Should the authors of the Wall Street Collapse be criminalized - Research Paper Example

? Should the of the Wall Street Collapse be criminalized? As researchers have gone to the press during the fall of 2011, economic prospects have been dim. Large number of prominent economists belonging to different schools of thought has seen the distinct level of possibility of more global economic meltdown situations, which have been predicted to continue greater volume of struggles. These struggles are expected to be related with significant level of loss of jobs, small number of related tools to be used for improving the global economic aspects. These global trends have also been expected to affect the legal relations as well as legal aspects associated with the global mortgage laws as well as legal aspects related to the global financial meltdown or financial collapse. However, despite all these legal aspects it has been known about the fraud as well as malfeasance practices all across the United States and all across the globe (Meister et al., 2011, p. 3). This paper is aimed at providing a detailed analysis of the legal aspects of the initiators of the Wall Street Collapse of the year 2008 and scrutinizing whether they should face criminal charges. Legal problems during this time: In the economic crisis of the period of 1990-91, global business organizations have been blamed mainly because of the global meltdown of various economic as well as financial variables. During this time, significant level of legal aspects has been raised all across the globe to encounter the financial problem by providing legal punishments to these financial institutions (Anderson and Jackson, 2005, p. 19). Despite all that legal aspects which has been predominant in the country there has now been known regarding the fraud as well as malfeasance most importantly at the core area of the financial crash. These have also been significantly related to the policy responses till date from the point of view of the government which has offered valuable little reform in the legal as well as economic structure of the country. In various editions of “The Advocate”, researchers have looked more intimately at some of the related enforcement as well as reform attempts taken by the administration. These enforcements and reforms have been implemented for the purpose of providing the people of the country and also the readers with the point of view of what is being completed, what is not, as well as possibly ‘what ought to be’. In these cover stories – “Government Goes After Insider Trading, but Where are the Financial Crisis Prosecutions?” – BLB&G associate, Mr. Kristin Meister, has discussed the most significant current indictments as well as convictions of several financial executives who have been caught in the wideranging insider trading mesh. However, raises a significant aspect: “Does this focal point come at the expenditure of aggressive prosecution of the persons behind the deceit at the heart of the financial fall down?” (Meister et al., 2011, p. 3). Researchers, in this respect have opined that, firm associate, Mr. Joseph Goodman, has taken an intense look at the obstructions that have significantly prevented the entire implementation of the “Dodd-Frank financial reform act”. This act has been regarded as the promise of greater level of financial reform aimed at by the supporters of the Dodd-Frank has however to be realized. In regard to the corporate governance memorandum, these researchers have been delighted to reprint a current column by “The New York Times” stating that “Deal Professor,” Steven Davidoff, professor at Michael E. Moritz College at Law at The Ohio State University — “Despite Worries, Serving at the Top Carries Little Risk”. In the part, Professor Davidoff has highlighted the fact that beneficiary effects as well as the comparative drawbacks (although these drawbacks have been detected as very few), for the purpose of serving as the director for the public company. Along with this aspect, Mark Lebovitch, the partner of BLB&G as well as Jeremy Friedman, the associate at the BLB&G, have discussed that the Delaware Supreme Court has indicated that courts can be treaded as the corporate director with the increasing level of deference (Meister et al., 2011, p. 3). During the time period of 2008 and 2009 when business organizations across the United States as well as across the world have been facing significant financial crisis, different government institutions started to develop the legal aspects of these companies. During this time the collapse of the Wall Street and also the collapse of the largest financial and insurance companies in the country have forced the legal authority of the United States of America to monitor the legal aspects of these business organizations. These legal aspects also included the business deals, business assignments as well as different collaborations or mergers or acquisitions of these large business organizations across the country. During the process of these legal investigations of the most powerful business organizations in the country, both financially as well as politically, have been investigated. In the stir of the financial and economic crisis of 2008, the call of the government for significant level of accountability has fallen mainly on the dead ears of business organizations in the country and across the globe. While investigating the reports, different congressional inquiries as well as different other in-depth government examinations regarding the financial crisis have described several facts and figures. These facts include the aspect that fraud at each and every level of business associated mainly with the mortgage and financial industries of the country which have played an important role in generating the economic or financial collapse during this time. The