Category Archives: Banking & Finance

Deficient in Deficiencies: The Potential Effects of the Refusal to Uphold Full-Recourse, Residential Real Estate Loans

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I. Introduction

Foreclosures have taken on a new significance in the last few years as a result of the financial crisis. This has the led the finer points of the foreclosure proceedings to become extremely important for many lenders, and for many borrowers in default. One potentially important practice is the oft-rumored, but rarely documented routine of certain judges to simply refuse to grant any deficiency judgments in personal foreclosures. Cases have been brought before higher courts across the country, leading to judges being rebuked for ill-advised activism in refusing to properly entertain requests for deficiency judgments. [1] In light of the record number of foreclosures taking place in the last two years [2], a lack of deficiency judgments may prove to have a significant effect on banks and may lead to a change in the practices of many banks. The purpose of this article is to question what effects … Read the rest

The Struggle for an Equal Opportunity to Bank

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The United States is founded on the premise of equal
protection. Equal protection is the scheme of legislated equality which
encompasses notions of fairness, goodness, fraternity and social justice. It’s
about maintaining a social stratification system which encourages any person to
achieve their fullest potential by preventing the worst forms of social
distinctions to arise. For years, members of our society, our elected officials
and governing bodies have fought vigorously to implement programs and laws that
promote … Read the rest

Looking East: The Road to Recovery

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I.   Introduction

The current global recession has experts around the world searching for a solution in a place never looked to before.  For the first time, Asian economies are leading the way out of a global economic slump.  While the United States and Europe have pioneered past recoveries from world recessions, recovery seems to have already begun in Asia with China at the forefront.  Massive government stimulus and expansionary fiscal policies have spurred growth in Asia with other strong economic indicators seemingly providing a foundation to a full-fledged recovery.  Despite a drop in exports, Asian economies have offset the decline in this major source of revenue by slashing interest rates, keeping savings levels high, increasing infrastructure demand and harnessing the potential for expansion in domestic consumer demand.  Many Asian nations are net creditors [1], with significant current account surpluses supplied by capital inflows over … Read the rest

An Option You Shouldn’t Pass Up

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          The nationwide credit crisis has made the “American Dream” unattainable to most citizens. As lenders instituting rigorous requirements making qualifying for mortgages nearly impossible. The record breaking foreclosures and unemployment have added fuel to the fire, putting pressure on homeowners to reduce their asking prices. Many owners have been forced to sell at far below market value, accepting a large loss on properties that when purchased had high potential for profitability. However, the resurgence of lease-option agreements, especially in areas where foreclosure rates are high, has sparked hope for many sellers and buyers. [1]

          A lease-option agreement, also called a rent-to-buy option, combines a traditional lease between a landlord and tenant with the option or right to purchase the leased home. [2] The agreement stipulates that “the buyer take possession of the goods with the first payment and takes ownership with the final payment.”[3] With a lease-option, the … Read the rest

Nationalized Treasure

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I. Introduction

On February 27, 2009, the United States government announced that it was taking measures that could result in it taking as much as a 36% equity stake in Citigroup, Inc.[1] This would make the federal government the largest shareholder in Citibank.[2] By converting $25 billion in preferred shares into common stock, the federal government hoped that the move would stabilize Citibank in a tumultuous market.[3] As a result of this move, a number of people have voiced a growing concern over the federal government taking further steps to nationalize other major financial institutions.[4]

Through taking a 36% stake in Citigroup, the federal government did not fully nationalize Citibank.  As a result, Citibank is now caught between the private markets and governmental interests. While nationalization could seriously undermine confidence in the financial system, as Bank of America Chief Executive Officer Kenneth Lewis suggests,[5] this scenario poses some unique … Read the rest

The Lending Tree: How to Snag a Small Business Loan from a Bank

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I. Introduction

Unless a new business owner is a millionaire or has an angel investor, a small business loan is almost always a necessity to get the business off the ground. The amount of labor that goes into starting a small business is a feat in and of itself.  However, without the financial backing of a small business loan issued from a bank, all other efforts at starting the business may be fruitless. This article will discuss how to obtain a small business loan from a bank by discussing the preparation that goes into receiving a small business loan from a bank and discussing how to manage debt.

II. Loan Meeting

Before receiving a small business loan from a bank, the new business hopeful will have to present his or her case to a lending officer from the bank. [1] While the presentation to the lender may be a … Read the rest

The U.S. Financial Crisis: Is Legislative Action the Right Approach?

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[A few short years ago, there was a country experiencing significant prosperity.  The flow of credit within the economy was fluid, stock prices were at all time highs, and many people were becoming wealthy in due part to real estate speculation and appreciation.  As the economic outlook in the real estate market was bright, banks began granting increasingly risky loans.  Eventually the bubble burst.  Inflated real estate market values began to decline, lendees found themselves unable to pay back their risky loans, and the credit markets froze.  As a result, government intervention came in the form of subsidizing failing banks and businesses.]

 In the middle of this financial crisis facing our country, one would assume this passage is referring to the United State of America.  However, this is the very similar story of the Japanese housing bubble that burst and led to what is … Read the rest

Weekend at Bernie’s

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I. Introduction

The past few months have seen numerous financial frauds
uncovered. Two of these frauds are
particularly noteworthy. On December 11th,
2008, the largest of these financial frauds was unveiled when Bernard Madoff
admitted to a $50 billion fraud through his firm, Madoff Securities.[1] On February 17th, the Securities
and Exchange Commission (SEC) filed charges against Stanford International Bank
relating to an allegedly fraudulent $8 billion certificate of deposit (CD)
scheme.[2] Other alleged frauds have come to light,
often in highly publicized and dramatic fashion.[3] These frauds suggest something is amiss in the markets.

In the midst of the current economic crisis, these alleged
financial frauds have further destabilized a badly shaken market. While fraud is an unfortunate fact of the
market, the allegations against Madoff and Stanford paint a picture of frauds
that have reached massive proportions and that have been ongoing for
years. The intention of this … Read the rest

The Wall Street Bonus Culture: Well-Deserved Benefit or Unnecessary Waste?

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Recent headlines that Wall Street investment banking executives have received billions of dollars in bonuses, just months after the federal government has given these same firms billions of dollars in bailout money, has greatly increased skepticism about acceptable methods of awarding bonuses. [1]  President Obama condemned the awarding of these exhobirtant bonuses. "That is the height of irresponsibility. It is shameful. And part of what we're going to need is for the folks on Wall Street who are asking for help to show some restraint and show some discipline and show some sense of responsibility." [2] However, many individuals on the flip side of the coin believe these bonses are imperative to the success of the banking business. [3] This article will discuss the arguments for and against seemingly inflated bonus plans by delving into the most common types of compensation plans and their relation to the current economic crisis on Wall Street.

 

In order … Read the rest

And the Walls Came Tumbling Down: Deregulation & the Current Financial Crisis

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I. Introduction

While intellectuals, economists, bankers, and pundits try to explain the ins and outs of the economic downturn we are currently facing, many on "main street" are asking "what happened to make my 401k retirement savings account diminish so much in value since I looked at it in August?" The fact is that many hard working individuals have no idea what happened to cause the global economic downturn we are currently facing, and the explanations being put forth by most media outlets simply do not make sense to many people.

In trying to understand the situation, there are without question many factors that played a role. Trying to identify one overwhelming factor would be futile, however, this article will look specifically at the role deregulation played in the financial crisis.

II. Deregulation

Deregulation has received a lot of the blame for the current crisis. [1] Deregulation can be defined

… Read the rest