Financial Giants That Fell
It seems that during the past few years the news has been littered with stories of giant
, influential companies suddenly falling to their knees. They either do so out of mismanagement or for fraudulent reasons. Either way, these companies that fall generally take with them their investors, employees and often times, even part of the economy. Here is a short recap of the more notable stories that had a large impact on the financial status of many people in recent years.
Goldman Sachs: The New York based investment firm reported a loss of $2.29 billion US in December 2008, which they blamed on the sub prime mortgage fallout. In October 2009, Goldman Sachs accepted a $10-billion bailout from the U.S. government under the Troubled Asset Relief Program. However in August, the company was heavily criticized for handing out $4.8 billion in bonuses in 2008, with 953 people receiving top-ups of at least $1 million each.
Merrill Lynch & Co. saw themselves collapse along with the investment banking firm Lehman Brothers. In September 2008, both institutions were heavily affected by mortgage defaults, falling stocks and a sharp devaluation of assets. In a $50-billion all-stock transaction the Bank of America Corp. acquired Merrill. In January 2009, former Merrill chief John Thain resigned from his new post at Bank of America following news that the defunct bank had paid out $3.6 billion in bonuses before the acquisition was made final.
Wachovia, the North Carolina-based financial institution, reported a $708 million loss in the first quarter of 2008, which was then followed by a $8.9 billion second-quarter loss. In July of 2008, the company accounted it was cutting out 6,350 jobs. The company continued to plunge downwards as stocks fell more than 35 per cent. Wells Fargo took control of the bank with a government-backed purchase in a $15 billion buyout.
AIG stock began to fall sharply in September 2008 as the company tried to sell some of its assets. The failed attempt resulted in the US government providing a $85 billion bailout package in exchange for a 79.9 per cent equity stake in the company. As the value of the rescue package was reconstructed, it totalled a whopping $182 billion. Shortly afterwards, the company was heavily criticized for spending hundreds of thousands of dollars on executive retreats as well as $165 million in retention bonuses and compensation packages.
These companies had an enormous impact on the lives of many people, who ended up losing not only investments, but also their livelihoods. If only these companies could have managed to put people ahead of making a fast buck.
by: Molly Wider
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