Matt Taibbi, a financial journalist for Rolling Stone Magazine, wrote two articles scorning the fraudulent practices of Goldman Sachs, a global investment banking firm. His articles rely on the use of both extensive economic research and fanciful, if violent, metaphor to expose the crooked behind-the-scene’s deals of the banking powerhouse and translate the goings on into layman’s terms. His analysis of Goldman Sachs and the power it holds over markets, taxpayers, and the government not only provides a counterexample to Adam Smith’s theory of a free market, but also reinforces Max Weber’s ideas of economic power. Taibbi’s first article, The Great American Bubble Machine, describes Goldman Sachs’ method of taking advantage of America’s democracy …show more content…
Robert Rubin, the Treasury Secretary under the Clinton administration who served as member of Goldman Sachs for 26 years, began a period of deregulation of the American economy, specifically the financial markets. Rather than resulting in the “general good,” the already corrupt financial market, and Goldman Sachs in particular, exploited the lack of management and milked the newly unregulated markets. For instance, when guidelines in place since the Great Depression governing the whether or not a company could be made public were lifted, Goldman and other investment firms made public “companies [not] much more than potfueled ideas scrawled on napkins by uptoolate bongsmokers…[which were] hyped in the media and sold to the public for mega-millions.” (Taibbi 2010). The deregulation of the financial market resulted in great economic loss rather than gain due to the fact that the market did not satisfy the conditions required for Smith’s ideal economy to work; for a free market economy, there must be a competitive market, perfect information, and extremely low if any transaction costs (Lecture 09-Capitalism). In reality, the market had an imbalanced competitive market due to the sheer magnitude of firms such as Goldman Sachs, false information circulated by the firms in order to trick clients into making dicey investments, and high transaction costs due to banks forcibly driving up prices (Taibbi 2010). Therefore, rather than an increase in efficiency, the economy experienced a sharp decline as a result of the corrupt, greedy enterprises of Goldman Sachs and other Wall Street
Michael Moore’s film of Capitalism: A Love Story is an examination on how much of a financial impact that corporation has on the lives of Americans. Capitalism seems to emulate a love affair gone wrong, with lies, abuse and betrayal towards the American people. Moore moves the film from Middle America, to the halls of power in Washington, to the global financial epicenter in Manhattan in order to answer the question of what price do Americans pay for the affection of capitalism. There is irony in the title of this film because there is certainly nothing to love about capitalism when families have to pay the price with losing their jobs, their homes and their savings as a result of the risky investments that the rich and powerful have at their disposal. With more than 14,000 jobs being lost, residents being evicted from their homes and banks stealing away families’ savings, one must wonder if there is an upside to capitalism at all. True democracy is the biggest threat to corporate America because of the one person one vote system. In order for this to take place, the growing number of people would have to come together and expose capitalism for what it truly is, a corrupt and greedy system for the wealthy.
Jake Clawson Ethical Communication Assignment 2/13/2014. JPMorgan Chase, Bailouts, and Ethics “Too big to fail” is a theory that suggests some financial institutions are so large and so powerful that their failure would be disastrous to the local and global economy, and therefore must be assisted by the government when struggles arise. Supporters of this idea argue that there are some institutions that are so important that they should be the recipients of beneficial financial and economic policies from government. On the other hand, opponents express that one of the main problems that may arise is moral hazard, where a firm that receives gains from these advantageous policies will seek to profit by it, purposely taking positions that are high-risk, high-return, because they are able to leverage these risks based on their given policy. Critics see the theory as counter-productive, and that banks and financial institutions should be left to fail if their risk management is not effective.
In the midst of the current economic downturn, dubbed the “Great Recession”, it is natural to look for one, singular entity or person to blame. Managers of large banks, professional investors and federal regulators have all been named as potential creators of the recession, with varying degrees of guilt. No matter who is to blame, the fallout from the mistakes that were made that led to the current crisis is clear. According to the Bureau of Labor Statistics, the current unemployment rate is 9.7%, with 9.3 million Americans out of work (Bureau of Labor Statistics). Compared to a normal economic rate of two or three percent, it is clear that the decisions of one group of people have had a profound affect on the lives of millions of Americans. The real blame for this crisis rests on the heads of the managers that attempted to play the financial system through securitization, and forced the American government to “bail out” their companies with taxpayer money. These managers, specifically the managers of AIG and Citigroup, should be subject to extreme pay caps for the length of time that the American taxpayer holds majority holdings in their companies, as a punitive punishment for causing the Great Recession.
