How Lehman and the iPhone reshaped financial markets - MarketWatch

6. The Enron scandal 

On December 2, 2001, Enron filed for bankruptcy tribunal protection. At the time, it was the biggest firm nonaccomplishment successful American past and symbolized the excesses that had taken spot successful fiscal markets. A Houston vigor and trading company, Enron had started 2001 arsenic the nation’s seventh largest institution with $100 cardinal successful reported gross and a high-flying banal earlier collapsing amid accusations of accounting fraud.

Employees were speedy to constituent the digit astatine Enron CEO Ken Lay and different apical executives. “He had to beryllium alert of what was going on,” one worker told MarketWatch days aft the bankruptcy. “Something astir this is not legal. Something, determination is wrong.” 

Federal prosecutors agreed. They criminally charged Lay and different apical executives, similar Jeffrey Skilling and Andrew Fastow, accusing them of employing accounting gimmicks to navigator the books and mislead investors. All 3 were convicted, but Lay died earlier his sentencing. He ever maintained his innocence.

The authorities besides charged Arthur Andersen, 1 of the large 5 accounting firms and Enron’s auditor, of obstructing justness by destroying Enron documents. “Andersen shredded ‘tons’ of paper,” arsenic MarketWatch enactment it successful 2002. That aforesaid year, a national assemblage convicted Arthur Andersen, causing the dissolution of the steadfast and the nonaccomplishment of 30,000 jobs. 

In effect to the Enron scandal, national lawmakers passed the Sarbanes-Oxley Act, requiring sweeping caller accounting and recordkeeping practices for corporations. Three years later, MarketWatch ran the pursuing headline: “Andersen’s Conviction Overturned.” As MarketWatch told it, successful a unanimous determination written by Chief Justice William Rehnquist, the the Supreme Court said “the assemblage instructions were flawed successful important respects.” But the ineligible reversal could not undo the extremity of Arthur Andersen’s accounting business. 

7. The subprime existent property roar & bust

The Bronx-born lad of a butcher, Angelo Mozilo became the perpetually-tanned look of the subprime owe boom. For years, his Countrywide Financial was the starring seller of location loans to radical with mediocre recognition scores who did not suffice for a accepted mortgage. Before 2000, this benignant of lending hardly existed. But galore banks and specialty concern companies followed Mozilo’s lead, originating toxic mortgages that were past sold to Wall Street and government-sponsored entities, fueling an unsustainable summation successful U.S. lodging prices. 

The subprime owe roar not lone opened up the owe marketplace to radical who antecedently could not entree location loans, it featured products that fto them bargain homes they genuinely could not afford. Across America radical bought homes without making archetypal down payments, utilizing loans that started retired with artificially debased teaser rates oregon required nary aboriginal main payments astatine all. Those financing presumption would aboriginal reset and summation dramatically. 

The erosion of lending standards was premised connected the cognition that lodging prices lone went successful 1 direction: up. Wall Street and the national authorities were blessed to substance this idea. For years, banks and government-sponsored enterprises had bought mortgages from lenders, backing their quality to originate much mortgages. The banks and GSE’s packaged the loans into securities that were sold to investors. With the subprime owe boom, the underlying mortgages became overmuch riskier and Wall Street stepped up its fiscal engineering with ever much riskier products. But the large recognition standing agencies, which were paid Wall Street fees, kept giving their highest ratings to the much risky products. 

By March 2007, galore American homeowners were incapable to marque their owe payments. Housing prices fell. Ben Bernanke argued that the problems associated with subprime loans were “contained.” MarketWatch reported that the Federal Reserve president astatine the clip saw constricted interaction from subprime. “We bash not expect important spillovers from the subprime marketplace to the remainder of the system oregon to the fiscal systems,” MarketWatch reported Bernanke saying. 

8. The iPhone 

On the time Steve Jobs introduced the satellite to the iPhone successful aboriginal January 2007, astir of the tech property was successful … Las Vegas, covering CES, the monolithic user electronics commercialized show. The last-minute unveil astatine San Francisco’s Moscone Center sent respective reporters astatine CES into a panic, and they booked the next-available formation to the Bay Area. They were not disappointed.

Longtime Silicon Valley expert Tim Bajarin, who was successful the assemblage that Tuesday morning, was instantly convinced Apple would make a caller class successful mobile computing. “We had mini computers, desktop computers and present with the iPhone, pouch computers,” helium recalled. “I felt it could beryllium Apple’s biggest deed ever.”

In a sit-down interrogation with Jobs pursuing the debut of iPhone (it would yet vessel successful June), the iconic Apple Inc. co-founder initially downplayed the societal and fiscal value of iPhone. Then, helium warmed up.

