Countrywide Financial have been the primary factors leading to 2008/2009 financial crisis.

Objective of this paper is to argue that the CEOs of Bear Stearns, Lehman Brothers, Citigroup and Countrywide Financial did not take the interest of the companies into a consideration leading to frictions between the CEO and the shareholders

In 2007, the financial markets were shaken by a serious financial crisis because of a dryness in liquidity associated with a subprime mortgage business where people with doubtful credit reports were offered mortgage loans leading to a rise of loan default. Moreover, lack of transparency, greediness and excessive desire for money have been…...

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Reference

Gorton, G. B. (2008). The Subprime Panic, National Board of Economic Review, Working Paper 14398,

Larcker, D. & Brin, T. (2010). Lehman Brothers: Peeking Under the Board FaAade, Stanford Closer Look Series.

Tucker, E. (2014). Citigroup to Pay $7 Billion to Settle Subprime Case. Associate Press.

Wiggins, R.Z. Piontek, T. & Metrick, A. (2014). The Lehman Brothers Bankruptcy: Overview. Yale Program on Financial Stability Case Study.

The real estate concept is very different in Great Britain. It consists of a system of bidding and auction. Still this obstacle did not stop Countrywide's management from seeing a wave of change. Many other companies had already seen Great Britain as an entry point into the rest of Europe. These success stories are Safeway, al-Mart and Pizza Hut to name a few. The means to acquiring a ready-made company within Great Britain was the next step. At this point, it was understood that independently opening a Countrywide branch there would be too risky. The strategy was to acquire or create a joint venture with a company that already existed where Countrywide could slowly take over meanwhile slowly introducing that workforce to American mortgage knowledge and skills (Globalhomeloans.com, 2005). The irony in this situation is that Countrywide may have been cocky. After all, the situation is very favorable and…...

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Works Cited

About Countrywide History. 19 Jan. 2005.   Printable=Yes>.http://about.countrywide.com/history/History.aspx?is 

AllDirect.com. 19 Jan. 2005. Company Profile. http://www.alldirect.com.html..

Globalhomeloans. 19 Jan. 2005. Company Web site. http://www.globalhomeloans.co.uk/mainsite/..

Lardy, Susan. 15 Jan. 2005. E-Marketing and Strategy within Countrywide Homa Loans,

They also helped wealthier buyers qualify for larger loans than they could really have qualified for, to purchase larger homes or to take equity out of the property in a booming housing market. When many of the unqualified and under-qualified borrowers began defaulting, the entire industry collapsed. The situation threatened the entire national economy because the wealth of some of the nation's largest banks and investment firms depended on the quality of those mortgage loans. Billions of dollars in stock value were based on complex mortgage-backed securities based on those bad mortgages sold by Countrywide and others.
3. What are the ethical issues that need to be addressed (be specific; cite examples)?

Countrywide violated ethical rules and the law almost every time they sold a mortgage in the years leading up to the housing market collapse. They knew that many of the buyers would probably end up defaulting and they tricked…...

Business Data Analysis
Tabel 1.0: data concerning the 30 fastest -- growing companies as listed on March 16, 2005, on the Fortune magazine website

Rank

Company

EPS Growth

Revenue Growth

Total Return

InVision Technologies

eResearch Technology

New Century Financial

Central European Distribution

eBay

National Medical Health Card Sys

Countrywide Financial

Neoware Systems

Friedman Billing Ramsey Group

Bradley Pharmaceuticals

Middleby

Hovnanian Enterprises

Websense

Sanders Morris Harris Group

Career Education

American Healthways

United PanAm Financial

FTI Consulting

Jarden

Par Pharmaceutical

Capital Title Group

Advanced Neuromodulation

46%

24%

Possis Medical

76%

38%

42%

Symantec

85%

30%

59%

25

33%

32%

Chico's FAS

47%

43%

66%

Rewards Network

29%

38%

Fidelity National Financial

64%

38%

38%

NetBank

60%

-1%

Electronic Arts

32%

24%

Source: Fortune magazine website

1. Develop a stem-and-leaf display of the revenue growth percentages for the 30 fastest-growing companies and describe the shape of the distribution.

Stem

Leaf

9

13

8

77

7

6

5

4

0334689

3

02335889

Stem-and-Leaf Display

Revenue growth percentages for the fastest growing companies show that most firms clustered in the 30% to 40% range. The remaining firms were fairly evenly distributed across the next three bands at 50%, 60%, and 70%. There is a nice short tail in the 80% to 90% bands. Only two firms performed below the median, in the 20% range. [See link for examples of many…...

The largest majority of subprime housing property has been noted in this study to be located in minority and low-income neighborhoods and therefore the subprime lenders are flooding the housing markets and specifically the low-income housing market with housing in neighborhoods that generally do no bring healthy prices on the housing market. With the housing market flooded with this class of housing the properties values of these homes will be pushed even lower and this with interest rates simultaneously at their lowest possible rate. In fact, what has resulted from subprime lending practices is the lenders worst nightmare in that prices are very low, interest rates are very low, and prospective buyers are very low as well.
ibliography

Isidore, Chris (2008) New Recession Worry: ank Failures - Recession Watch 2008. 3 March 2008. Online available at http://money.cnn.com/2008/03/03/news/economy/bank_failures/index.htm?ref=patrick.net

Goldman, David (2008) Fed Officials: Housing Crisis Critical. Eyes on the Fed -CNN News 29…...

