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Example research essay topic: Continental Illinois Case Part 2 - 1,633 words

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... to ones investment and risk, the Continental Illinois bank should have been allowed to fail just like Prof. Kaufman claimed in his 1995 report. The USA has historically allowed windfall gains as well as bankruptcies to contribute to the competitive environment within the States and to the market economy this country strived to uphold throughout its history. From the utilitarian point of view the Continental Illinois bank should not have been allowed to fail due to the fact that it would have been more beneficial (or actually less damaging) for the greatest number of people than in the case when the bank is left to go south on its own. The ethics allow the failure of the Continental Illinois bank, yet still claim that the most beneficial state would be achieved if the bank was left on its own.

Of course at present it is rather easy to speak about what would one do if the situation were to repeat. During the accounting standards that led to the collapse of other US giants like Enron, Nortel and WorldCom in 2002, most of these companies were given grants and were assisted by the US government organizations to prevent the whole economy from going down. I would not be surprised to hear in 2010 from some other Prof. Kaufman that these three companies should have been left to go bankrupt while hundreds of stockholders are being left without any means for survival. Thus it can be said that the Continental Illinois from the capitalist business and efficient market point of view should have been allowed to fail negatively impacting the whole US economy, yet at the same time making people aware of the dangers that over-reliance on such large banks can cause to people and individuals. Yet from a social or more human point of view, one should take into account that it is not the fault of thousands or hundred of thousands people that the banks undertook such highly aggressive and reckless loan strategy that ultimately led to its collapse.

These people had no control of the bank and therefore should not be affected in any way. Let alone their deposits that would have disappeared if Continental Illinois was allowed just to go down, these people would face just the opposite from the aggressive loan policy from other banks and would have to abandon the idea of obtaining a loan for many years to come. And even though the US economy would to die if Continental Illinois and several dozen other banks were allowed to disappear, the impact on the other households and companies would certainly be too harsh. 3. To what extent did the OCC contribute to the management failings of Mr Roger E. Anderson -- CI's chairman & CEO and his management team. From the case about Continental Illinois bank we read that OCC indeed contributed to the management failing of Mr.

Roger Anderson, which would have occurred in any case regardless of the government interference in Continental Illinois or the absence of thereof. The OCC showed the investors and other organizations that Mr. Anderson and his management team was not able to lead the company out of crisis. When OCC asked the board of directors to abandon the banks last attempt to make additional loans with the Federal Reserve funds given to it as a bail, the board responded that such action would mean the collapse of the bank and that OCC would be the organization to blame this collapse on. What has been the last straw from OCC that broke Mr. Roger Anderson and his management teams back was the OCC request from other banks and securities firms to assist Continental at a time when the Continental Illinois CEO and his management team completely refused the rumors that the bank was going down.

The rumor contributed to the market reaction that caused the run on Continental Illinois bank as well as completely cut off any commercial funding for this institution and turned out to be deadly for the bank and for its management. 4. What short and long term benefits were expected to arise from appointing David Taylor as CI's new CEO and Edward Bottum as President in the run-up to the restructuring of CI? The following benefits were expected from the appointing David Taylor as Continental Illinois new CEO and Edward Bottum as President in the run-up to the restructuring of Continental Illinois Short term benefits: When management is changed the company appears to be governed by better people who increase trust The new CEO and President would adopt more conservative policies at Continental Illinois, thus preventing the damaging to the bank policies in the short run. The new CEO and President do not have any personal considerations about the Continental Illinois and thus are more likely to act logically rather than out of fear to lose the company like the former executives as Continental Illinois would act. Long-term benefits: the management that almost caused the Continental Illinois bankruptcy certainly is not effective for the Continental Illinois, and therefore should be substituted for a better one. The new inflow of ideas that the new management team is about to present would certainly have impact on the whole corporate structure of Continental Illinois bank.

It is expected that the benefit would be positive. The new management would bring the new contacts into the organization that in the long run are supposed to completely restructure the Continental Illinois and make it more conservative and less risk taking. 5. a. What is the current status of CI?

At present there exist no Continental Illinois bank in the world. After being acquired by the Bank of American Continental Illinois had transferred all its operations and clientele to the Bank of America that now operates the markets previously occupied by Continental Illinois. b. What are their main sectors of banking? The Bank of America that has acquired Continental Illinois in the late 1980 s had completely undertook the Continental Illinois operations in Illinois, thus depriving the company management of any presence in the USA. Bank of America investment services inc. , offers more than 820, 000 account holders innovative strategies for wealth management.

Our customers have entrusted with more than $ 71 billion in assets under our management. The former Continental Illinois and present day Bank of America Private Bank division is one of the world's largest corporate fiduciaries for individuals, with $ 150 billion in assets under management, 44, 000 trust relationships and 79, 000 accounts. Since the acquisition of Continental Illinois, Bank of America Community Development Banking has invested or directly developed more than 100, 000 units of affordable housing in the state of Illinois. c. How have these sectors changed since their collapse? The commercial sector that the Continental Illinois operated in are now the property of the Bank of America.

More than 100, 000 Bank of America associates provide financial products, services, ideas and solutions to customers and clients in 48 states and the District of Columbia. The Bank of America Global corporate and Investment banking group has offices in 30 countries serving clients in more than 150 countries, with associates in major business centers in the Americas, Europe and Asia. The Bank of America consumer and commercial banking operations serve more than one in four households in the United States, transacting with more than 150 customers per second. The Bank of America that was built up on the Continental Illinois is the nations number 1 small business lender according to the U. S. Small Business Administration, that has doubled its SBA loan output during the years 2000 - 2002 SBA fiscal year.

The Continental Illinois at present would have been a part of the 4, 225 banking centers in 21 states and the District of Columbia that now is the property of Bank of America and is more than any other financial services company. Two million small businesses (up to $ 10 million in annual revenues) within our 21 -state franchise bank with the Bank of America. That's one small business out of every five. In conclusion I would like to say that Continental Illinois history has proved to the world that regardless of the size, the company has to be managed properly to succeed in business and to remain afloat. The Continental Illinois was given a chance yet it failed to secure the conservative asset management and could not stand the bank run. The company was indeed to big and too expensive to go bankrupt without causing too much chaos in the US economy.

Therefore, the US government organizations (OCC, FDIC, and Federal Reserve) did their best to smoothen the process of company failure and to protect as much assets as possible from the deterioration and bankruptcy before the Continental Illinois was acquired by Bank of America in 1984. The case proved that the US government has properly assessed the status quo of the Continental Illinois and made the best decision with respect to the US economy, politics, society, and ethical principles as was mentioned above. This case proved to the reader that regardless of the economic system the world freest and most capitalistic country may not always act in a dog-eat-dog manner and allow the company and its economy experience the negative sides caused by the management, but rather organize some creative restructuring idea that would if not benefit then find a compromise that would suit all. Bibliography: web, original case. web (prepaid archive on CI and Bank of America) web (prepaid archive on CI and Bank of America) web (prepaid archive on CI and Bank of America) Ducks, peter, The US economic history, McGraw Hill, 2002.

Johnson, Richard, The Continental Illinois case, Penguin Books, 1999. Anderson, John, The Banks of USA, NY Random House, 2001.


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