“This is simply a revolutionary merchandise that has the accidental to truly interaction people’s lives,” Jobs told Jon Swartz, present a MarketWatch Silicon Valley correspondent. Jobs compared the iPhone to the archetypal Macintosh and iPod. “This is the eventual integer device.”

Jobs made a convincing case, demonstrating however iPhone users could marque calls portion viewing contented connected the Web and exchanging email — each astatine the aforesaid time.

In the 15 years since its inception, the iPhone redefined the burgeoning smartphone market, kick-started Apple AAPL, +0.24% into years of hyper-growth and made Apple the world’s biggest institution by marketplace capitalization, a rubric it precocious mislaid to Saudi Aramco. Roughly fractional of Apple’s $365.8 cardinal successful 2021 gross came from iPhone sales. At the aforesaid time, developers are selling immoderate $600 cardinal annually of goods and services done the App Store. 

In total, Apple has sold much than 1.3 cardinal iPhones.

9. Lehman Brothers Collapses 

On September 15, 2008, Lehman Brothers filed for bankruptcy. MarketWatch bore witness to the country extracurricular the 158-year-old concern bank’s Manhattan headquarters, describing it arsenic “a media circus, with cameras lined on the Seventh Avenue sidewalk and reporters approaching employees for comments.” MarketWatch was among the media mob approaching the watercourse of employees leaving the gathering with boxes successful their hands. 

“Several twelve radical went into the Lehman offices wheeling suitcases. One of them, who said helium was with the probe section astatine Lehman, was notified implicit the play that helium had been laid off. He said helium didn’t cognize however galore radical successful his radical had been dismissed, but that helium was coming backmost Monday greeting to ‘salvage what I can’ from his office,” MarketWach reported.

Lehman Brothers collapsed nether the value of souring existent property assets,  sending shockwaves crossed the satellite and sparking a fiscal crisis. Within hours of the bankruptcy filing, 1 of the biggest wealth marketplace funds was forced to “break the buck,” incapable to afloat wage its investors due to the fact that of the Lehman Brothers commercialized insubstantial it held. MarketWatch reported however the Reserve Primary Fund “put a seven-day frost connected capitalist redemptions aft the nett plus worth of its shares fell beneath $1.”

As planetary recognition markets seized up, the Federal Reserve was forced to warrant wealth marketplace money assets and enactment successful the national government’s $182 cardinal bailout of teetering AIG, the security behemoth. MarketWatch quoted Andy Barile, an autarkic security manufacture advisor based successful Rancho Santa Fe, Calif. “There indispensable beryllium thing that tin beryllium done to halt this. There are excessively galore fiscal consequences.”

The national government’s melodramatic involution successful markets, which featured Congress’ $700 cardinal bailout law, prevented the illness of the fiscal system. But the fiscal situation inactive triggered the Great Recession, and governmental backlash, similar the Tea Party and Occupy Wall Street movements. 

10. Satoshi Nakamoto

In October 2008, during the darkest days of the fiscal crisis, a idiosyncratic utilizing the pseudonym Satoshi Nakamoto sent an email to a cryptography mailing list. “I’ve been moving connected a caller physics currency strategy that’s afloat peer-to-peer, with nary trusted 3rd party.” Nakamoto published a achromatic insubstantial online detailing a integer currency. He called it bitcoin. 

The existent individuality of Satoshi Nakamoto remains a mystery, but the exertion helium introduced has had a profound interaction connected markets. Bitcoin BTCUSD, -0.30% popularized the thought of integer currencies powered by distributed bundle known arsenic blockchain. There are present much than 12,000 integer currencies with a combined marketplace capitalization of astir $2 trillion. Bitcoin is inactive the astir wide traded and highly valued.  

It took a portion for MarketWatch to drawback onto the value of bitcoin. Chuck Jaffe, a columnist, first described bitcoin for MarketWatch readers successful 2011 arsenic “a caller signifier of currency that is not tied to immoderate state oregon government, and that doesn’t really beryllium successful the carnal world.” Jaffe noted that “the bitcoin strategy is tally by the radical who usage it,” and added determination are “no authorities officials to measurement successful and messiness things up.” He besides compared it to tulips and Beanie Babies and suggested investors “still favour stocks and bonds and different investments.” At the time, bitcoin changed hands for $10.  

Since then, bitcoin has been bid up supra $40,000 and been mentioned successful 5,300 MarkeWatch articles. The tickers of cryptocurrencies are among the astir fashionable connected the MarketWatch site. We adjacent person a reporter dedicated to covering bitcoin and different integer currencies.