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Bibliography

Isidore, Chris (2008) New Recession Worry: Bank Failures - Recession Watch 2008. 3 March 2008. Online available at  http://money.cnn.com/2008/03/03/news/economy/bank_failures/index.htm?ref=patrick.net 

Goldman, David (2008) Fed Officials: Housing Crisis Critical. Eyes on the Fed -CNN News 29 Feb 2008. Online available at  http://money.cnn.com/2008/02/29/news/economy/fed_speeches/index.htm?postversion=2008022912 

U.S. files New Lawsuit Against Countrywide (2008) Reuters News Service 4 Mar 2008. Online available at  http://www.reuters.com/article/bondsNews/idUSN0452271620080304 

Weil, Judy (2008) Housing Market Tracker - What will Replace Subprime Lenders. 28 Feb 2008. Seeking Alpha. Online available at  http://seekingalpha.com/article/66562-housing-market-tracker-what-will-replace-subprime-lenders

This in turn gives the financial professional better idea of the stock's risk behavior.
The equation used in this security market line relationship is as follows:

Mathis, CAPM, par. 3)

The measure of systematic risk is considered Beta or bi while E[Ri] is equal to the expected return on asset I and Rf is the risk-free rate. E[Rm] is the expected return on the market portfolio and E[Rm] - Rf is the market risk premium for the stock. Once the Beta is known then the risk and rate of return can be found.

APT is different because not only can forecast for the long-term, it can also work for the short-term scenario. This fact makes it the better of the two theories because it gives the financial professional more tools to assess risk and the rate of return. APT does this by using a model that captures all the data. All model estimations…...

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Works Cited

Anonymous. "Risk and Return." The Economist (1991): 1-2.

APT: Risk Models and Portfolio Analytics. 22 Dec 2004 http://www.apt.com/..

Capital budgeting needs vision." Business Line. Islamabad: Jul 21, 2003. pg. 1.

Johnson and Johnson Financial Summary. Yahoo Finance. 22 Dec. 2004  http://finance.yahoo.com/q?s=JNJ&d=t ..

"Forecasts by Moody's Economy.com now use a 20 percent drop in median
existing-home prices from their 2005 peak as a baseline, with prices
weakening through at least mid-2009" (Shinkle, 2008, p. 44). Moody's
director of housing economics Celia Chen, states in the same report that
the 20% decline is the good news and that the bad news is that it could
easily be more than that. The worst-case scenario is a lot more than that.
"You want the darkest? Forty percent, she says. There's your apocalypse"
(Shinkle, p. 45).
Websites that track foreclosures indicate that "the US-wide total of
loans foreclosing was running at 2.5 million in 2007, up by 70% from about
1.5 million in 2006" (Dumas, 2008, p. 23). The problem is that the teaser
rates that were initially set in 2006 will reach their peak in 2008,
ultimately affecting another approximate 1.5 million mortgages, with
another round in 2009. The spring 2009 cumulative total of over 4 million
foreclosures is a…...

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References

Aldrich, P.; (2008) UK banks preparing to access BoE's emergency liquidity

scheme, Telegraph, Telegraph Media Group Limited 2008, accessed May

18, 2008 at

 

ey/2008/05/16/cnbank316.xml

Altfest, L.J.; (2008) What the subprime mess means to you, Medical

Economics, Vol 85, No. 2, p. 24http://www.telegraph.co.uk/money/main.jhtml?view=DETAILS&grid=&xml=/mon 

Conclusion
If AIG would not have been helped by the Federal eserve, it is more
than obvious that the financial group would have declared bankruptcy.
Although the bailout reached an enormous sum, the action was justified.
Given the current market conditions, an eventual collapse of AIG would
contribute even more to the fragility of the financial market. Also, it
would have led to a reduction of public wealth, and it would have reduced
economic performance.
The opinion of U.S. taxpayers is that the AIG bailout was not
justified. For them, it did not seem fair that they should pay for the
mistakes made by financial corporations' CEOs and by the defective policies
and strategies practiced by financial groups.
There are two sides to this issue, one opposing the other. U.S.
citizens have strongly declared themselves against the bailout. Their
pressure determined the country's officials to reject financial saving
plans initially.
However, the efforts of these taxpayers had to be sacrificed, and AIG
has to be helped to…...

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Reference list:

1. Chronology: Financial Crisis Spreads from U.S. to World

Markets (2008). Deutsche Welle. Retrieved November 7, 2008

from http:www.dw-world.dedwarticle0,2144,3689713,00.html.

2. Subprime mortgage crisis (2008). Wikipedia, the free

encyclopedia. Retrieved November 7, 2008 from

http:en.wikipedia.orgwikiSubprimemortgagecrisis.