business organizations have created significant level of mortgage loans across the country which has increased the level of dependence of various financial variables more on the market conditions during this time. However, till date none of these significant players have been legally charged or criminalized in the country. Along with this, the SEC has also brought small number of enforcement actions related mainly to the most important causes of the financial crisis in the country (Meister et al., 2011, p. 4). Instead of creating significant level of legal enforcements or legal actions, the government has emphasized mainly (or put its main focus or attention) on the ground that these business organizations have aggressively pursuing the widespread insider trading in the country. These have also been related to the process of achieving significant level of admirable string of specific convictions in the country. These prosecutions have exposed the volume of financial fraud across the country evocative of the Hollywood film. This film stated that “the culprits were known by colorful nicknames by their sources in the corporate world, used and destroyed disposable cellphones to avoid being caught, and at least one wrongdoer fled the country and is a fugitive from justice”. Along with this the movie has also revealed that “in a first for government prosecutions of securities fraud, many were eventually captured on wiretap boasting about their misdeeds” (Meister et al., 2011, p. 4). In spite of the despicable nature of various actions, at the end, various scheme of the business organizations mainly at the heart of those numerous fraud cases. These fraud cases have revealed the fact that in personal profits of an approximately accounted to more than ten million dollars (Meister et al., 2011, p. 4). On the contrary, the negligence in the risk management attitude of the Wall Street administrators has created significant level of negative impacts upon the association of the government investigation process and the economic or financial transactions in the country. These business officials and business management executives started to develop their short term profits which have significantly reduced the form of negotiation between these business leaders or financial experts and the investigating officials of the government (Grey, 2008). Hence, massive level of mortgage and cases of financial fraud has been realized in the country. The notion of insider trading has accelerated this growth process of lack of negotiations between the business organizations and the government. This finally resulted in the collapse of the world strongest financial sector, the Wall Street. Hence, need for further investigation in the country has been realized (Meister et al., 2011, p. 5). Economic meltdown and financial intermediaries and legal aspects: The notion of “Wall Street investment bank” has faced significant level of negative effects in respect to the growth process of various financial intermediaries. These business organizations operating in the financial sector of the country have also been significant in terms of the process of development of the legal aspects in relation to the financial meltdown during this time. Large financial institutions in the country (and also in the world), Morgan Stanley and Lehman Brothers have created the first significant move toward the reduction of its volume of financial transactions all across the country. During this time these business organizations have been so much (negatively) affected by the crisis that they started to lay off workers at rapid speed. Business practices of these financial institutes have been suggested by large number of other business organizations across the globe or by the legal government departments of other countries including the US. The most important reasons behind these business organizations in the financial business domain of the country to get legally punished has been that these business organizations have used the financial market conditions for the purpose of making higher level of profits. These financial companies have used significant level of financial leveraging without informing the government of the country or of the respective financial departments of the country. Hence, banks and lending institutions in the country have started to face severe shortage of financial assets in the country when significant number of borrowers of different financial assets has failed to repay their obligations to the business organizations or banks (Berman, 2011). Beset by thrusting share prices as well as alarmed by the termination of contestants, the two remaining individual Wall Street banks have accepted legal licenses from the Federal Reserve that has allowed them to receive deposits from the people backed by several federal government guarantees. Whereas safeguarding customers' assets, the change has radically restricted the companies' activities by striking strict regulatory boundaries on the hazards their traders can obtain on the markets as well as on the monetary amounts that they can sponge. Morgan Stanley has further propped up its financial situation by selling a venture of almost upto 22 percent in itself to the Japan's “Mitsubishi Financial Group” for an estimated amount of $8 billion to $9 billion. Along with this, against a milieu of an ongoing worldwide financial crisis, the speedily agreed transform in the two most important US banks' status has happened even without the customary 30-day waiting time for such functions. It has emerged as the Congress began searching for legislations to ratify a $700 billion government assist for banks and other financial intermediaries through the process of creation of a public-sponsored body to siphon off toxic, underperforming different mortgage-backed assets. These illegal transactions have not only