Directions: Readthe articles below (each is less than one page in length. Reading them in order will make them easiest to understand.)
What Happened to Enron?
http://www.pbs.org/newshour/extra/features/jan-june02/enron_past.html
Lessons of Enron
http://www.csmonitor.com/2002/0116/p1s1-usec.html
AIG is the New Enron
http://features.csmonitor.com/economyrebuild/2009/03/19/aig-is-the-new-enron/
AND
A Whiter Shade of Enron (AIG)
http://www.nytimes.com/2005/04/03/business/yourmoney/03gret.html
A) Use these articles and any outside resources you chose to summarize the American International Group (AIG ) and ENRON scandals.
B) What happened in both cases that outraged so many Americans?
C) How did these events change the stock market and the American public’s view of corporations?
D) In your opinion, how should corporations be held accountable for “white collar crimes”? What can be done to prevent future scandals like these?
E) What questions do you have about these scandals and how they relate to the US economy?
Due Friday March 25 before class. Minimum 250 words.
In both the Enron and AIG scandals many similarities are found. Such as the fact that the companies would give stocks to usually employees for the time being, to make Enron look like it’s doing good. This illusion would make more people want to buy the stock, but the companies problems never got better. They also paid off their auditors so that they could stay in business. In the long run no matter how hard the company tried to look good, their lies caught up with them and the business failed. What happened in both cases that outraged so many Americans is that when the company failed, the stock holders never got their money back. The stock was worth tons of money one day and the next day it was worth nothing because of the illusion the company created. These events made the stock market lose a lot of money because now people saw investing as too risky because so many people had lost their retirement funds in stocks and more. People started to lose trust in the companies and the stock market. I think if the corporations are like AIG and Enron, lying to people and creating an illusion, they should have to pay every person their money back because what they did was extremely wrong and against some laws (ie. Paying off their auditors). To prevent future scandals like this laws should be created involving harsher punishment for companies who are not telling the truth to the public and are doing illegal activities. A question I have is why It took so long for these companies activities to start being questioned and how they got away with it without a slap on the hand.
ReplyDeletephillipe
ReplyDeletea'aig and enron were two corps that were apart of the biggest wall street scandals of our modern day world. they give people he mirage that they were two companies on the upwards giving there employees stocks o make it seem that every thing there investing in is real and healthy no fear nothing to worry about but success but it always was a sham and a lie to convince more people to invest in them.the companies were both doing very bad and there business failed.b, people were angered cause no one was paid back there losses some people lost life savings had no more money to survive anymore and filed for bankruptcy to protect them selves.at one time these investors taught that they doing the right thing buying enron stock man were they mistaking and paid for it 10 full.c, you could argue that these companies led the way for our current day recession people lost trust in the stock market saving there money instead keeping it in the bank which hurts our economy heavily.c we see these companies as cheap greedy and not to be trusted see them as they really are and how they can hurt us as a whole so be careful when investing your money.d,we should have the government look at these corps with a fine tooth comb and see whats really going on inside not just blind guesses that get us hurt in the end of it all.also we should put the bosses of these corporations go to jail for 20 years than work life time jobs when released from jails to at least try to pay back investors even though they may not be able to reach the mark.e, how did they really impact our nation economy.
phillipe ron renoird
Angela Salmos
ReplyDeleteD-block
-What happened to Enron?
Enron was a very successful energy company selling natural gas to big businesses, which resulted for energy markets to change their price by competition in 1996. As Enron grew, it expanded into other industries such as internet order to keep growing at this rate. In order to keep growing at this rate, Enron began to borrow money to invest in new projects. However, because this debt would make their earnings look like it is not piling up, Enron began to create partnerships that would allow it to keep debt off of its books. Enron began to borrow money to invest in new projects.This was a risk in terms of not knowing if the company would still be strong or if something new will come up that consumers would prefer thats better for the environment, yet this choice became successful. One partnership created by Enron, Chewco Investments allowed Enron to keep $600 million in debt off of the books, which made this company "seem" successful than it actually was. Enron however, has had warning signals indicating the coming collapse as early as March 2011. Enron's method of making money was questioned, yet the real collapse began on October 16th, when it lost $638 million due to the failure of its Internet Investment. From here, Enron went downhill and it declared for Chapter 11 bankruptcy.
