Did Countrywide Influence the Recent Financial Crisis?
Mentor:Zhenguo Lin, Full - Time Faculty, Finance, California State University Fullerton
While there are many explanations as to the multiple causes of the most recent financial crisis, a thorough examination of one very important factor seems to be lacking: accounting. The purpose of this study is to examine the ways in which accounting practices in the mortgage banking industry may have contributed to the financial crisis of 2007. Countrywide Financial Corp. is used as a case study. Through examination of the company’s financial statements, comparative study of the industry, and application of banking analysis techniques, an inquiry is made to the consequences of current accounting standards for financial institutions. A realization is made that a sole short term focus on annual results is neither good for the long term growth of a company, nor society as a whole.