Abstract
Although the empirical research was confined to banking practices and ethical conduct in Australia and Hong Kong, there were distress signals emanating from the United States as early as the end of 2006 and mounting in intensity and frequency as 2007 unfolded, and these would have unforeseen ripple effects on the entire global banking system. The financial events that emanated from America offer a profound and disturbing insight into the conflicts of interest afflicting banks and other lenders. The troubles arose when numerous American homeowners were unable to repay their mortgage loans as interest rates escalated, thus prompting lenders to foreclose on their properties. These loans generally had attractive low rates at the outset but would adjust after a grace period to reflect market rates and the higher risk category of the borrowers, who unfortunately lacked the financial capability to repay larger amounts of debt.
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Notes
Bob Herbert, ‘A Swarm of Swindlers’, The New York Times, 20 November 2007, http://www.nytimes.com/ (accessed 21 November 2007). The opinion article describes a family that was hounded by mortgage lenders to sign up to repeated refinancing of a mortgage on the mother’s home despite lacking financial capacity. The lender falsely inflated the borrower’s income despite the fact that the only source of income was social security payments.
Steve Schifferes, ‘Housing Meltdown Hits US Economy’, in BBC News, 2007, http://news.bbc.co.uk/go//pr/fr/-/2/hi/business/7078492.stm (accessed 12 November 2007).
Steve Schifferes, ‘Foreclosure Wave Sweeps America’, BBC News, 2007, http://news.bbc.co.uk/go/pr/fr/-/2/hi/business/7070935.stm (accessed 12 November 2007).
Michael Lewis, Panic: The Story of Modern Financial Insanity (New York, NY: W.W. Norton, 2009), p. 310. Italics added.
Sean Farrell, ‘Anatomy of a Credit Crisis’, The Independent, 6 November 2007, http://www.independent.co.uk (accessed 7 November 2007).
Charles R. Morris, The Two Trillion Dollar Meltdown: Easy Money, High Rollers and the Great Credit Crash 2009 ed. ( Melbourne, Australia: Black, 2009 ), p. 77.
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© 2015 Jes Villa
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Villa, J. (2015). The Sub-Prime Crisis: An Ethical Failure?. In: Ethics in Banking. Palgrave Macmillan Studies in Banking and Financial Institutions. Palgrave Macmillan, London. https://doi.org/10.1057/9781137340283_6
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DOI: https://doi.org/10.1057/9781137340283_6
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