-AIG is the new Enron
The AIG is said to replace Enron times ten. " AIG will be rememberd as one of the worst corporate disasters in American History. People are wondering where is the money really going to. People feel like they are being fooled. They want to find out who are the heroes and who are the villains. Eron's bankruptcy cost shareholders more than 60$ billion and collapsed the retirement savings of 20,000 employees. The AIG has already cost taxpayers thrree times Enron's losses, and people are outraged. They say that theere are alot to blame including the elected officials but mainly, "If the investment sounds to good to be true, it is."
-Both the Enron and AIG seems to fall in the same category in terms of business which is "disaster". Big businesses would invest in these stocks because they made themselves look like they were doing such a great job, but in reality these companies are being sneaky with taxes off the books and secrecy. Illusions were made to make them seem so successful, but later on people questioned their ways in terms of money and how they make, invest, and spend money. They were both given horrible names by out outraged Americans like the AIG will be remembered as one of the most worst corporate disasters in American History. This event changed many other companies as they saw investing was too risky and big businesses feared from being fooled. No one likes to lose money, so businesses took a sudden slow role. The law was disobeyed, but it seems that punishment was not scary enough for people to be sneaky.
In my opinion, corporations should be punished more harshly by the law because this causes innocent people to lose their money and employees to lose their jobs. This reflects our country and we will look like a joke to other businesses if ours is full of liars and frauds. Corporations should not be able to make partnerships, and if they do the loans should be under strict under the law because this should not be held a secret.
A question I have about these scandals are how do they fool big business, should big businesses be aware where there money would go? Why would they agree keeping loans a secret?
ANGELA SALMOS
D-BLOCK
Both of Enron and AIG scandals have a certain resemblance to one another. The Enron scandal was that the company started to expand rapidly into other industries such as internet services. In order to keep this fast-pace going, Enron started to borrow money to invest in new enterprises. The company began to obtain a lot of debt. This debt would make their sales look unprofessional. So they would create allies with other companies such as "Chewco Investments" to keep the debt confidential. So the company would give stocks to the employees for that particular moment, to make Enron look like they were doing well. This delusion would make citizens want to buy the stock, but the companies problems only kept getting worse. And they were involved in more debt. The same problems had occured with AIG, they were sharing stocks and borrowing money, the end result for Enron and AIG was bankruptcy. They kept on lying and lying, claiming to pay off the debt but were not financially fit to. No matter how desperate the companies tried to look suitable, their disbeliefs had caught up with them and both corporations failed. What happened in both cases that outraged so many Americans was when the corporations had collapsed, the stock holders never received their funds back. At one point the stocks were worth a lot of money, and the stocks were doing very well. All of a sudden they just crumpled due to their major debt. These events changed the stock market and people's views of corporations because the stock market lost a lot of money. This happened because now people have seen investing being too risky. So many people have lost their retirement funds in stocks. People had started to lose trust in the companies and stock market. In my opinion, I think that if corporations end up like Enron and AIG, lying to people, creating a delusion, they should be forced to pay every single person their funds back because what those companies did was really unprofessional and against the law. They should not be greedy and steal people's money. To restrain these future scandals from happening again, certain laws should be produced having rougher punishments for corporations who do not be honest to the public and doing illegal actions. A question I have is why don't these companies who are being greedy and stealing get investigated sooner? A second question I have is why do people who have wealthy paying jobs always become greedy and steal from the publics funds?
ReplyDeleteAdrian Nieves C-Block
Amanda Long
ReplyDeleteEnron was a company that sold natural gases to gas companies and businesses. When the energy market was changed Enron made some changes to its company. They expanded into different industries such as Internet services. Because the growth rate was so fast Enron needed to borrow money to invest in newer projects. Due to the debt that one builds up when they take out a loan Enron figured that the company would look that good so they created partnership companies that would allow them to hide some debt. One of Enron’s partnership companies allowed them to keep 600 million dollars in debt hidden from the government and people who owned shares in Enron stock. By having this debt hidden Enron appeared to be more successful than it actually was. In 2001 everything started to go downhill. In August the vice president of Enron sent an anonymous letter to the CEO of Enron. In the letter she stated that the companies accounting methods could and probably would lead to a scandal and in October of the same year Enron loss $638 million due to a failed investment. A couple of days later the SEC announced that they were under investigation. In November, Enron admitted that they had lied about the earnings for the last four years and owed $6 billion in debt by the next year, when they could not afford to repay the declared Chapter 11 bankruptcy. This is a little bit different than the AIG scandal because AIG was a real company that offered a genuine profit and apparently Enron was all smoke and mirrors. Much like Enron AIG did some hiding of its own. A lot of secretiveness took place and the management team tried as many accounting tricks as possible. Many Americans were taken advantage of and lost a lot of money because they bought into this get rich quick scheme that sounded great but actually wasn’t. After these scandals Americans were probably reluctant to purchase any type of stock. They didn’t want to lose any more money than they had already lost. People probably didn’t want to anything to do with the stock market. They probably sold all they stocks and kept their own damn money. Corporations that commit this crime should not only go to prison and not the federal one. To prevent future scandals like these the government could run biannual checkups on all corporations.
