Unformatted text preview: government sponsored enterprises going against GAAP, in particular the principle of prudence. This principle in general states that the company should show the reality of the situation as opposed to giving the probability of what might happen. By offering adjustable rate mortgages to high risk consumers they lead them on to believe that the low rates of the time would stay low which is obviously what didn’t happen, especially when the housing bubble burst. Many of the companies that chose to go against these principles are now no longer operating and have gone belly up in the long run....
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- Spring '10
- Subprime mortgage crisis, global financial crisis, accepted accounting principles