3. DiMartino, D. & Duca, J. V. (2007). The Rise and Fall of

Predatory lenders look to stretch the debt-to-income ratio to a point where, it is not considered responsible lending (Smith 3). Another example of predatory practice is attaching a balloon payment to the loan. Balloon payments are typically seen in prime paperwork used when the borrower is upwardly mobile in their profession. Meaning simply, they will be making more money in the future and able to pay a large compounded payment years from origination. A balloon payment helps maximize the amount borrowed for a higher end property.
Another practice made by these lenders is to put the borrower under distress or fear of non-approval if they sop around but also to present different facts during the home-buying process and then show up at the Closing with different paperwork than discussed prior. Smith argues, "in a study of 255 very high-cost loans in Dayton, Ohio, 75% were found to have prepayment penalties…...

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Works Cited

Aaron, Ailis. "Study: Predatory Loan Terms Increase Risk of Subprime Mortgage Foreclosure by Up to Half." PR Newswire (Jan. 25, 2005).

ACORN Study Documents Problem of Predatory Lending and Financial Apartheid." U.S. Newswire (Nov. 2, 2000).

America's Homeownership Challenge. 23 Feb. 2005  http://www.whitehouse.gov/infocus/homeownership/homeownership-policy-book-ch2.html#challenge 

Background on U.S. Homeownership. 23 Feb. 2005  http://www.whitehouse.gov/infocus/homeownership/homeownership-policy-book-background.html#goodfor

PESONAL & OGANIZATIONAL ETHICS
Personal and Organizational Ethics Values for, for-Profit and Non-Profit Organizations

Ethics is a requirement of the society to both individuals and organizations. Ethics are applied to business and personal behaviors, and are used to determine how companies and individuals abide to policies. To indicate the application of ethical principles in organizations, an analysis is carried out of For-Profit and Non-For-Profit organizations, in this case Bank of America and Boys Club of America. This is by analyzing an ethical dilemma they are experiencing, their approach to the problem, and the legal, political, and social outcomes emerging from this cause of action.

Part One

The Boys Clubs of America is a non-for-profit organization founded in 1860s in Harford, Connecticut Formed with the aim of giving boys who roamed the streets a positive alternative. The club has undergone major changes beginning in 191 when several boys' clubs affiliated to form the federated boys…...

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References

Anonymous. (2009, Dec 16). Boys & Girls Clubs of America, Lowe's Announces $1 Million

Bach, R. (2010, March). A Letter from our Chairman Emeritus: March 2010. Retrieved from Boys and Girls Club of America:  http://www.bgca.org/chairman/Pages/MarchLetterfromOurChairman.aspx 

Bank of America. (2013). Retrieved March 21, 2013, from Bank of America:  http://message.bankofamerica.com/heritage/#/ourheritage 

BCOA. (2011). Boys of America. Retrieved from Boys of America:  http://www.bgca.org/Pages/index.aspx .

real or hypothetical situation?
The context of the report is based on the real world implications of the financial crisis on the banking industry and society as a whole. The report details the need for reform within the sector overall. Particular emphasis is placed on Bank of America, as it was a large component of the subprime-lending crisis.

Why did you choose this topic, and does it relate to you in any way?

I chose this topic because it has impacted both society and the world at large. Nearly $1 trillion in asset values were erased in 1 year due to the financial crisis. People were foreclosed on and subsequently lost their homes. Taxpayers were forced to pay large sums of money to bailout a corrupt and greedy system. This topic not only resonates with me personally, but with the entire developed world. We nearly were on the brink of financial Armageddon.…...

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References:

1. Edward Gramlich (2004). "Subprime Mortgage Lending: Benefits, Costs, and Challenges." Board of Governors of the Federal Reserve System.

2. Eichengreen and Hausmann (2005), Other People's Money: Debt Denomination and Financial Instability in Emerging Market Economies. Pg 6-15

3. Peter Coy (2007). "Why Subprime Lenders Are In Trouble." Business Week

4. Pitt, Harvey L. (2005). "Conflict of Interest Lessons From Financial Services." Compliance Week.pg 2-5

American Express
This report is an analysis of the American Express company.

Company Background

Founder, date incorporated -- "Established in 1850 in New York, American Express Company was among the first and most successful express delivery businesses to arise during the rapid westward expansion of the United States." (American Express)

Initial source of Capital -- "Although in its early years American Express was not itself a financial services company, its largest and most consistent clients were banks. Delivering the banks' typically small parcels -- stock certificates, notes, currency and other financial instruments -- was considerably more profitable than transporting larger freight. Soon the company would scale down its parcel and freight delivery business in favor of creating and selling its own financial products." (American Express)

Key innovations -- "In 1882, American Express launched the money order business, which proved an almost instant success. The company introduced the world's first traveler's cheque in 1891 and within…...

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Works Cited

6-Month Forecasts. Ed. financial forecaster. neatidea.com. Retrieved on 12/17/2004, from .

American Express. History. American Express. Retrieved on 12/17/2004, from .

Yahoo Finance. American Express. Retrieved on 12/17/2004, from Yahoo Finance at .