The Effects of the 2007-2008 Financial Crisis: An Ethical Perspective
Ethics in business practice plays a significant role in enhancing the quality and success of enterprises in the global platform. The 2007-2008 financial crisis had adverse effects, which are still felt today in many business sectors. McLean and Nocera provide a perspective on the unethical business conduct orchestrated by professionals within the banking and real estate industry (76). According to the authors, activities that led to the 2007-2008 economic crisis had started as an initiative to provide citizens with affordable homes (367). Although homeownership was a business opportunity for financial institutions and real estate agents, it was managed unethically, and hence, it adversely affected the U.S. economy, leading to a global recession.
The idea of owning a home for U.S. citizens propelled risky business ideology. However, McLean and Nocera illustrate the extent to which unethical business practices started over 30 years ago in the banking and real estate sector led to severe losses (352). According to the authors, the American desire for owner occupancy brought a camouflaged deal that offered expensive houses (157). From the perspective of the utilitarianism theory, an idea or activity is judged as either right or wrong depending on its outcome or consequences (Mill 9). Although the philosophy behind affordable home ownership was positive, facilitating agents mismanaged the process, leading to the crisis. Likewise, the institutions practiced negative virtue ethics by adjusting regulations and procedures to their advantage, occasioning massive economic losses to investors. Therefore, the lack of efficient regulations advanced through a positive approach in the mortgage industry led to ineffective policies and procedures, which initiated a global recession.
Furthermore, unethical practices in the industry affected the capability of banks to collect premiums from homeowners on mortgage arrangements. McLean and Nocera demonstrate that mortgage industry challenges started when banks and other lenders agreed on transferring the responsibility of collecting monthly repayments (270). Notably, the individual loans were summed into bonds and sold to investors, but later became risky (McLean and Nocera 66). Therefore, when the demand for mortgages rose, the underlying system of paperwork and legal expectations, such as due process and desktop appraisal, were ignored and incompetency prevailed.
Theunissen provides illustrations of the Kantianism philosophy explaining that human life is valuable since people represent the bearers of rationality (351). Therefore, rational individuals are expected to project balanced behavior without promoting activities that affect them, but which lead to the happiness of others (Theunissen 352). Based on these perspectives, it was wrong for agents to take advantage of citizens by denying them the right to own homes. Hence, unethical practices affected the entire industry, leading to massive losses.
The actions of lawyers, lenders, and banks failed the test of virtue ethics since they neglected an obligation to follow ethical traits in their professional endeavors. Therefore, in response to the 2007-2008 mortgage crisis and failed paperwork that facilitated the collapse of major financial institutions, the government imposed stringent measures to manage the issue. The policies to remedy the economy from collapse affected all citizens and led to a period of the global recession. The principles of both utilitarianism and Kantianism expected the agents to be guided by observing the general good of citizens and delivering beneficial programs to the entire population, but this was not the case.
McLean, Bethany, and Joe Nocera. All Devils Are Here: The Hidden History of the Financial Crisis. Penguin Group, 2010.
Mill, John Stuart. Utilitarianism: Seven Masterpieces of Philosophy. Routledge, 2016.
Theunissen, L. Nandi. “Must We Be Just Plain Good? On Regress Arguments for the Value of Humanity.” Ethics, vol. 128, no. 2, 2018, pp. 346-372.