C Block
Enron began to borrow money for new projects. In doing so, they entered a debt, thus creating partnerships. Enron did not reveal their debt at hand, so it appeared that their company was moving in a successful direction. Many people thought Enron was still moving forward so they invested their life savings with them. Enron, then sold the stock when the value peaked, making billions. After selling the stock, the stock crashed, causing much of the public to lose their life savings.
ReplyDeleteA.I.G. did not include the Secretive off-balance-sheet entities that should have been included on the company's financial statements. This added to the turmoil plummeting their financial position, forcing them to take a big hit.
Enron lied to the American public about the debt that was accumulating in their hands. In addition, they were giving out bonuses of money that was not even theirs to start with. A.I.G. was misleading as well, yet on a more massive scale. Enron's bankruptcy cost shareholders more than $60 billion and collapsed the retirement savings of 20,000 employees and retirees. AIG's situation has already cost taxpayers three times Enron's losses which furthered their defaults throughout the world.
The events with Enron and A.I.G. helped shape American’s mindset that investing in large insurance corporations could be more of a risk then they had anticipated. This was because these two companies lied about how American’s investments were being handled, and they were not precisely notified on the status of their money. In fact, most Americans lost more money then they actually put in, causing a risk in the belief of stock handlings.
The corporations should have a menial fine for the first offence and any other subsequence offences after this should be doubled. If the company continues to falter the assets should be froze by the government for at least six months until they get their act together.
Why didn’t Enron reveal their debt in its actuality, before their stock had crashed?
How can Americans be more informed about their future transactions with large insurance companies?
Justin Castro D-Block
Enron was established in 1995 as a very successful energy company which sold natural gas to big businesses. However, these sales forced energy markets to change their price by competition. As Enron expanded, it broadened into other industries, such as the internet, in order to keep progressing at a fast rate. The money for borrowing had to come from somewhere, which was starting to put Enron in debt. To keep up appearances, Enron started creating partnerships which allowed it to keep $600 million of debt off the books. Furthermore, The American International Group followed down the wrong path in the footsteps of Enron. Enron's bankruptcy cost shareholders an unacceptable amount of money and put a damper on retirement savings of 20,000 employees. AIG's path already cost taxpayers over three times Enron's losses and is said to possibly could create a surge of “defaults that would ripple throughout the world”, said author Laurent Balsie. Together, theses two made a mockery out of Wall Street. Both of their stories ended the same way, bankruptcy. The two companies tried to be sly and make it seem like they were doing better then they really were. This outraged many Americans and big business owners because they never got their money back. People became more hesitant in investing in stocks because they did not want to be ripped off again. Committing this “white collar crime” should be handled in a serious way. There should be prison time on the table because they are basically just stealing other people’s money. I feel as though if the consequences are more serious, and are enforced, then people will be less willing to commit the crime. A question I have is how can Americans be sure that their money that is invested in stocks is not being put toward a big scandal like the Enron and AIG?
ReplyDeleteJessica Mallozzi
Block A
Providing legitimate information about the company's profits and debts is what makes stock market stable. Enron alone with AIG were the companies that shook the stability of the stock market. Enron was successfully developing company with fast growing stock prices. However, when company started to develop it needed more money. The best way to get money is to start selling stocks so people can invest their money. In order to increase price of stocks, company had to show how successful it is. Enron company started to hide their debt amounts from government so it would be lookin more successful. Also they started to give away stocks to their employees so it looks like more people are interested in that company and they should start to invest. This way company started to attract people to buy their stocks and price per share increased. However, eventually company had to reveal it's real problems what made it bankrupt. People who invested lost all their money. This scandal really impacted stock market because people started to be afraid of investing. My question is how is it possible for company to hide profits and debts from government?