To achieve this, “banking firms provide [them] with a way to maintain [their] elite status in society by providing avenues to wealth and power that other professions do not” (179). They leave them unconsciously with an ultimatum, to either continue living their prestigious lifestyle and be the in the top with the elites, or settle for lower than what they’ve worked for, which is any other career path. Students who attend Princeton and Harvard who aspire to become teachers or writers are told they are settling for less than what they deserve and will be “more happy” with an investment banking career. There is a subtle form of manipulation being acted upon prospective students from investment bankers which is hidden by all of the positive, glamorous stigmas of Wall Street. To fully understand Wall Street as a whole, someone must know the small components that make it come together as a whole. This is shown through Karen Ho’s observations such as learning that students at Princeton and Harvard do not need to hold a finance degree to obtain a job on Wall Street. Whereas, Yale and Brown students must have a finance degree and are forced to show their abilities at a higher level than Princeton and Harvard students. Underneath all the dashing appearances and smart conversations on Wall Street, there is a hidden bias and a constant manipulation system in order for them to get what they want. The small components of Wall Street consist of their “small” priorities,
During the 1800’s, business leaders who built their affluence by stealing and bribing public officials to propose laws in their favor were known as “robber barons”. J.P. Morgan, a banker, financed the restructuring of railroads, insurance companies, and banks. In addition, Andrew Carnegie, the steel king, disliked monopolistic trusts. Nonetheless, ruthlessly destroying the businesses and lives of many people merely for personal profit; Carnegie attained a level of dominance and wealth never before seen in American history, but was only able to obtain this through acts that were dishonest and oftentimes, illicit.
Mackay, Tim. "The Ethics Of The Wolf Of Wall Street." Charter 85.2 (2014): 67.Web. 23 Mar. 2014.
Michael Lewis is the author of “The Big Short: Inside the Doomsday Machine” and Lewis’ main theme, or the main point, that he is trying to get across is how the 2008 financial crisis came to be, who saw it coming, and how people reacted. Lewis has experience with Wall Street and has worked for Salomon Brothers when he was younger. Today, Lewis is an American non-fiction author and financial journalist. There were three things I highly enjoyed “The Big Short”: the character development, themes, and personalization.
Michael Lewis’s The Big Short tells the tale of the 2008 financial crisis from the perspective of a few idiosyncratic characters that saw it coming. Unlike big financial institutions that underestimated the risk of increasingly extending subprime mortgage loans to uncreditworthy customers, Lewis’ characters gauged such risk accurately and anticipated the eventual burst of the housing bubble. Not only did they foresee the inevitable, but they also made a fortune by betting on its happening. Had they conformed to the public sentiment of extreme optimism and confidence in the stability of the real estate market, they would not have reaped immense monetary rewards. Between the lines of The Big Short, there lurks, albeit not too covertly, a message about the benefits of nonconformity. While conformity is often times socially encouraged and applauded, it is important to wonder at times whether going against the flow would be of greater benefit to us or our community. In Michael Lewis’s narrative, defiance of the status quo as a result of skepticism toward financial markets has yielded big payoff, whereas conformity to the widespread denial of the housing market’s unpredictability has incurred massive losses.
A competitive market makes a country stronger but without regulation it can threaten the country’s democracy. The President criticized the large corporations for “keeping prices artificially high and failing to increase workers’ purchasing power”(Liberty 863). Franklin D Roosevelt realized large corporations who gained monopolies were gaining immense influence on matter’s concerning government and the daily lives of American citizens. The first New Deal reforms were introduced, not to dismantle large industries but to control them in such a manner that they could never challenge the democratic government. Large corporations took advantage of the liberty given to them prior to the crash by exploiting the profits in payoffs or bribes. The businesses gained influence in government by funding election campaigns of tainted politicians who would in return be blinded of the corruption spread by the untouchable corporations to expand their profit margins.
