To address the rising concern that algorithmic decision-making may reinforce discriminatory biases, researchers have proposed many notions of fairness and corresponding mathematical formalizations. Each of these notions is often presented as a one-size-fits-all, absolute condition; however, in reality, the practical and ethical trade-offs are unavoidable and more complex. We introduce a new approach that considers fairness—not as a binary, absolute mathematical condition—but rather, as a relational notion in comparison to alternative decisionmaking processes. Using US mortgage lending as an example (...) use case, we discuss the ethical foundations of each definition of fairness and demonstrate that our proposed methodology more closely captures the ethical trade-offs of the decision-maker, as well as forcing a more explicit representation of which values and objectives are prioritised. (shrink)

Recent research has emphasized the negative effects of finance on macroeconomic performance and even cautioned of a “finance curse.” As one of the main drivers of financial sector growth, mortgages have traditionally been hailed as increasing the number of homeowners in a country. This article uses long-run panel data for seventeen countries between 1920 and 2013 to show that the effect of the “great mortgaging” on homeownership rates is not universally positive. Increasing mortgage debt appears to be neither necessary (...) nor sufficient for higher homeownership levels. There were periods of rising homeownership levels without much increase in mortgages before 1980, thanks to government programs, purchasing power increases, and less inflated house prices. There have also been mortgage increases without homeownership growth, but with house price bubbles thereafter. The liberalization of financial markets might after all be a poor substitute for more traditional housing policies. (shrink)

The current debate on U.S. housing policy focuses on the role of the government in supporting the mortgage market. Existing organizations (Fannie Mae/Freddie Mac) are in conservatorship status, and Congress is considering alternative structures and guarantees including the Johnson‐Crapo bill, to provide catastrophic insurance in support of the coverage from private companies. The resolution of this issue is complicated by the various activities involved in the issue—investment securities, public policy, macroeconomics, accounting, and insurance. This article reviews the impact of (...) these activities on U.S. housing, with a discussion of the feasibility of creating a catastrophic insurance program similar to that of the Federal Deposit Insurance Corporation. The federal government has successfully operated catastrophic insurance programs in support of private sector initiatives, and this experience—while certainly not perfect—may be a reasonable approach to the current Fannie/Freddie dilemma. (shrink)

We investigate whether religion acts as a deterrent to the types of mortgage misrepresentation that played a significant role in the recent housing boom and bust. Using a large sample of mortgages originated from 2000 to 2007, we provide evidence that local religious adherence is associated with a lower likelihood of home appraisal overstatement and owner occupancy misreporting. The evidence on borrower income misrepresentation is mixed. Religiosity does not appear to reduce the incidence of income misrepresentation; however, it seems (...) to restrain the degree to which income is misrepresented. Our results are generally consistent with the hypothesis that religion, as a set of social norms, fosters ethical behavior, and possibly risk aversion, in the mortgage market. (shrink)

This article proposes a framework for the analysis of experienced discrimination in home mortgages. It addresses the problem of home mortgage lending discrimination in one of the richest areas of northern Italy. Employees of a local hospital were interviewed to study their perception of discriminatory behavior related to home financing. The analysis follows two steps. The first evaluates self-selection and the second focuses on the likelihood that applications are accepted by the bank. Findings show that discrimination is likely to (...) appear when the applicant’s nationality is considered. In addition to its findings, the study provides an original econometric model on a two-step procedure to test perceived discrimination and suggests a method and approach that may constitute a point of reference for those willing to study perceived discrimination. (shrink)

Since 2013, mortgage advisory has become an independent profession in the Netherlands. Initially working for mortgage providers, the newly nonpartisan advisers now work for standard advisory fees, thereby reducing conflicts of interest. In this article, I provide an ethical analysis of the different types of ethos of mortgage advisers, that is, the ways they see and talk about, and relate to their work in a certain way. The central research question is: What different kinds of ethos do (...) mortgage advisers have, and which moral dilemmas do they experience in their advisory work? The existence of moral dilemmas is controversial in ethics but nonetheless experienced in real-world business practice. An “ethological” understanding of morality is developed in this paper to understand how these dilemmas are experienced. Twenty-nine mortgage advisers have participated in Q methodological research, a mixed qualitative–quantitative small-sample method. Three different types of ethos were found: Principled Advisers, Moral Advisers, and Minimal Morality Advisers. In considering these three types, I argue that many mortgage advisers should professionalize their ethical stance and learn to address situations in which moral values are neglected. Business ethicists, in turn, need to acknowledge that something may be considered morally inappropriate but is still defensible in some other sense. In this paper, I develop a “layered” conception of business ethics that broadens the perspective from universal notions, such as “rights” and “duties,” toward a concrete ethos that people have in a certain professional practice. (shrink)

