2008 Woodie Awards
Subprime market exposes deeper flaws in morality
Michael Daly '08
Issue date: 10/10/07 Section: Opinion
- Page 1 of 1
What happened to personal responsibility in our culture today? The recent meltdown of the mortgage market speaks volumes about a much larger trend in our country today. We as a people have ceased to believe in consequences. The subprime lending that caused this economic downturn is a symptom of this disease that is creeping into every aspect of our society. Somehow we became a society that dissociates our actions from reality. The reality is that all the actions we take may have unintended consequences. But far worse is that we have no thought for how they affect others.
The subprime lending problem essentially boils down to the fact that banks loaned money to people who would have, by any decent measure, no way to repay them. The banks were betting on the "fact" that housing prices would continue to rise indefinitely, allowing them to continue to pay for the homes. However, the banks issuing the loans had no reason at all to be careful to whom they lent from a bottom line perspective. The banks were turning around and selling the mortgages to other companies. This led to a very bad ethical decision on the banks' part. They were sure to get the short term cash assets for the mortgage from investors. But that also meant they had no reason at all to be careful about the long term.
Now many people are defaulting on loans they were not informed enough about to understand in the first place. Many of the loans being defaulted upon are adjustable rate mortgages, or ARMs. These start out with small interest levels but rise sharply after the first few "teaser" years. That can be a wonderful benefit for a young professional with a growing income, but for retirees or the disabled, it is catastrophic when their payments jump by hundreds of dollars a month on a fixed income. This was extremely unethical on the part of the banks. The banks unethically sold the mortgages to people who couldn't pay for them, and then unethically sold the mortgages a second time to investors. Now the housing market is falling, there is a large number of people without homes, and the United States has taken yet another hit in the international court of opinion.
This was predatory and wrong. To understand some of these mortgages one would need an accounting and finance degree to understand your possible economic futures. The banks trying to sell the loans were certainly not about to throw their customers into a cold shower. We are taught here at Saint Joseph's to not just be good businessmen and women, but to be good men and women. So what happened to personal responsibility?
The subprime lending problem essentially boils down to the fact that banks loaned money to people who would have, by any decent measure, no way to repay them. The banks were betting on the "fact" that housing prices would continue to rise indefinitely, allowing them to continue to pay for the homes. However, the banks issuing the loans had no reason at all to be careful to whom they lent from a bottom line perspective. The banks were turning around and selling the mortgages to other companies. This led to a very bad ethical decision on the banks' part. They were sure to get the short term cash assets for the mortgage from investors. But that also meant they had no reason at all to be careful about the long term.
Now many people are defaulting on loans they were not informed enough about to understand in the first place. Many of the loans being defaulted upon are adjustable rate mortgages, or ARMs. These start out with small interest levels but rise sharply after the first few "teaser" years. That can be a wonderful benefit for a young professional with a growing income, but for retirees or the disabled, it is catastrophic when their payments jump by hundreds of dollars a month on a fixed income. This was extremely unethical on the part of the banks. The banks unethically sold the mortgages to people who couldn't pay for them, and then unethically sold the mortgages a second time to investors. Now the housing market is falling, there is a large number of people without homes, and the United States has taken yet another hit in the international court of opinion.
This was predatory and wrong. To understand some of these mortgages one would need an accounting and finance degree to understand your possible economic futures. The banks trying to sell the loans were certainly not about to throw their customers into a cold shower. We are taught here at Saint Joseph's to not just be good businessmen and women, but to be good men and women. So what happened to personal responsibility?
Be the first to comment on this story