Ethics, and Corporate Governance the Term Paper

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Because lending institutions stood to lose anytime borrowers defaulted on a loan, lenders always engaged in a very careful process of ensuring that loan applicants were capable of repaying any debts they sought to take on (Phillips, 2008).

Deregulation shortly before the turn of the century eliminated the self-interest basis of rejecting risky debtors, leaving only legal and ethical obligations to exercise due diligence in good faith (Phillips, 2008). Unfortunately, mortgage lenders throughout the nation began issuing loans irresponsibly and often without any collateral or interest due on the loan. Since they intended to sell off the obligation anyway, they had little concern for what might happen subsequently. Likewise, home realtors and mortgage brokers began aggressively soliciting business from customers unethically, often by exploiting their ignorance about variable-rate mortgage loans. Unfortunately, this process also triggered an artificial housing bubble based largely on inflated property value statements and those overvalued but unstable and improperly secured loan obligations were subsequently incorporated into commercial paper that (as it turned out) were not even understood by executives and risk managers at the largest investment firms in the world.

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Ultimately, the current U.S. economic crisis serves as one of the most comprehensive examples of the need for effective government oversight, business ethics, and corporate governance. Inadvisable government deregulation removed the most natural check on corporate and individual professional ethical conduct and precipitated a systemic failure of home property market on a national scale. Without formal regulation, unethical practices quickly overtook an entire industry and nearly bankrupted the nation.

Source Consulted

Halbert T. And Ingulli E. (2008). Law & Ethics in the Business Environment. Cincinnati,

OH: West Legal Studies.

Phillips K. (2008). "Bad Money: Reckless Finance, Failed Politics, and the….....

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