Subprime loans have come known to be some of the most unethical financial tools that were used in the mortgage industry. There are many examples of companies that, as a result of their leadership, came out of the crisis positioned to overcome past deficiencies.
In the Countrywide autopsy are several clues about the vulnerability of leaders — how personal baggage and ego unchecked can drive unintended outcomes and turn a deaf ear to the very criticism that contains information needed to get back on course.
There were different ethical issues that caused the downfall of Countrywide Financial. Such loans are known to trap unsuspecting customers when they are trying to purchase a home, burying them deeply beneath mounds of debt. In the Watergate era, several political operatives who went to jail came out Born-Again Christians.
Countrywide Financial was co-founded in the and it was the largest provider of the home loans in the United States, after few decades. Subprime lending is risky because clients are less likely to be able to pay back their loans.
This was to become one of the chief accusations against Countrywide during the financial crisis Clark, As mentioned in the case study, Countrywide launched many programs for providing loans to people for building their homes and these programs included House America and We House America etc.
The Subprime Meltdown Are subprime loans an unethical financial instrument, or are they ethical but misused in a way that created ethical issues? Retrieved from Business Ethics: In earlythe company president warned that the real estate boom was waning and recommended tighter loan restrictions; he was passed over for a promotion and left the company.
The company lost touch with its mission. Earlier this month, he settled the Securities and Exchange Commission SEC suit that alleged he committed civil securities fraud. He was obsessed with taking market share away from Ivy League types who he thought were snobs looking down on him and the mortgage business.
South Western Cengage Learning. This thing resulted in company losing its market image and reputation. Ethical Decision Making and Cases pp. In addition, Bank of America will also have to focus on adjusting the terms and conditions of ARMs as per the income of borrowers. Weighing a Trade-off Angelo Mozilo is the first high-profile CEO involved in the meltdown to be held personally accountable.
Bank of America is regarded among the most popular banks in the United States of America. It got carried away by its own success and grew so fast after that its culture changed and customers were no longer protected by its lending practices. In an interview inMozilo admitted he was driven by a chip on his shouldersaying he hired others with chips similarly driven.
Starbucks was one of the countless companies hurt in the downturn, causing Chairman Howard Schultz to take back the role of CEO in and architect a turnaround.
Discuss the ethical issues that caused the downfall of Countrywide Financial. He co-founded Countrywide in with the mission of making home ownership affordable for everyone. How should Bank of America deal with potential ethical and legal misconduct discovered at Countrywide?
With this being said, it is important for Bank of America to not allow their recent acquisition of Countrywide Financial to tarnish the great reputation that the Bank of America company has worked so hard to create for itself.
Hopefully such damage control will ultimately encourage society to forgive Countrywide Financial and not take out the frustrations that they have with the lending company on that of Bank of America.
In the spirit of wanting to avoid the all-too-human proclivity for history repeating itself, there continue to be post-mortems and debate over what needs to change in business and regulation to avert another economic crisis.
As it is quite clear that these loans are offered to clients who are high risk clients and they cannot qualify for conventional clients. In he had announced that Countrywide intended to dominate the mortgage market by increasing its market share from about 10 percent to 30 percent by Hence, as a general analysis, it is clearly evident that Subprime loans are actually the unethical financial instruments which were used improperly by the company to increase its market share and to maximize the profit ratio.
How should Bank of America deal with potential ethical and legal misconduct discovered at Countrywide? The company could start by making a public apology to each and every customer that Countrywide Financial has managed to injure during the market financial meltdown.
The nationally recognized company has had a very long stint in the financial industry. Such behavior was deemed to be unethical due to the fact that Countrywide Financial would have made a profit off of their use of subprime loans no matter how the situations transpired.
Schultz, talking about Starbucks turnaround, said: In the aftermath of the economic crisis, no business leader has gone to jail yet; will basic qualities of leadership that foster strong, long-term financial results and thriving cultures come back into vogue?
In order to deal with potential ethical and legal misconduct discovered at Countrywide, the Bank of America will have to manage its debts and will have to achieve consistent and above average shareholder returns. The biggest ethical issue that contributed to the demise of Countrywide Financial is owed to the fact that the company targeted the low-income minority families to use the subprime loans as a means of financing their homes.There were different ethical issues that caused the downfall of Countrywide Financial.
These are as: Company started giving Subprime loans to the borrowers. Countrywide operates more than 1. or are they ethical but misused in a way that created ethical issues? ANS: Subprime is a financial instrument that there is no right or wrong for it. Bank of America should fire those suspects to ease public rage.
Make ethical business decisions Question 2 Discuss the ethical issues that caused the downfall of Countrywide Financial BERG, R. (, July 05).
Members of congress received preferential treatment on loans from countrywide.
Politics. In the Countrywide autopsy are several clues about the vulnerability of leaders – how personal baggage and ego unchecked can drive unintended outcomes and turn a deaf ear to the very criticism that contains information needed to get back on course.
Countrywide Financial: The Subprime Meltdown QUESTION NO:1 Discuss the ethical issues that caused the downfall of Countrywide Financial? QUESTION NO. 2 How should Bank of America deal with potential ethical and legal misconduct discovered at Countrywide?
US economy began to slow. prices became to increase,due to increase in demand. One of the Ethical issues that cause the downfall of countrywide financial is the allegation that accused them of increasing its profit by offering subprime loans to people who qualified for regular loans.Download