On August 22, 2005 the U.S. Environmental Protection Agency issued proposed new regulations for radiation releases from the planned permanent U.S. nuclear-waste repository in Yucca Mountain, Nevada. The goal of the new standards is to provide public-health protection for the next million years — even though everyone admits that the radioactive wastes will leak. Regulations now guarantee individual and equal protection against all radiation exposures above the legal limit. Instead E.P.A. recommended different radiation exposure-limits for different time periods. It also (...) recommended using only the arithmetic mean of the dose distribution, to assess regulatory compliance during one time period, but using only the median dose to assess compliance during another period. This piece argues that these two changes — in exposure-limits and in methods of assessing regulatory compliance — have at least four disturbing consequences. The changes would threaten equal protection, ignore the needs of the most vulnerable, allow many fatal exposures, and sanction scientifically flawed dose calculations. (shrink)

Conflicts of interest are pervasive in the financial industry. Globally, policymakers are seeking ways to limit such conflicts and curb the resulting misselling of financial products. This study investigates the effects of a prominent policy instrument: the mandatory disclosure of financial intermediaries’ mortgage commissions. Using unique confidential regulatory data, we evaluate the mandatory commission disclosure of mortgage sales that was implemented in the Netherlands in 2009. We find that, contrary to some predictions based on prior experimental research, the (...) association between risky sales and intermediaries’ commission-dependency decreased after the introduction of disclosure regulation, indicating reduced misselling. More commission-dependent intermediaries experienced relative decreases in mortgage revenues, but also show a relative increase in revenues from non-disclosure products, indicating a shift of focus to these products. This suggests that while disclosure policies may contribute to mitigating conflicts of interest, policymakers also need to consider possible adverse effects of disclosure regulations on non-substitutable products in firms’ product portfolios. (shrink)

The large-scale proliferation of China’s new type of agricultural entities has given rise to a higher demand for funds. Farmers have insufficient effective collateral, which makes it difficult for them to obtain sufficient loans. Chinese financial institutions have developed a biological asset mortgage loan business to cope with this situation. China has not considered biological mortgages but has been using real estate and asset mortgage models with strong realizability. This innovative financial business has achieved positive results since it (...) was attempted, but it also faces many risks. It is very important to comprehensively and accurately consider the risk factors of biological asset mortgage loans. Based on 1249 production and operation data samples of new agricultural entities in Zhejiang, Henan, and Shandong provinces, this study constructs an XGBoost model for empirical analysis and compares it with logical regression, support vector machine, and random forest algorithms to obtain the optimal model and feature importance value. According to the characteristic importance value, a biological asset mortgage loan risk assessment system with 4 primary indicators and 20 secondary indicators is established, which can effectively identify the biological asset mortgage loan risk of new agricultural entities. (shrink)

The conventional wisdom regarding the creation of federal housing programs during the Great Depression cites market failure as the key factor leading to government action. A review of the historical record regarding one program in particular, the Federal Housing Administration's insurance of real‐estate mortgages, suggests a more complex picture. Amortized loans were not created anew by the FHA but had been developed previously by various financial institutions; their use by national banks was restricted by law. What market failure occurred seems (...) to have been induced, at least in part, by the federal government. (shrink)

This essay revisits the question of inheritance, legacy and handing-down (das Erbe) as it is developed in Heidegger's Being and Time. A careful reading especially of paragraphs 6 and 72–74 allows us to consider whether Heidegger's notion of inheritance might not be far more resistant to modes of premature closure—such as its apparent exclusion of das Erbe from the workings of Destruktion—than readers often have perceived it to be. In a second step, the discussion of Heidegger's inheritance opens onto some (...) of Derrida's fundamental reflections on the mortgage of inheritance, in which Heidegger is never far away, even when his work is not the ostensibly primary topic of analysis. If Derrida suggests that certain difficulties ‘never disappear from Heidegger's discourse’ and that they ‘bring the consequences of a serious mortgage to weigh upon the whole of his thought’, the legacies of this Heideggerean inheritance call for perpetual reappraisal. (shrink)