If financial markets are instable, it will lead to sharp contraction of economic activity. For example, in this most recent financial crisis, a deterioration in financial institutions’ balance sheets, along with asset price decline and interest rate hikes increased market uncertainty thus, worsening what is called ‘adverse selection and moral hazard’. This is a serious dilemma created before business transactions occur which information is misleading and promotes doing business with the ‘most undesirable’ clients by a financial institution. In turn, these ‘most undesirable’ clients later engage in undesirable behavior. All of this leads to a decline in economic activity, more adverse selection and moral hazards, a banking crisis and further declining in economic activity. Ultimately, the banking crisis came and unanticipated price level increases and even further declines in economic activity.
During the 1920s, approximately 20 million Americans took advantage of post-war prosperity by purchasing shares of stock in various securities exchanges. When the stock market crashed in 1929, the fortunes of many investors were lost. In addition, banks lost great sums of money in the Crash because they had invested heavily in the markets. When people feared their banks might not be able to pay back the money that depositors had in their accounts, a “run” on the banking system caused many bank failures. After the crash, public confidence in the market and the economy fell sharply. In response, Congress held hearings to identify the problems and look for solutions; the answer was found in the new SEC. The Commission was established in 1934 to enforce new securities laws that were passed with the Securities Act of 1933 and the Securities Exchange Act of 1934. The two new laws stated that “Companies publicly offering securities must tell the public the truth about their businesses, the securities they are selling and the risks involved in the investing.” Secondly, “People who sell and trade securities must treat investors fairly and honestly, putting investors’ interests first.”2
Eight years ago, the world economy crashed. Jobs were lost, families misplaced, hundreds of thousands of people left shocked and confused as they watched the security of their world fall to pieces around them. In, “The Big Short,” a film directed by Adam McKay and based on the book written by Michael Lewis, viewers get an inside perspective on how the financial crisis of 2008 really happened. Viewers learn the truth about the unethical actions and irrational justifications made by those who unwittingly set the world up for failure. Two main ethically tied decisions are brought into question when watching the film: how could anyone conscionably make the decision to mislead investors by misrepresenting mortgage backed securities (MBS), and why
Zero in on a 45 year-old mother of 13. A man comes to her with a proposal. Invest in his company, and he can guarantee 100%, 200%, possibly even 300% returns on what she gives in mere months. For her this means taking out a second mortgage on her house; the same house she hopes to pay off entirely with the promised large return on her investment. Two years later, the windows of the house are boarded up and the woman recounts to reporters the chilling details behind the reason her family has no place to spend Thanksgiving this year. Her money is gone, along with her hopes of ever retiring from the two jobs she works. Stories like this are heard all too often from victims of white-collar crime. “Lying, cheating, and stealing. That’s white-collar crime in a nutshell. The term- reportedly coined in 1939- is now synonymous with the full range of frauds committed by business and government professionals” (FBI, n.d.). White-collar criminals are not holding a gun to anyone’s back demanding wallets and valuables. Instead, they gain the trust of those they prey on. Worse, they use their status in society to build comfort in their victims’ minds. A few of the best-known schemes in U.S. history are Enron, WorldCom, and the massive Bernie Madoff Ponzi scheme. These three cases alone amount to losses upwards of 70 billion dollars. The victims in each case are the same, American citizens. White-collar crime in America is insufficiently controlled due to weak laws, a broad pool of victims, and the enormous power scale of those involved.
The stock market is an essential part of a free-market economy, such as America’s. This is because it provides companies the capital they need in exchange for giving away small parts of ownership in their company to investors. The stock market works by letting different companies sell stocks to gain capital, meaning they sell shares of their company through an exchange system in order to make more money. Stocks represent a small amount of ownership in a company. The more stocks a person owns, the more ownership they have of that company. Stocks also represent shares in a company, which are equal parts in which the company’s capital is divided, entitling a shareholder to a portion of the company’s profits. Lastly, all of the buying and selling of stocks happens at an exchange. An exchange is a system or market in which stocks can be bought and sold within or between countries. All of these aspects together create the stock market.
Have you ever invested in the stock market? If so, do you know where your money is really going? The stock market is a risky business and it can make or break people’s lives. The stock market is used to daily to keep America on its trembling feet; it’s also being used at this very moment to cheat people out of money for personal gain. This happens every day in the stock market and its evolving rapidly, super computers that can trade faster than a blink of an eye, social media trends that can predict share values, and intricate stock market schemes that are getting harder and harder to find and take down. While the stock market keeps the world turning and the economy steady, the stock market is also being used in manipulative ways that are not always legal.