First Person From a CPA: The Financial Decade in Review

The past decade has been a roller coaster of financial highs and lows, especially in the United States. It was the most volatile decade since the Great Depression and financial hardship touched the vast majority of people in one way or another. As an accountant, I am afforded a peek into how the decade has affected the lives of my clients. It was a decade of more lows than highs, overall. As we look forward to the next decade, we can take some lessons from the past and insulate ourselves from the financial impact of fiscal catastrophes. Here are the top five financial events of the decade that affected people's lives adversely:

9/11

September 11, 2001 is a date that no American will forget. It was the day that the first large-scale attack occurred on American soil since 1941. It shook many people's ideas about security and safety and it also rocked the financial world. The American stock exchanges closed and did not open again until September 17, when they all took precipitous drops. It would be another two years before the U.S. economy would begin to recover.

Dot com bust

For the last half of the nineties owning a tech company was hot. It seemed like anyone with some computer-related expertise and an idea could put together a virtual company on the proverbial back of a cocktail napkin and get millions in financing by going public. But, the dot com love-in couldn't last and, like all financial bubbles, it burst in 2001 when investors began to realize that there were no bricks and mortar under the marketing brochures. The NASDAQ index lost more than half its value during the bust and lots of investors lost their lunch.

Enron

In October 2001, one of the largest corporate frauds and audit failures was discovered, leading to the largest bankruptcy reorganization in history as well as the dissolution of one of the top five accounting firms in the world. Enron, an energy conglomerate out of Texas, had engaged in a number of high-dollar gambles and lost. Management abused the financial reporting rules to cover up the losses and involved Arthur Andersen in the ruse, forcing them to release clean audit opinions on the company in the midst of the fraud. Several executives were arrested and tried. From the ashes of the Enron debacle came the Sarbanes-Oxley Act, a piece of legislation that tightened up reporting requirements for public companies and forced more transparent disclosure.

Bernie Madoff

Former investment advisor Bernard Madoff made the phrase "ponzi scheme" a household word when, in 2008, he was arrested for running what has been called the largest investment fraud in history. Madoff took in investment money from clients but used it for personal gain rather than investing it in trust. As the scheme went on Madoff had to take in more and more new funds in order to pay out clients who wanted to cash out. His fraud impacted celebrities, retirees and even large pension funds. He is now serving a 150-year sentence in federal prison.

The Great Recession

The years of 2007 to 2009 represented the largest and most prolonged recession since the Great Depression in 1929. The causes of the recession were numerous, including an over-inflated real estate market, loose credit policies, and lack of control over financial instruments. The bankruptcy of Lehman Brothers was the first true indication that the entire economy in the United States could collapse and the government scrambled to prop it up. Although the recession officially ended in 2009, its effects are still being felt in the housing and job markets at the end of the decade.

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