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The role that I have chosen to examine is that of a mortgage lender employee– the representative of a firm that gives out loans for property purchases. In this particular case, my title is a mid-level executive at a financial corporation, and I am responsible for leading the department related to mortgage loans. This position was held by many people before and doing the financial crisis, and their main pitfall was the decision to give out subprime mortgages without checking people’s credit (Lane, 2016). This paper aims to consider the ethical decisions and problems faced by mortgage lenders such as Rebecca Steele.
The ethical dilemma that I encountered in my position was based on the United State’s improving economy and increased access to personal wealth and credit. Before the financial crisis of 2008, the nation enjoyed low rates of unemployment, increasing personal wealth, and growth in many sectors of the economy (Kothari & Lester, 2012). Many Americans wanted to purchase homes, and the lowered interest rates allowed them to do that. However, the banks’ rigid credit scores limited people’s chances of owning a home – the economic growth inspired the relaxation in lending criteria (Kothari & Lester, 2012). As a result, I also participated in streamlining the process of mortgage lending, lowering the standards for eligibility.
This decision would not be made if our organization valued transparency, thoroughness, and commitment to the long-term growth of the national economy. First of all, we did not check the financial abilities of the loan-takers, which led to them not making monthly payments. Moreover, we also did not present the information about the borrowers in an honest and critical way, which resulted in the government’s protection of these deals (Rexrode & Viswanatha, 2016). Finally, we did not anticipate the effects that such a streamlined process would have on the property market, underestimating the value of careful planning.
From my perspective, our investors, the bank’s senior management, borrowers, and both state and federal government are among the main stakeholders. It is apparent that the role of the financial market is crucial in creating and pushing a narrative for people to invest in property. Thus, this trend also urged the bank’s executives to think that the relaxation of criteria for borrowers was a logical step towards furthering economic development (Rexrode & Viswanatha, 2016). The pressure from higher levels of authority is detrimental to employees making risky decisions.
There also exists a conformity bias – if all banks are relaxing their mortgage standards, it is reasonable to think that our firm would do the same not to lose clients. As an executive manager, it is my duty to ensure that our company is acting in agreement with the overall financial situation. Moreover, as I am an employee of a mortgage lender, one of my expected results is profit (Rexrode & Viswanatha, 2016). Thus, my actions in addressing the condition of the market were guided by this aim as well.
On the other hand, the lack of attention to this process from the federal government and its interaction with state officials acts as another lever in not stopping the practices in their initial stage. The external influence is to continue giving people an opportunity to acquire property, and the risks are not measured by society. Overall, one can say that a single employee or even a company cannot be fully responsible for the crisis – the need to conform and drive profits may lead to poor decisions, which should be addressed on a systemic and not individual level.
References
Kothari, S. P., & Lester, R. (2012). The role of accounting in the financial crisis: Lessons for the future. Accounting Horizons, 26(2), 335-351.
Lane, B. (2016). ‘Face of the housing crisis’ exonerated by Appeals Court Countrywide Hustle ruling. Housing Wire. Web.
Rexrode, C., & Viswanatha, A. (2016). Villain or victim? The problem with assigning blame for the financial crisis. The Wall Street Journal. Web.
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