Question

Business newspapers and magazines, such as the Financial Times, The Wall Street Journal, Bloomberg Businesseek, and The Economist, include various statements made by economic analysts and business gurus. At the end of each chapter, you will be given the opportunity to explain a global news items. How can the following examples of financial news related to the concepts in each of the identified chapters be interpreted? Clearly identify which question you are answering.

2) Critics have charged that the economic and financial problems experienced by the United States in 2008–2010 were largely caused by a government belief that every American should be able to own a home. Is this belief culturally compatible with what exists in other countries?

3) Swiss banks, like UBS and Credit Suisse, have a culture of secrecy for their depositors, and this culture has been supported by Swiss government policy. What problems has this policy caused for the banks and their depositors, especially American ones?

1) While the U.S. government rails against Switzerland and other places providing U.S. corporations with tax advantages or benefits, the Mexican government has similar com- plaints about the U.S. government. It appears that the U.S. government permits U.S. banks to take deposits and pay interest to nonresident foreign nationals from Mexico without reporting the interest paid to either the Mexican government or the U.S. Internal Revenue Service. Mexico wants an income and tax information exchange program with the United States, in part to help fight drug lords who tend not to report taxable income. Do you agree with the Mexican government’s position on this matter?

4) In 1985 China had only 5,000 lawyers serving a population of more than 1 billion. Today China has more than 150,000 lawyers and that number is growing exponentially. What are some of the benefits and costs of this dramatic increase in the number of lawyers in the country of China?

2) A news story criticized corporate ethics codes, saying that they had no impact upon corporate behavior. Do you think ethics codes affect or do not affect the behavior of corporations and their employees?

3) In a news article about the Foreign Corrupt Practices Act (FCPA), the writer said that the FCPA hurt the ability of American firms to compete with non-U.S. firms. The writer said that the time had come for Congress to repeal the FCPA so that American firms would be better able to compete in the global marketplace. What do you think?

Answer 1

Ans.2) The year 2008 -2010 is related to the financial crisis which lead to the downfall of banks such as Lehman brothers, Morgan Stanley banks etc. The crisis is best known subprime mortgage crisis.The problem rooted in the household sector which involves lending the loan without proper Know your clients norms. This problem is a cause of managerial inefficiency and political ambition which is stated in the comment as every American should have a home , if we analyzes the thought it is culturally  justified not for Americans but also for the other national citizens of the world.There is a need to effectively implement the policies and laws to ensure this.Here the per Capita income of the citizens need to be increased and also the employment level should be increased and above all household savings should be converted  effectively into investments that will result on high return on investment. Along with the control on inflation and a more effective interest rate and tax rate should aim at higher disposable income which countries like Japan and Germany do.

Ans 3) Swiss banks has a policy of secrecy which means that they fully do not  considered important to know the source of funds of the depositors and keep the critical money information secret although it is a duty of the bank to fully keep the personal data of client secret but there should be a compliance and general industry rules which states or restrict money laundering which involves converting black money into white that is illegal money to be shown to have come from a legal source. This effect the criminal elimination process as it results in drugs, narcotics and terrorism and other crime.The country like America where there is sound banking norms and Anti money laundering policy face difficulty like loss in the market share in global banking market.and it also resulted in the tax evasion and creation of tax heavens which will attract capital into these regions.

Ans 1.) Tax exchange information initiative between Mexico and US will help to restrict  tax evasion that is finding ways to avoid tax through illegal means.Here the US banks were allowed by US government for hiding information about the interest that it pays for Mexican citizens account , as we know Mexico is famous for drugs and if the Mexican drug lords as it will disclose the source of funds as well as tax liability and this will help in the reduction of drugs to be landed to America. It will help to increase the welfare economy. And helps in building effective human capital.

Ans 4.) The legal system is the basis for the development of a country a sound legal system ensures efficient democracy . The lawyer to population ratio was very small in China earlier this resulted in the huge backlog of cases and hampers the social  and mental well being as well as hampers productivity of the citizens with increase in lawyer to population ratio the cases of financial ,environmental and social nature will get resolved fast.Hence the social  benefit is more than social cost.

Ans 2.) Here it is very important to understand the corporate Ethics code they are meant to encourage the behavior of the employees that will help organisation to achieve its mission and objective they affect the behavior of employees as the consequences of their breach will results in the termination some codes have zero tolerance like sexual abuse. They also helps in building the image of the companies and help in building reputation and sound management.

Ans 3) FCPA or Foreign corrupt practice act helps in reducing corruption in the American companies this will help to create a sound image of the company as well as sound management and above all it helps to prevent corruption and protect the interest of the shareholders. I think such regulation has a huge gain in the long run as such measures keep the stakeholders as well as the regulators high alert although there are cost involved in the implementation but benefit increases such cost and it will increase the market share of the firm through investors confidence.