ReplyDeleteThe Enron and A.I.G scandals are both similar for the fact that the companies were in a lot of debt and tried borrowing money to create new projects along with slowly pay off the debt. Both companies believed that creating allies with other companies would hide the debt from society and keep the business going. It helped advertise people to buy stocks in the companies to keep them above water. Even though it was successful for a little while, it didn’t cover the debt up for too long. Paying off the debt wasn’t an option because of lack of money. Also many people lost money because the investments in the companies were pretty much worthless. A difference between the companies were that Enron were completely full of scandals while A.I.G had legitimate purposes, of course up until secret business was done. Both filed for bankruptcy and gave Wall St. one cruel reputation. The people who owned stocks for these companies never received their money nor got their money back; not one dime. It leads people to believe that investing overall leads to rip offs and loss of tons of money. How could the government not know about these scandals, especially since it was going on for awhile? There should be enforced consequences for situations like these so Wall St. could remain stable and safe for people to invest. Investing is already a risk and having companies like Enron and A.I.G causing havoc on Wall St. could create problems that are unnecessary. If situations like these keep occurring without consequences, it could affect the economy horribly.
ReplyDeleteALYSSA DITRE - C-block
Enron started as a traditional energy company that sold natural gas to gas companies and businesses. Later, Enron expanded into other industries such as Internet services. In order for Enron to keep growing, the company had to borrow money to invest in new projects. However, to avoid the company’s debt to look less impressive, Enron created partnerships that allowed it to keep debt off of its books. Because of this hidden debt, Enron attracted big investors and promised them that they would receive secret information about the company that was not being given to the government or public. This secrecy was illegal and did not guarantee investors access to truthful and accurate information about publicly traded companies. Just like Enron’s scandal, AIG’s scandal became very similar. The AIG scandal involved hubris and brought the financial system to a decrease. There were controversy among AIG bonuses and who authorized the bonuses and who hid them. AIG is held responsible for the collapse in retirement savings of 20,000 employees and retirees as well as bankruptcy which cost shareholders more than $60 billion. In both cases, both corporations collapsed, hit bankruptcy, and was involved in both fraud and greed. Wall street was fooled, as stock prices ran up, and while thousands of people lost their life savings. Both cases included the following factors: corporate greed, high powered connections, broke investors, and gullible accountants. These events changed the stock market and the American public’s view of corporations by making American’s loose trust for corporations. Because of these scandals, the stock market is becoming more strict in their rules and regulations, making it more frustrating for investors. In my opinion, these corporations should be held accountable for “white collar crimes” that include bailout recipients, bankers, ratings agencies, federal regulators, and even elected officials. Everyone should obey the roles because if not, then there will be large consequences. To prevent future scandals like these, there should be stricter banks’ balance sheets and no more secretive balance sheets. Questions I have about these scandals include: What is now being done to recover the collapsed retirement savings of 20,000 employees and retirees of AIG? Accounting standards are so strict now but what exactly became strict, and are these strict policies helping the United States economy?
ReplyDeleteMarisch Perera
E Block
This comment has been removed by the author.
ReplyDeleteAIG and Enron are two large corporations that have recently been involved in unethical business fraud. Both companies fabricated profit, were dishonest about the amount of money they borrowed, and paid off the auditors that were supposed to report these illegal practices. Eventually, both Enron and AIG would be discovered and go bankrupt, causing billions and billions in losses for their shareholders.
ReplyDeleteIt is of no real shock that Americans were outraged by this. These companies had lied to everyone for the sake of their own greed. At the expense of the average American, these companies lied about their profits, the money they were borrowing, and bribed auditors in order to keep the charade up for as long as possible. The effects were devastating. Shareholders in Enron lost 60 Billion dollars and over 20 thousand seniors and workers lost their retirement fund.
The effects of such a large scandal were, as you may have guessed, large. Other then the billions of dollars lost and the crash of no less then 2 huge businesses, the effect was rippled throughout the world. Not to mention the faith the public had in the stock market was damaged.
