Financial Crisis -- Critical Issues Research Paper

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In that regard, the regulatory changes that allowed banks and other mortgage lenders to sell off their obligations (and the development of complex investment techniques to do so) undermined the integrity of the U.S. housing market. Specifically, Wall Street investment firms and mortgage banks began purchasing, repackaging, and trading in all of the individual home mortgages simultaneous to the elimination of any natural incentive of lenders to ensure that their borrowers were safe risks (Bhide, 2009). The obvious solution to that problem would be to prosecute lenders, mortgage brokers, realtors, and certain borrowers who deliberately ignored their legal duties to conduct business in good faith (Bradley, 2008).

Fundamental Ethical Problems and Conflicts of Interests

Throughout the financial services and mortgage lending industry that developed after the most recent era of deregulation, the de facto elimination of any liability or risk on the part of lenders for bad loans generated fraudulent practices among lenders, brokers, and lenders in connection with inflated income and credit worthiness documentation (Bhide, 2009).

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Without any consequences to lenders for making bad loans that were immediately sold off to Wall Street as tradable obligations, an artificial housing boom emerged, created by unethical profiteering throughout the U.S. housing industry (Bradley, 2008). The obvious solution to this problem would re-imposing the regulations necessary to make sure that lenders cannot profit from making bad loans and punishing those who purposely did so to create the problems that ultimately culminated in the U.S. financial crisis of 2008......

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