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    Conflicts of Interests in Subprime Mortgages and at Enron

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    The case is about Conflicts of Interests in Subprime Mortgages and at Enron. Thanks in advance for your help.

    The case can be researched on google. Some details may be found here: http://www.neocrisis.com/articles/178-jazzking2001s-/9791-enron-a-conflict-of-interest

    1. Who was harmed by misvaluing of subprime mortgages? Who was benefited?

    2. Who, if anyone, was harmed by Andrew Fastow's dual roles as Enron's CFO and as managing partner of Enron's SPEs?

    3. What laws or policies would you recommend to prevent future Enron's and to reform lending practices in high risk credit markets?

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    Solution Preview

    1. The people harmed most were the homeowners and the shareholders of banks that carried the mortgages. The mortgage brokers and real estate people were paid and they probably were ultimately the only ones who benefited. Homeowners were paying large amounts of money to mortgage holders and could not keep up with the payments, so they lost their homes after investing a lot of money into them. Banks that could not get the payments from homeowners cut earnings and the shareholders lost dividends among other things. Banks also failed, so bankers and employees lost out. ...

    Solution Summary

    The following posting discusses conflicts of interest in subprime mortgages and at Enron.