Even in the best of times, there is no shortage of financial scandals. In hard times, the production of scandals often seems like the only industry that's growing. No doubt some of this owes both to a media fixation on finance when the economy hits ruts, and the resulting pressure for finger pointing - preferably in a 30 second sound bite or less. In this article we'll look at the financial scandals that caught our attention in 2010. (For more, see Scandals That Bring The CEOs Out.)
IN PICTURES: 7 Forehead-Slapping Stock Blunders

The BP Oil Spill
The BP (NYSE:BP) oil spill was far and away the biggest scandal of the year. It is disingenuous to call it a scandal because it suggest BP intentionally blew up its own rigs and killed its own people, but that's how it came off. The complexities of controlling and stemming the flow of oil into the ocean further raised frustration levels as days dragged into weeks and then months. Fortunately, this one is wrapped up, with the exception of pending court battles and ongoing environmental cleanup.

IN PICTURES: 10 Ways To Prepare For Nature's Worst

Toyota and Sticky Parts
A bit of xenophobia crawled into this scandal to help puff it up. Moreover, Toyota (NYSE:TM) had the "gall" to suggest that driver error played a part in the uncontrolled acceleration issue. In the end, this proved to be largely the case. That said, Toyota was in a tough position from the start. Its accuser and judge was, at the time, the owner of the second largest competitor to the company and coming under pressure to stop the loss of jobs overseas. The fact that many parts (and entire cars) were made in U.S. factories by U.S. workers did complicate the matter, but dragging the Japanese CEO in front of a panel helped brush those concerns under the rug. Since then, much less popular stories have cropped up outlining some of the disproportionate and outright dishonest coverage Toyota faced over the recall. Better late than never, but you can ask Audi whether consumers have a better memory for accusations or retractions. (To learn more, see Analyzing Auto Stocks.)

The Banking Sector
Evidence would suggest that most banks have somehow mastered time travel and brought Marie Antoinette to act as the PR person. As Antoinette is supposed to have addressed the problem of starving masses with, "let them eat cake," so have the banks dropped the ball as per the Great Recession - eating cake paid for by taxpayer dollars.

Bank bonuses and pay dominated headlines until Europe began falling apart. Making matters worse, the Fed finally released some TARP data showing who was tapping the piggybank while talking big to media about not needing a bailout. Wall Street has never done humble very well, but 2010 was a particularly bad act. (To learn more, check out The Top 6 U.S. Government Financial Bailouts.)

Government Scandals
Of course, Wall Street can't bear all the blame for a mediocre year. If proper timing is the key to making beautiful music, the government is tone deaf. There are times when a nation can decide that it is time to have public funding for large programs. There are even times when unfunded entitlement programs that will burden future generations can be reasonably discussed and decided upon. The middle of a recession already marked with trillions in deficit spending and stimulus is not the time.

The healthcare reform is just one example of the ambitious expansion of government that has, for the most part, passed in 2010. Adding payroll taxes to businesses that are already seeing their margins squeezed is not the way to address high-unemployment because it makes every employee more expensive. The government has made the most of hard times by ramming through initiatives the economy can't afford, and the scope, scale, cost and implications of which not even the legislators fully understand.

Budgeting, European-Style
On the theme of unsustainable, entitlement-driven governance, Greece, Portugal, Ireland and even England have provided an enlightening example of some possible issues. The Greek debt crises set off a European bailout that will mostly cost the more responsible members of the union. It's a small group - mainly Germany. More significant than the actual numbers is the reaction of the people.

Images of protesters, fires and riot police spooked investors and roiled currency markets as the purity of the euro compared to the easy ways of the dollar was thrown into question. As the recent Irish bailout suggests, trouble in the European Union will not be confined to 2010.

The Bottom Line
Any time a list is compiled with the word "top" in the title, it becomes contentious. It could be "Top 4 Beatles Members" and someone would be outraged that Ringo Starr beat out Pete Best. Many events didn't make the list, and that, unfortunately, is the nature of the beast. A lot of equally newsworthy tales of corporate and government excess get passed over for the ones that are perceived as juicy.