In many Western capitalist economies, private indebtedness is pervasive, but it has received little attention from political philosophers. Economic theory emphasizes the liberating potential of debt contracts, but its picture is based on assumptions that do not always hold, especially when there is a background of structural injustice. Private debt contracts are likely to miss their liberating potential if there is deception or lack of information, if there is insufficient access to (regular forms of) credit, or if credit is overly (...) expensive. Markets for private debt can be mechanisms of structural injustice: rather than playing a neutral role, they reinforce injustices, because the failures of debt to be liberating disproportionately hit individuals in disadvantaged positions. By individualizing what are in fact structural problems, private debt can contribute to stigmatization, social exclusion and oppression. What is at stake, from a perspective of structural justice, is not only the distribution of income, but also the distribution of risk. The problems of private debt markets therefore require political attention. In addition to fighting the structural injustices that form the background condititions of private debt, it is also worth addressing private debt markets themselves. (shrink)

This paper explores the behavior of the banking industry in the new business environment that arose after the subprime crisis. The main hypothesis is that there are two major types of banking institutions: conventional banks and ethical banks. Each has a distinct business model. To test how they have reacted to the new environment, factor analysis techniques have been used. The main findings are twofold. Firstly, the new financial context has indeed caused the behavior of mainstream banks to change. Within (...) this group, one can further distinguish between those that have tried to anticipate the changes by adopting a more responsible financial attitude and those that have merely modified their banking practice to comply with the new regulatory framework. Secondly, there are the so-called ethical banks. Interestingly, their behavior has scarcely been altered by the new financial context. The main conclusion is that the different response of both types of banks reflects the existence of a distinct business model. (shrink)

The subprime mortgage crisis which was caused to a large degree by questionable mortgage lending and securitization practices that were furthered by deregulatory policies devastated the economy, led to large scale unemployment, and caused the foreclosure of millions of homes. There is evidence that numerous mortgage companies, financial firms, rating agencies, and high-level professionals were involved in unethical and often fraudulent business practices leading to the most severe economic meltdown since the Great Depression. In spite of the (...) great economic and social harm, there was a lack of criminal sanctions against those companies and individuals, who were involved in creating the crisis that reached even global dimensions. This article analyses the reasons for and the possible social impacts of the lack of criminal sanctions against those who crossed the line between unethical and criminal business practices. (shrink)

This case study examines five dimensions of the 2007–2009 financial crisis in the United States: the devastating effects of the financial crisis on the U.S. economy, including unparalleled unemployment, massive declines in gross domestic product, and the prolonged mortgage foreclosure crisis; the multiple causes of the financial crisis and panic, such as the housing and bond bubbles, excessive leverage, lax financial regulation, disgraceful banking practices, and abysmal rating agency performance; the extraordinary efforts of the Federal Reserve, the Federal Reserve (...) Bank of New York, and the Department of the Treasury to stem the financial freefall triggered by the crisis and resuscitate financial institutions, the ethical implications of the unprecedented actions by government institutions to rescue financial institutions and drag the country back from the brink of global financial collapse, and the conduct of the various parties contributing to the financial crisis, such as the shoddy behavior of mortgage brokers, the massive securitization of mortgages into overly complex bonds, the excessive leverage of financial institutions, the disgraceful work of bond rating firms, the abysmal risk management systems employed by financial institutions, and the massive operations of the shadow banking and over-the-counter derivatives markets; and the major provisions of the Dodd–Frank Wall Street Reform and Consumer Protection Act signed into law to in response to the financial crisis and for the purpose of correcting the egregious conduct of major financial institutions. (shrink)

In this study, I examine the role racial minorities in the boardroom can play in reducing social injustice by promoting more equal access to mortgage credit to minority households. I develop a simple theoretical model that posits directors who are racial minorities provide the credit unions they govern with a perspective that shapes lenders’ trust of minority applicants. This trust is shaped by homophily and the tendency of individuals to prefer interactions with similar individuals. Using mortgage loan data (...) from a cross-section of credit unions in the United States from 185,446 applications, I find that credit unions where the majority of board members are minorities are less likely to reject a similarly qualified minority applicant than their counterparts. Governance by minority directors significantly reduces the effects of discrimination faced by minority applicants. The board’s effect is strongest in minority neighborhoods and where the homophily is stronger between directors and applicants. (shrink)

