Interpreting Subprime Loans from an Ethical Perspective Essay.
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critical review on employment, training and labor markets in the EU. I’ll send along format instructions and 2 articles to use. I’d ask for 2 additional references. Please provide links or the articles used.
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Ethical conduct within business organizations and financial institutions has become a crucial part in the contemporary business environment. Ethical Decision Making (EDM) may be a virtue that every manager or administrator would not risk if the business has to be successful. Corporate and financial misconduct in the wake of the recent financial crises such as the subprime loans have raised questions as to whether ethics existed in the business world. To be able to interpret the ethical implications of the events surrounding the subprime loans, it would be crucial to understand what the loans really are and highlight the ethical decision making activities practiced by the leadership in the crisis. Also, crucial may be analyzing the notion of corporate social responsibility with respect to the loans, and outline the measures that have been taken since the crises happened. Was EDM practiced during the financial crises, were the measures taken to end the crises sustainable? Would such a scenario recur in the future? These may be some of the most significant questions ringing in the minds of every American; it is only through answering these questions that one may interpret the subprime loans comprehensibly.
A subprime loan may be described as a loan with extremely low or no down payment; it may include second loans that may offset the first loan thus eliminating a cash down payment or a monthly premium. This loan was availed to households with moderate incomes, imperfect credit records, or limited wealth (Watkins, 2011, Pg. 366). After the dot-com bubble burst and the September 11 terrorist attacks, market dislocations and deflationary price spiral resulted to the Federal Reserve significantly reducing short-term interest rates. This catapulted the demand for mortgage refinancing heightened demand for home ownership. Banks adopted lenient financial policies that would be predicted to toggle the housing business. Such policies included home-equity loans, exotic mortgage loans, and cash-out refinancing, this was followed by skyrocketing of the 0% refinancing on the purchase of several consumer goods. Because overspending, both household and business balance sheets deteriorated. Between 1995 and 2005, increased borrowing ensued due to friendly financial policies. This saw the rise in subprime loans alone from $ 18.5billion to $ 507.9 billion (Utt, 2008). In mid-2006, the world experienced a slowdown in the growth of housing prices, this reduction in housing values coupled with resetting of adjustable-rate loans made home ownership unaffordable. Home foreclosures mounted, mortgage lenders recorded losses. The decline of the mortgage-lending enterprises resulted in massive losses among investment banks and the financial sector. This exacerbation of the financial crisis has had a myriad of negative impacts on society. The consequences of the subprime loans that had been predicted by analysts to affect only the housing business precipitated down to other industries; the economy was at the verge of collapse.