Countrywide financial; The Subprime Meltdown

Currently, we are discussing study case entitled ‘Countrywide financial; The Subprime Meltdown’. Let’s take a look a little bit to the fact of that case. Countrywide has become the largest provider of home loans in the United States during the year 2000s. it was the primary provider of home loans to minorities in the United States and had lowered the barriers of homeownership for lower-income individuals. Countrywide also offered loan closing, capital market, insurance, and banking service to its clients. In 1970s countrywide had diversified into the securities market as well.

Then, let’s Identify what are the ethical issues involved in this case. The main and underlying problem with Countrywide is usage of subprime loans. Subprime lending means lending to borrowers, generally people who would not qualify for traditional loan, at a rate higher than the prime rate (market rate). The lending job has made easier with exotic mortgages such as so called no doc loan or liar loans, which enable borrowers to borrow without having to supply evidence of income or assets.

Banking Industry Meltdown; A 'Moral Imagination' perspective

Banks and other financial institutions presented these derivatives as attractive financial instruments to invest in, whereas they were not. Derivatives were used to save financial situation in many banks in a very unethical way. And main reason of failure was that the banks were over dependant on these financial instruments. And as it happens they tried to save their situation by using unethical ways.

The key problem and underlying issue with all examples given in the case is mishandling derivatives, and over dependence on them. Another main issue is that credit default swaps were repackaged and sold as mortgage debt. Apart from that each particular example has its own unethical behaviour exposure. They conduct a manipulation to deceive stakeholders. They are hiding debt and losess by creating off balance sheet and also by creating error accout in case of Barings Bank.

What are the available alternatives – also called “moral imagination” that we can learned from this case? According to Tawhidic Paradigm, everything in the universe is created by God. We are God’s vicegerents on the earth; it has been given us in trust. In this case, Banks are given trust by their customers to protect their saving or investment.