In my personal opinion, the white collar criminals described in these articles are no better then the person sticking up an elderly woman for her purse. In a way, these criminals are worse because of the amount they are taking from people and the number of people they are harming. These people,starting with the auditors that let this go on, should be removed from their positions, stripped of all their illegally obtained funds, which would be placed back in the company, and finally, dealt a severe legal blow, including a large fine and a long stay in prison.
Travis Knight
D Block
Enron began to function more as a middleman than a traditional energy supplier. Enron’s rapid growth created excitement among investors and drove the stock price up. The company expanded rapidly, which led the company’s debt. Expanding into other industries such as internet services forced the company into borrowing money to invest in new projects. Since their sales were fast, they created partnerships that would keep their debt confidential. Enron hid their debt from their shareholders and the government. Similar to the Enron scandal, was the AIG scandal. The American International Group cost taxpayers over three times Enron’s losses. The AIG scandal brought the financial system down, as well as their reputation. AIG is held responsible for sharing stocks and borrowing money. Because of this, the only option for the two companies was bankruptcy. Their lies caught up with them and the business failed. What had happened in both scandals is that stock holders never received their funds back. They created this illusion in which stocks were worth a lot of money one day, and then the next day, the stock had no value. These scandals changed the stock market and peoples’ views because a lot of money was lost. People weren’t as confident in investing in stocks because they did not want to spend money on nothing. I feel that if Enron or AIG did not lie, did not fool stock holders, they would have been in less trouble and in less debt. But because of what they did, a lot of money was loss which affected many peoples’ lives. To prevent future scandals like this, companies should be threatened to prevent these situations. A question I have about these scandals is Why create an illusion if that will cause more problems? Another question is, What has the government been doing?
ReplyDeleteHaynes Yatco, C-Block
Eron and AIG were two major companies. they were in debt and lied about the amount of money they had borrowed.Eron was a big energy company. both companies tried to make allies to try and draw attention away from the debt that was piling up. there scandals began to be similar in many ways .people who invested in both the companies lost money because of the lack of money going into the companies. Eron was full of scandals and AIG had specific purposes to do what they did. when they filled for bankrupt they put wall streets reputation down. these events changed peoples view on the stock market and big buisnesses. many people lost money and never got there money back. i think that the companies AIG and Eron were both wrong for trying to take money and not being able to pay it back. also they did make all of the prices go up in the stock market, and left the people who invested with them also broke. to prevent other scandals in big buisnesses monitor there finacial earnings and give out fines for borrowing money if they cant pay it back.
ReplyDeleteAshley Miller
D- block
There were many similarities between A.I.G. and Enron. Both companies told their employees that the companies were doing well and to buy stock in them. The jump sales gave the appearance that the stock was doing well. Both companies also played off their auditors so they would not get in trouble with the law. Eventually what the companies were doing caught up to them and they failed. Sure enough the stocks were worth nothing and stock holders were outraged. These scandals were a big blow to the economy many saw investing as too much of a risk because so may lost their savings and retirement. Executives of Enron and A.I.G. should be held accountable by paying every penny back to their employees and investors. The auditors should also undergo harsh punishment for aiding both companies in their fraud. To prevent further crimes such as this people need to be aware of their investment choices and harsher punishment and stricter laws need to be invoked. What I want to know is why no one knew that the companies were failing before the employees invested. Before putting all their money in their company they should have closely looked at the progress of both A.I.G. and Enron. If the employees would have been more careful this catastrophe would have been a lot less severe.
ReplyDeleteJames Guardino
In the article "Whiter shade of Enron" the article states that AIG has similarities and some differences to Enron. AIG is a genuine company while Enron was "all smoke and mirrors". Enron defrauted thousands of investors of their life saving and retirement funds. They destroyed people's lives and created one of the largest cover up's in our time. This catastrophe caused many investors to loose trust in Wall Street and fear any future investments. Corporations should be fully accountable for their crimes, and they should also be punished and even their families should be held accountable. They should be stripped of all wealth,and this wealth should be liquidated and given to the investors who they defrauded. These types of scandals effect the US economy in a very negative way. The diffculties we have suffered the last fews years are evidence of the aftermath of corportate scandals. The question I have is will these scandals continue. Will the regulations recently implemented change anything. I hope for the sake of our future that these types of crimes end.
ReplyDeleteAccording to the article “A.I.G. Whiter Shade of Enron” the two large corporations Enron and AIG had several things in common such as: “ Asleep at the switch auditors, secretive off balance sheet entities that should have been included on the company’s financial statements but weren’t, a management team willing to try any accountant tricks to make the company’s results look better than they actually were.”