To investigate the role of anger and anxiety traits on psychological attitudes about consumer behaviour, we asked to participants their perceptions and preferences about housing loans. Results show that: mortgage risk perception is negatively associated with trait anger and positively with trait anxiety, whereas the opposite happens for housing loan predictability; trait anger is positively associated with preference for adjustable-rate mortgage, whereas trait anxiety predicts a preference for no form of housing loan. These findings fit with a growing (...) body of evidence suggesting that personality traits influence perceptions and preferences about financial risk-taking. (shrink)

Sustainable and ethical leadership in the financial industry expand in importance since the financial crisis of 2007–2009. This research examined the level of sustainable and ethical leadership of leaders in mortgage loan originator (MLO) organizations, as perceived by loan originators. The Perceived Leadership Survey (PLIS) developed by Craig and Gustafson (Leadersh Q 9(2):127–145, 1998) and the Sustainable Leadership Questionnaire (SLQ) developed by McCann and Holt (Int J Sustain Strat Manage 2(2):204–210, 2011) were utilized for this research. The survey results (...) yielded high levels of both ethical and sustainable leadership. Employees also felt their leadership was encouraging ethical and sustainable behavior. However, correlations between the PLIS and SLQ did not prove to be dependent or closely correlated. (shrink)

The expansion of competition on financial services market forces to search for new ways of development. A bank-insurance cooperation, which is more and more popular in the world and in Poland, becomes an effective remedy to this problem and a factor which stimulates rivalry and competition. The final beneficent of this cooperation is a customer for whom a diverse market offer of financial services means creation of added value. The customer’s satisfaction with that kind of services is important to further (...) development of bank-insurance cooperation. The aim of this work is to estimate whether the services of an integrated bank-insurance offer and insurances with mortgage credits are friendly and useful, and also whether they assure comfort and safety or may cause risk. (shrink)

The access of Poland to the EU caused the creation of the consumer protection system which consists of legal controls and different institutions such as e.g. UOKiK, BA, RZu. The aim of the study is to show problem of protection of bank services market consumer. The range of bank services is limited here to mortgage loans. Changes on the mortgage loan market in Poland during 2005–2008 are analysed in this work. The crisis on financial markets and its consequences (...) have also been considered. The author presents the bank actions in the face of consumers during the crisis and the possibilities of the solving the disputes with dissatisfied consumers. (shrink)

Hidden Mortgages. Taking the case of Oswald Spengler as an example, this article discusses the politics and practices of canonization and exclusion within the history of science since the 1990s and advocates a critical revision of the discipline's own history, its founding figures and main influences.

This chapter examines the convergence of digital assets and real estate transactions. It analyzes two models that have emerged, both purporting to revolutionize property transfers through distributed ledger technology. Model 1 proposes direct ownership of real property through digital assets, claiming that tokens can embody and transfer title to real estate. The analysis demonstrates that this approach encounters fundamental legal obstacles. Property law’s statute of frauds, deed requirements, and title assurance systems create formidable barriers. Concurrently, UCC Article 12 explicitly excludes (...) real property interests from its tokenization framework. Although electronic transaction statutes theoretically permit digital assets to function as electronic deeds, the chapter reveals that such instruments cannot operate as bearer instruments of title as market participants envision. Each transfer would require metadata modifications identifying new grantors and grantees, while recording system incompatibilities create substantial implementation obstacles that negate purported efficiencies. Model 2 employs indirect ownership through tokens representing equity interests in entities that hold real property. While legally viable, this structure transforms financing arrangements from protective mortgage law to Article 9’s commercial enforcement regime. This shift eliminates judicial oversight, redemption periods, and consumer safeguards for residential borrowers while exposing lenders to competing property liens and risks of equitable mortgage recharacterization. The chapter concludes that both models generate cascading legal complications that overwhelm any theoretical benefits. (shrink)

This chapter focuses on the credit decisions of individuals. How debt fits into the life-cycle model is described. The life-cycle model implies that people typically borrow early in their lives to pay for their education and the start of their careers but become eventually become savers building up assets for retirement. Unfortunately, debt can have a dark side. This dark side is on display in the inappropriate use of payday loans and credit card debt. Mortgages are a major form of (...) household debt. The importance of mortgage term is explored, along with when it makes sense to refinance or even default. (shrink)

