View the video The Untouchables: Are Wall Street Leaders Too Big to Jail? As we
ID: 362337 • Letter: V
Question
View the video The Untouchables: Are Wall Street Leaders Too Big to Jail? As we learned when we viewed The Corporation earlier this term, corporations are required by law to place the financial interest of their stakeholders even ahead of the public good. But utilitarianism would say that corporations, as a legal person, should consider all shareholders and not just stakeholders. In the Untouchables, did these corporations act on behalf of their shareholders? Or did individuals act on behalf of themselves? Is there evidence that individuals or organizations were concerned about stakeholders other than themselves or their shareholders?
http://www.pbs.org/wgbh/frontline/film/untouchables/
Explanation / Answer
No, the individuals didnt act on behalf of shareholders. Mortgages were based on unverified information and inevitably headed for collapse, were sold and resold, with everybody along the banking line getting a fee, and nobody being bothered to make it stop. A "Due Diligence Underwriter," once told that a person tasked with assessing the loans and mortgages, who says, "It wasn't uncommon for underwriters to laugh at the loans being given." But his boss would dismiss the concerns and say, "The loan looks reasonable to me." The boss's bosses would then sell a package of dubious loans to investors with an assertion that everything was fine. At one point, Countrywide was estimated to have assets of $200-billion. When it was acquired by Bank of America in 2008, its assets were estimated at only $2.8-billion.
This kind of information is absolutely crucial to understanding what caused the subprime crisis. There are people out there still willing to argue that the government somehow "forced the banks to lend" to unworthy applicants. In reality, it was unscrupulous companies like Countrywide that were cranking out loans en masse, knowing that these loans would be unloaded down the line, first to banks and then to sucker investors like pension funds and foreign trade unions, almost as soon as they were created.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.