For the latest financial news, see Water Cooler Finance: FBI Insider-Trading Bust.

Related Articles
  1. Economics

    What is a Code of Ethics?

    A code of ethics is a collection of principles and guidelines an organization expects its employees to follow.
  2. Mutual Funds & ETFs

    ETF Analysis: SPDR EURO STOXX 50

    Learn about FEZ, the Euro Stoxx 50 ETF. FEZ tracks the 50 largest companies in Europe, making it the Dow Jones Industrial Average of Europe.
  3. Stock Analysis

    How GM Keeps on Truckin'

    Following a giant bailout and a giant IPO, the new GM is carried by sales of its giant trucks. But is it profitable?
  4. Economics

    3 Reasons Germany Would Be Better Off Without the Euro

    Explore the arguments in favor or against the idea that Germany would be better off leaving the European Union and abandoning the euro.
  5. Investing

    How To Invest For The Greater Good

    We discuss why is important to prioritize economic, social and governance factors when making investment decisions, regardless of gender or generation.
  6. Investing Basics

    Toshiba's Accounting Scandal: How It Happened

    Learn how Toshiba's corporate culture and lax internal controls led to an accounting scandal that ended with the resignation of the company's CEO.
  7. Mutual Funds & ETFs

    Top 4 European Bonds ETFs

    Learn about the top exchange-traded funds (ETFs) that invest primarily in treasury and corporate bonds issued by European governments and companies.
  8. Stock Analysis

    What AIG Looks Like Now (and How it Got that Way)

    Despite some mammoth mistakes and a gargantuan government bailout, AIG remains a global insurance powerhouse. Here's how it maintains its position.
  9. Professionals

    Is Your Financial Advisor Looking Out for You?

    Financial advisors sometimes aren't looking out for clients' best interests. Regulators are scrutinizing their practices; investors should too.
  10. Investing News

    Will Greece Return to the Drachma?

    More drama from Greece, as rumors swirl about a return to the drachma.
RELATED TERMS
  1. Principal-Agent Problem

    The principal-agent problem develops when a principal creates ...
  2. Brazil, Russia, India And China ...

    An acronym for the economies of Brazil, Russia, India and China ...
  3. Black Money

    Money earned through any illegal activity controlled by country ...
  4. European Monetary System - EMS

    A 1979 arrangement between several European countries which links ...
  5. Sprexit

    Sprexit, or SPanish euRo exit, is the possible case of Spain ...
  6. European Economic and Monetary ...

    The successor to the European Monetary System (EMS), the combination ...
RELATED FAQS
  1. What are some high-profile examples of wash trading schemes?

    In 2012, the Royal Bank of Canada (RBC) was accused of a complex wash trading scheme to profit from a Canadian tax provision, ... Read Full Answer >>
  2. What are the major laws (acts) regulating financial institutions that were created ...

    Presidents George W. Bush and Barack Obama, in conjunction with Congress, signed into law several major legislative responses ... Read Full Answer >>
  3. What are examples of inherent risk?

    Inherent risk is the risk imposed by complex transactions that require significant estimation in assessing the impact on ... Read Full Answer >>
  4. What is the difference between wash trading and insider trading?

    Wash trading is an illegal trading activity that artificially pumps up trading volume in a stock without the stock ever changing ... Read Full Answer >>
  5. What impact did the Sarbanes-Oxley Act have on corporate governance in the United ...

    After a prolonged period of corporate scandals involving large public companies from 2000 to 2002, the Sarbanes-Oxley Act ... Read Full Answer >>
  6. In what ways does Bayesian probability support the probability default model when ...

    During the European debt crisis, several countries in the Eurozone were faced with high structural deficits, a slowing economy ... Read Full Answer >>

You May Also Like

Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!