Drawing on Dutch mortgage orientation consultations, the present study uncovers how mortgage advisors communicate information packages to laypersons. These information packages are jointly constructed by advisors and customers as a distinct activity within a professional advisory setting. We name this activity ‘explicative telling’. Through a systematic analysis of 57 of such explicative tellings we will demonstrate that this explicative telling activity consists of doing preliminary work; a body in which general, official information about a specific mortgage topic (...) is given and information is applied to the customer’s situation; and closing sequences. Essential to the explicative telling activity is the recipient orientation of mortgage information, and also the advisors’ display of accountability for providing eligible information. This is supported by the irreversibility of the preliminary phase and by the presence of news deliverer upshot formulations during the body of the telling. (shrink)

In this topical book, Boudewijn de Bruin examines the ethical 'blind spots' that lay at the heart of the global financial crisis. He argues that the most important moral problem in finance is not the 'greed is good' culture, but rather the epistemic shortcomings of bankers, clients, rating agencies and regulators. Drawing on insights from economics, psychology and philosophy, de Bruin develops a novel theory of epistemic virtue and applies it to racist and sexist lending practices, subprime mortgages, CEO hubris, (...) the Madoff scandal, professionalism in accountancy and regulatory outsourcing of epistemic responsibility. With its multidisciplinary reach, Ethics and the Global Financial Crisis will appeal to scholars working in philosophy, business ethics, economics, psychology and the sociology of finance. The many concrete examples and case studies mean that this book will also prove useful to policy-makers and regulators. (shrink)

Data-driven predictive algorithms are widely used to automate and guide high-stake decision making such as bail and parole recommendation, medical resource distribution, and mortgage allocation. Nevertheless, harmful outcomes biased against vulnerable groups have been reported. The growing research field known as 'algorithmic fairness' aims to mitigate these harmful biases. Its primary methodology consists in proposing mathematical metrics to address the social harms resulting from an algorithm's biased outputs. The metrics are typically motivated by -- or substantively rooted in -- (...) ideals of distributive justice, as formulated by political and legal philosophers. The perspectives of feminist political philosophers on social justice, by contrast, have been largely neglected. Some feminist philosophers have criticized the local scope of the paradigm of distributive justice and have proposed corrective amendments to surmount its limitations. The present paper brings some key insights of feminist political philosophy to algorithmic fairness. The paper has three goals. First, I show that algorithmic fairness does not accommodate structural injustices in its current scope. Second, I defend the relevance of structural injustices -- as pioneered in the contemporary philosophical literature by Iris Marion Young -- to algorithmic fairness. Third, I take some steps in developing the paradigm of 'responsible algorithmic fairness' to correct for errors in the current scope and implementation of algorithmic fairness. I close by some reflections of directions for future research. (shrink)

This first edition of this book was a broad study, drawing on a wide range of published research and historical evidence, of the enormous stock market boom that started around 1982 and picked up incredible speed after 1995. Although it took as its specific starting point this ongoing boom, it placed it in the context of stock market booms generally, and it also made concrete suggestions regarding policy changes that should be initiated in response to this and other such booms. (...) The book argued that the boom represents a speculative bubble, not grounded in sensible economic fundamentals. Part one of the book considered structural factors behind the boom. A list of twelve precipitating factors that appear to be its ultimate causes was given. Amplification mechanisms, naturally-occurring Ponzi processes, that enlarge the effects of these precipitating factors, were described. Part Two discussed cultural factors, the effects of the news media, and of "new era" economic thinking. Part Three discussed psychological factors, psychological anchors for the market and herd behavior. Part Four discussed attempts to rationalize exuberance: efficient markets theory and theories that investors are learning. Part Five presented policy options and actions that should be taken. The second edition, 2005, added an analysis of the real estate bubble as similar to the stock market bubble that preceded it, and warned that "Significant further rises in these markets could lead, eventually, to even more significant declines. The bad outcome could be that eventual declines would result in a substantial increase in the rate of personal bankruptcies, which could lead to a secondary string of bankruptcies of financial institutions as well. Another long-run consequence could be a decline in consumer and business confidence, and another, possibly worldwide, recession." Thus, the second edition of this book was among the first to warn of the global financial crisis that began with the subprime mortgage debacle in 2007. (shrink)