ReplyDeleteDue to these careless acts, the company’s shares dropped dramatically when the stock market dropped, and there was no money to back up the stock. Thousands of investors lost all their money, investments, and future due to the carelessness, and greed of top CEO and management. The scandalous acts of AIG and Enron definitely affected the way Americans viewed these companies. They were no longer corporations Americans can trust their money with, they were now companies known as corrupt, false, liars, cheats, conniving, and bottom line greed.
My questions is “How could the government allow such actions to go on for so long?” “ Is there any insurance that investors can purchase in the event of such a scandal”
In my opinion “white collar crime” should be dealt with the maximum punishment, many, many years in prison. Individuals who are knowingly involved in such crimes, affect and ruin the lives of thousands of people, and only to make themselves rich. Families lose their lifesavings, their homes, money for their children, and grandchildren, all because” while collar” management is careless, and downright liars in falsifying statements, and actually stealing the money. The government needs to get involved in these types of corporations, and have their own auditors come and audit these companies to prevent these types of scandals. Governments need to keep a close eye on these corporations to make sure that the American people are no longer conned. “White collar crime” deserves harsh punishment so that in the future such acts are not committed again.
Enron & AIG were two large corporations that were involved in lying and cheating people about their money. Enron & AIG lied about the money they were making as well as the money they borrowed, and paid off the auditors that were sent to investigate these cases. In the end both Enron & AIG went bankrupt and all the lies came to the surface.
ReplyDeleteThere were many bad after affects after this situation. The biggest one of course, being money loss. Billions and billions of dollars were gone, causing bankruptcy.
These scandals made people very cautious for future stock choices. Since the stock market was so corrupt at one point, people obviously have an open mind that it could happen again. I wonder if something like this can happen again. I also wonder if some large companies or some smaller companies are stealing from people without them even knowing, and without being caught. You never know what people are really doing if you're not cautious.
chelsea cruz
a block.
The Enron and AIG scandals both affected many people. The Enron scandal came about because they kept on borrowing money causing massive debt. Enron then started to create partnerships that would hide the huge debt. Because this debt didn’t show up on Enron’s reports, Enron seemed more successful than it really was. Then when Enron announced a loss of over 600 million dollars, the collapse and investigations began. The CEO also told his employees to buy more stocks, while he sold his. The AIG scandal was similar because AIG also withheld a lot of information and were in debt causing many shareholders to lose money. What outraged so many Americans was that many invested their money into these companies, not knowing how much debt there was and then not getting their money back. This ruined thousands of people’s plans for retirement as well. The scandals with both AIG and Enron made people too hesitant to buy stocks, because these scandals made the stock market seem like a very dangerous place to put any money into. It also made the American public view these corporations as corrupt, especially the ones that make more money. In my opinion, these corporations should be held accountable by having their executives sent to prison, since they lied to the public and in their reports. To prevent future scandals, corporations should all be investigated more thoroughly from time to time. Ideas like mark to market accounting should also become illegal. My main question about these scandals is how the executives only get slaps on the wrist for causing so many people to lose their money.
ReplyDeleteJustin Roa
C-Block
Enron began in 1985 as a traditional energy company selling natural gas to gas companies and businesses.In 1996 the energy industry had changed so that there would be no longer fixed gas prices. this change had made enron look like the middle man ,Enron's rapid growth created alot of excitement among the investors. As Enron grew, it expanded into other industries such as Internet services, and its financial contracts. So in order to keep growing enron needed more money to invest in new projects. so in order to get money enron started to invest in their own FUTURE earnings. this didnt work out because Enron started to become in debt so Enron would try and hide the debt in other smaller companies to make them still look good even though they were 600 million dollars in debt.
ReplyDeletehis scandal had effected millions of people. many people had lost their jobs their whole life savings and retirement funds.
