Financial Markets after Enron and WorldCom Collapse Assignment - 3

Financial Markets after Enron and WorldCom Collapse - Assignment Example This necessitated legal, social and financial reforms. One such legislation, The Sarbanes-Oxley Act of 2002 has meant that public companies spend additional millions for compliance, (Roy and Walter, 56). The NYSE also proposed a new governance proposal, which focused on eliminating conflicts of interest. The financial markets with time recovered with fears of the costs of regulation and financial intermediation being passed on to consumers. Government efforts to clean up the mess began with the state of the Union address on 29th January 2002 by then-President George Bush on the impact of corporate failures on markets and society. Enforcement agencies were formed by the SEC, Justice Department and Congress in an effort to punish offenders. Several were indicted and jailed. Billions of out of court settlements were reached compensating investors albeit minimally. The financial crisis of 2008 emanated from a mix of bad political, financial, corporate and economic decisions. Though it may take time for effects of decisions to manifest, the private sector greed for short-term profit is responsible for escalating the financial crisis. The ensuing events were set in motion by three related factors. First off, there were large inflows of foreign funds into the United States following the Asian financial crisis of the late 90s and the debt crisis in Russia. Availability of credit led to a boom in the construction industry, most of which was debt financed. Further, a noble liberal political idea that encouraged and pressured banks to help poor people transform into homeowners began during the Clinton administration. This led to the creation of numerous sub-prime loans to borrowers with poor creditability, with no down payments, and no verification of assets and liabilities setting them up  for defaults, (Michael, 253). This was fuelled in part by the greed of lenders, bankers and related financial institutions.