The current crisis is one outcome of the financialisation of contemporary capitalism. It arose in the USA because of the enormous expansion of mortgage-lending, including to the poorest layers of the working class. It became general because of the trading of debt by financial institutions. These phenomena are integral to financialisation. During the last three decades, large enterprises have turned to open markets to obtain finance, forcing banks to seek alternative sources of profit. One avenue has been provision of (...) financial services to individual workers. This trend has been facilitated by the retreat of public provision from housing, pensions, education, and so on. A further avenue has been to adopt investment-banking practices in open financial markets. The extraction of financial profits directly out of personal income constitutes financial expropriation. Combined with investment-banking, it has catalysed the current gigantic crisis. More broadly, financialisation has sustained the emergence of new layers of rentiers, defined primarily through their relation to the financial system rather than ownership of loanable capital. Finally, financialisation has posed important questions regarding finance-capital and imperialism. (shrink)

In this updated and revised version of his 2008 Society for Business Ethics presidential address, Richard Nielsen documents the characteristics and extent of the 2007–2009 economic crisis and analyzes how the ethics issues of the economic crisis are structurally related to a relatively new form of capitalism, high-leverage finance capitalism. Four types of high-leverage finance capitalism are considered: hedge funds; private equity-leveraged buyouts; high-leverage, subprime mortgage banking; and high-leverage banking.The structurally related problems with the four types of high-leverage finance (...) capitalism converged in something of a perfect economic storm. Explanations for the crisis are offered in the context of the type of the high-leverage finance capitalism system that permitted andfacilitated the economic crisis. Ethics issues and potential reforms are considered that may be able to mitigate the destructive effects of what Schumpeter referred to as the “creative destructive” effects of evolutionary forms of capitalism while realizing the Aristotelianeconomic ideal of creating wealth in such a way as to make us better people and the world a better place. (shrink)

The issue of voting rights for older children has been high on the political and philosophical agenda for quite some time now, and not without reason. Aside from principled moral and philosophical reasons why it is an important matter, many economic, environmental, and political issues are currently being decided—sometimes through indecision—that greatly impact the future of today’s children. Past and current generations of adults have, arguably, mortgaged their children’s future, and this makes the question whether (some) children should be granted (...) the right to vote all the more pressing. Should (some) children be given the right to vote? Moreover, does the answer to this question depend on civic education, on whether children have been deliberately prepared for the exercise of that right? These are the questions that will occupy us in this article. Our answer to the first will be that older children—children roughly between 14 and 16 years of age1—ought to be given the right to vote. (shrink)

I owe you a dinner invitation, you owe ten years on your mortgage, and the government owes billions. We speak confidently about these cases of debt, but is that concept clear in its meaning? This book aims to clarify the concept of debt so we can find better answers to important moral and political questions. This book seeks to accomplish two things. The first is to clarify the concept of debt by examining how the word is used in language. (...) The second is to develop a general, principled account of how debts generate genuine obligations. This allows us to avoid settling each case by a bare appeal to moral intuitions, which is what we seem to currently do. It requires a close examination of many institutions, e.g. money, contract law, profit-driven finance, government fiscal operations, and central banking. To properly understand the moral and political nature of debt, we must understand how these institutions have worked, how they do work, and how they might be made to work. There have been many excellent anthropological and sociological studies of debt and its related institutions. Philosophy can contribute to the emerging discussion and help us to keep our language precise and to identify the implicit principles contained in our intuitions. (shrink)

The financial crisis was caused by the complex, constantly growing web of regulations designed to constrain and redirect modern capitalism. This complexity made investors, bankers, and perhaps regulators themselves ignorant of regulations previously promulgated across decades and in different “fields” of regulation. These regulations interacted with each other to foster the issuance and securitization of subprime mortgages; their rating as AA or AAA; and their concentration on the balance sheets (and off the balance sheets) of many commercial and investment banks. (...) As a practical matter, it was impossible to predict the disastrous outcome of these interacting regulations. This fact calls into question the feasibility of the century-old attempt to create a hybrid capitalism in which regulations are supposed to remedy economic problems as they arise. (shrink)