reduced the efficiency of the market, but also hampered the government intervention in terms of making the market to operate under the control of the government (Berman, 2011). Neither “Goldman Sachs” nor “Morgan Stanley” has instant plans to open different networks of bulk-produced branches. Morgan Stanley previously has about 300 local offices and is predicted to offer a much broader range of financial services to the customers. Goldman has intended to bid for monetary deposits on an extensive basis - for instance, by intervening to become guardian when different local banks fight in the country. Between these financial organizations, the banks clutch about $56 billion of customers' monetary as well as non-monetary deposits in their “wealth management businesses”. This large monetary amount was contained by these banks for rich private customers. They, from today, have guaranteed by the taxpayers' money in the country. The collapse of the Bear Stearns in the March was the start of the finish for the “Wall Street's "big five" standalone investment banks”. Along with this, Lehman Brothers went ruined during this time, even though its US function re-opened few days after its announcement of getting bankrupt under the ownership of Barclays. Also the Merrill Lynch has set to be ingested through an amount of $50 billion buyout by the “Bank of America”. Also alarmed by the pace of the financial industry's unraveling, the administrative power of Bush has started to push for speedy legislation in respect to an amount of $700 billion bail-out preparation. Large number of democrats in the Congress has been fighting to insert evaluations where it would provide the government a venture in banks and other financial intermediaries benefiting from assist and would limit executive pay. However, critics of the financial industry have said that the money should be utilized to assist the homeowners in risk of losing their assets (or houses). During the period of early trading, the Wall Street stocks have been piercingly down alongwith the “Dow Jones Industrial Average” losing to the extent that 200 points (Berman, 2011). The failure of the most important financial sector of the world has raised significant level of question in terms of making greater level of government intervention in the financial sector of the country. The failure of the American capitalism has also raised the similar type of question in the country (Grey, 2008). Also the need for providing significant level of legal restrictions on the operations of financial intermediaries in the country has been felt in the country during this time (Clark, 2008). Hence, financial intermediaries and banks in the country are expected to be legally controlled or their financial transactions are required to be managed under the supervision of different government organizations. Several legal cases have been issued in the country after the occurrence of the financial crisis of 2008. However, in most of these cases the financial business organizations of the country have used their power and reached the level of satisfaction of the courts. Hence, most significant level of legal issues has been required in the country (Levin and Coburn, 2011, p. 41). Conclusion: Financial intermediaries in the United States have been provided significant level of freedom in terms of making financial transactions and also in terms of making business deals with companies across the globe. These financial corporations have been trying to make greatest level of profit by leveraging significant amount of money into the business domain all across the world. In this process these business organizations have lost significant level of monetary resources which have been lost from the market. This lost of monetary as well as non-monetary resources have created significant level of instability in the market of financial services. This market instability has largely been created by the malfunctioning of several financial organizations in the country. These wrong doings have also negatively affected the world economies. Hence, in view of all these aspects, it can easily be opined that these business organizations should be legally charged by the legal system of United States and of other countries as well. These legal charges are expected to reduce the level of dependence of the market on these selected financial organizations and will also reduce the future aspects of illegal business transactions by any company in the country. References Anderson, W. L. and Jackson, C. E. (2005), IT’S THE ECONOMY, STUPID: RUDY GIULIANI, THE WALL STREET PROSECUTIONS, AND THE RECESSION OF 1990–91, JOURNAL OF LIBERTARIAN STUDIES, Vol. 19, No. 4, pp. 19-36 Berman, J. (2011), Financial Executives Likely Won't Face Criminal Charges For Role In Financial Crisis: Former Investigator, The Huffington Post, retrieved on June 5, 2012 from: http://www.huffingtonpost.com/2011/12/06/criminal-prosecution-financial-crimes_n_1131639.html Clark, A. (2008), Business Morgan Stanley Wall Street crisis: Investment banks succumb to collapse in confidence, The Guardian, retrieved on June 5, 2012 from: http://www.guardian.co.uk/business/2008/sep/22/morganstanley.goldmansachs Grey, B. (2008), The Wall Street crisis and the failure of American capitalism, World Socialist Web Site, retrieved on June 5, 2012 from: http://www.wsws.org/articles/2008/sep2008/lehm-s16.shtml Levin, C. and Coburn, T. (2011), WALL STREET AND THE FINANCIAL CRISIS: Anatomy of a Financial Collapse, United States Senate, retrieved on June 5, 2012 from: http://www.ft.com/intl/cms/fc7d55c8-661a-11e0-9d40-00144feab49a.pdf Meister, K. (2011), Government Goes After Insider Trading, Bernstein Litowitz Berger & Grossmann LLP, retrieved on June 5, 2012 from: http://www.blbglaw.com/news/publications/advocate/2011/2F2011/_res/id=sa_File1/Advocate_Fall2011.pdf Read More