These scandal's made people very aware and nervous about investing in other companies.
the company should pay everybody who lost their money atleast some of their money back. and my question is could this situation happen again?
david innamorato d---- block
Enron and the AIG were two really big scandals that outraged many people. They both created illusions to make it seem that they were doing better than what it actually was. Enron was was an energy company selling natural gas to big business and the AIG was a big insurance company. Many investors wanted to invest in these huge companies because it would make them look good and both companies wanted to keep this "perfect" image so when both companies failed, many people lost their money, none of the stock holders ever got their money back. Many employees lost their jobs and retirement pans completely fell apart. These events has cause the public to hold back on investing because they were scared that they were being fooled and would eventually loose all their money. The people that owned heir stocks from Enron or AIG never got their money back. Consequences for these white collar crimes should be severe. I hate people that steal and don't think of others and the hard work they do. If I worked for Enron and lost everything as well, I would of caused a riot. To prevent such problems there should be heavier consequences because fraud is not something that should be taken lightly. There should be inspections on companies and layouts of their money should be made every 6 months to show that all the math equals up.How could people let this slip away? How could the government not realize or inspect how these businesses are getting all this money. What is being done to recover from all this loss of money?
ReplyDeleteJose Valentin
D-Block
Enron and AIG were companies that collapsed as a result of bankruptcy due to unethical business tactics that were used in order to keep the illusion that the companies were doing well despite the debt they were in. As a result of the bankruptcy of these companies, millions of dollars were lost in investments made by people who held shares for Enron or AIG. In both cases, Americans were outraged as a result of the failure of these companies. Many people lost thousands of dollars because of the investments they made in stocks of either Enron on AIG due to the high returns the stocks appeared to promise. As a result of these cases, Americans began to view the stock markets very negatively and many became skeptical to invest in stocks because of the destruction caused by Enron and AIG. These events lead to a severe drop in the value of all stocks because of the debt that Enron and AIG hid from the government and public for so long. The government should be held accountable for these “white collar crimes” because although suspicion was raised as a result of these companies, the situations were not properly evaluated in order to be prevented. To eliminate the chance of another scandal arising, auditors should take more responsibility in evaluating these types of companies. How did the government stay unaware of AIG’s scandal after the destruction caused by Enron?
ReplyDeleteEnron is known as a highly successful energy company which was established in 1995. Enron was always making new projects which lead to many loans needed to complete these projects. These loans were never paid back which lead to Enron being in dept. However, Enron managed to hide all their dept from the public so that they can keep their successful reputation. It is no wonder why people trusted Enron with their life savings. With all the money Enron was putting in stocks from people’s savings, they were in the riches. Then the stock crashed which pretty much robbed all these people of all their money.
ReplyDeleteAIG wasn’t much better. AIG failed to mention the Secretive off-balance-sheet entities that should be mentioned in the financial statements. This obviously put their financial positions at risk. Enron didn’t do much better when they were hiding all their depts and giving out bonuses with the money they didn’t own themselves. However, AIG had left a much more negative impact then Enron did because it cost taxpayers nearly triple the amount of Enron’s losses. Clearly, these are issues which are making the economy so difficult to recover.
The Enron and AIG only shaped the stock market for the worst because people lost a lot more money then they actually put in as a result of the stock crash. In order to prevent future scandals, people should be a lot more careful in choosing where they put their money because with this economy, because you cannot trust anyone. Enron and AIG should have been caught right from the beginning. Enron should have been ordered to show proof of their success while AIG should have been stopped right from their failure to mention the Secretive off-balanced-sheet.
Questions:
Was Enron the start to the economic recession? Was AIG the straw which broke the camal’s back?
Would the economy be as bad as it is if these scandals didn’t occur?
Enron and AIG were both scandals. These scandals effected many people in different ways. Enron established in 1995. They started out as a gas company, but later on down the road, they became involved with the interent as well. As they years came on Enron kept borrowing money which ended up turning into debt. The company didn't want America to know that they were in debt so they created partnerships. This was causing so much trouble with Wall Street. This also started with the economy going downhill too. AIG was following with what Enron was doing. Many people also were investing their money into this company, and at the end, they had no idea if their money was going to be given back. These people who had saved their money for their retirement, also lost some of their money. Lots of people stopped putting their money into these companys, and didn't want to buy stocks from them. The stocks with these companys kept going down, because they were in so much debt. At the end, AIG and Enron had no choice but to go Bankrupt. Everyone was pretty shocked that they actually went bankrupt. But in the end of this, Enron and AIG didn't get away with what they were doing. Many people got arrested in the end after they got caught with what they did. My only question is how did they not catch what was going on much earlier and how would the economy be if nobody found out about this scandal?
ReplyDeleteAmanda Aasen
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