ABSTRACT The main cause of the crisis was the behavior of the banks—largely a result of misguided incentives unrestrained by good regulation. Conservative ideology, along with unrealistic economic models of perfect information, perfect competition, and perfect markets, fostered lax regulation, and campaign contributions helped the political process along. The banks misjudged risk, wildly overleveraged, and paid their executives handsomely for being short‐sighted; lax regulation let them get away with it—putting at risk the entire economy. The mortgage brokers neglected due (...) diligence, since they would not bear the risk of default once their mortgages had been securitized and sold to others. Others can be blamed: the ratings agencies that judged subprime securities as investment grade; the Fed, which contributed low interest rates; the Bush administration, whose Iraq war and tax cuts for the rich made low interest rates necessary. But low interest rates can be a boon; it was the financial institutions that turned them into a bust. (shrink)

In the 1930s, the Home Owners’ Loan Corporation (HOLC) graded the mortgage security of urban US neighborhoods. In doing so, the HOLC engaged in the practice, imbued with racism and xenophobia, of “redlining” neighborhoods deemed “hazardous” for lenders. Redlining has caused persistent social, political and economic problems for communities of color. Linkages between redlining and contemporary food access remain unexamined, even though food access is essential to well-being. To investigate this, we used a census tract-level measure of low-income and (...) low grocery store food access from the US Department of Agriculture Food Access Research Atlas, redlining data from Mapping Inequality Project, and demographic data from the American Community Survey. We employed generalized estimating equations with robust covariance estimates to analyze data pertaining to 10,459 census tracts in 202 US cities. Tracts that the HOLC graded as “C” (“decline in desirability”) and “D” (“hazardous”) had reduced contemporary food access compared to those graded “A” (“best”). Increases in contemporary census tract proportions of Black, Hispanic, or other racial/ethnic minority residents, as well as disabled residents, were associated with reduced food access. Increases in contemporary proportions of residents age 75 years and older or those without a car were associated with better food access. Tracts that underwent housing redevelopment since being graded had better food access, while those undergoing gentrification had reduced food access. Results suggest that issues of redlining, housing discrimination, racism, ableism, displacement, and food inaccessibility are deeply intertwined. (shrink)

Systemic financial risk is one of the most significant collective action problems facing societies. The Great Recession brought attention to a tragedy of the commons in capital markets, in which market participants, from the first-time homebuyer to Wall Street financiers, acted in ways beneficial to themselves individually, but which together caused substantial collective harm. Two kinds of risk are at play in complex chains of transactions in financial markets: ordinary market risk and systemic risk. Two moral questions are relevant in (...) such cases. First, from the standpoint of interactional morality, does a person have a moral duty to avoid risk of harm to others if their financial transactions contribute in some way, however small, to the loss or harm? This article identifies the conditions in which persons are morally responsible in such cases. Second, from the standpoint of institutional morality, how should society distribute the risk of harm associated with massively complex financial markets? This question is considered in the context of the home mortgage credit market. Luck egalitarianism, in particular a Dworkinian insurance scheme to allocate risks and resources relating to mortgage credit and private home ownership, offers substantial promise. (shrink)

Natural Property Rights presents a novel theory of property based on individual, pre-political rights. The book argues that a just system of property protects people's rights to use resources and also orders those rights consistent with natural law and the public welfare. Drawing on influential property theorists such as Grotius, Locke, Blackstone, and early American statesmen and judges, as well as recent work in in normative and analytical philosophy, the book shows how natural rights guide political and legal reasoning about (...) property law. It examines how natural rights justify the most familiar institutions in property, including public property, ownership, the system of estates and future interests, leases, servitudes, mortgages, police regulation, and eminent domain. Thought-provoking and comprehensive, the book challenges leading contemporary justifications for property and shows how property both secures individual freedom and serves the common good. (shrink)

The credit crises experienced in the US in year 2008 is labeled as perhaps the most significant crises since the great depression. The roots of the crises were found in the default of the sub-prime mortgages and the failure occurred in both the US and the UK. Due to the integrated nature of international financial systems the spillover impacted many countries as the economies in Asia and Europe were purchasers of the sub-prime mortgages that originated in both UK and US. (...) The impact of the credit crises in Canada is of unique importance due to the close proximity to US, and both the US and Canada being of great strategic importance to each other as well as one of the largest trading partners.Even though the international financial credit crises adversely impacted many countries, the evidence that has come across recent years point towards the conclusion that Canada was able to weather the crises much better than many other countries. (shrink)

ABSTRACT The financial crisis was caused by the complex, constantly growing web of regulations designed to constrain and redirect modern capitalism. This complexity made investors, bankers, and perhaps regulators themselves ignorant of regulations promulgated across decades and in different “fields” of regulation. These regulations interacted with each other to foster the issuance and securitization of subprime mortgages; their rating as AA or AAA; and previously their concentration on the balance sheets (and off the balance sheets) of many commercial and investment (...) banks. As a practical matter, it was impossible to predict the disastrous outcome of these interacting regulations. This fact calls into question the feasibility of the century‐old attempt to create a hybrid capitalism in which regulations are supposed to remedy economic problems as they arise. (shrink)

In the wake of the current financial crises triggered by risky mortgage-backed securities, the question of ethics and risk-taking is once again at the front and center for both practitioners and academics. Although risk-taking is considered an integral part of strategic decision-making, sometimes firms could be propelled to take risks driven by reasons other than calculated strategic choices. The authors argue that a firm's risk-taking propensity is impacted by its ethical climate (egoistic or benevolent) and its emphasis on output (...) control to manage its marketing function. The firm's long-term orientation is argued to moderate the control–risk propensity relationship. The authors also extend research on risk and performance and argue that the association of risk-taking propensity and firm performance is contingent on the ownership (publicly traded versus privately held) structure of the firm. Based on survey data from a sample of manufacturing industries in the United States, the results show significant impact of ethical climate and marketing output control on a firm's risk-taking propensity; also risk-taking propensity shows a stronger association with firm performance in privately held firms than in publicly traded firms. (shrink)

The aim of this article is to show how the critically acclaimed and award winning film Margin Call may be used in business ethics teaching. Set in a fictional investment bank at the dawn of the financial crisis, the film zooms in on the motivations and decision-making of people who had much to lose from the crash of the hitherto very profitable mortgage-backed securities market. The film offers rich material for analysis of behaviours that contributed to the crisis. The (...) article will set out topics for classroom discussion, including the impact of incentives and power structures, contextual factors that distance people from the consequences of their actions, and considerations of how the banking industry may be transformed. (shrink)

ABSTRACT The underlying cause of the financial meltdown was much more mundane than a “crisis of capitalism”: The real origins lay in mostly obscure housing, tax, and regulatory policies of the U.S. government. The Community Reinvestment Act, the affordable‐housing “mission” of Fannie Mae and Freddie Mac, penalty‐free refinancing of home loans, penalty‐free defaults on home loans, tax preferences for home‐equity borrowing, and reduced capital requirements for banks that held mortgages and mortgage‐backed securities combined with each other to create the (...) incentives for both subprime lending and the housing bubble that eventually led to the financial collapse. (shrink)

ABSTRACT By means of the high ratings that they awarded to subprime mortgage‐backed bonds, the three major rating agencies—Moody's, Standard & Poor's, and Fitch—played a central role in the current financial crisis. Without these ratings, it is doubtful that subprime mortgages would have been issued in such huge amounts, since a major reason for the subprime lending boom was investor demand for high‐rated bonds—much of it generated by regulations that made such bonds mandatory for large institutional investors. And it (...) is even less likely that such bonds would have become concentrated on the balance sheets of the banks, for which they were rewarded by capital regulations that tilted toward high‐rated securities. Why, then, were the agencies excessively optimistic in their ratings of subprime mortgage‐backed securities? A combination of their fee structure, the complexity of the bonds that they were rating, insufficient historical data, some carelessness, and market pressures proved to be a potent brew. This combination was enabled, however, by seven decades of financial regulation that, beginning in the 1930s, had conferred the force of law upon these agencies' judgments about the creditworthiness of bonds and that, since 1975, had protected the three agencies from competition. (shrink)

ABSTRACTHow can political actors identify which putative expert is truly expert, given that any putative expert may be wrong about a given policy question; given that experts may therefore disagree with one another; and given that other members of the polity, being non-expert, can neither reliably adjudicate inter-expert disagreement nor detect when a consensus of experts is misguided? This would not be an important question if the problems dealt with by politics were usually simple ones, in the sense that the (...) answer to them is self-evident. But to the extent that political problems are complex, expertise is required to answer them—although if such expertise exists, we are unlikely to know who has it. This conundrum is illustrated by the financial crisis. The consensus views of financial regulators prior to the crisis appear to have been mistaken, in that the regulators not only failed to anticipate a crisis of the type that occurred, but adopted regulations that may have encouraged the concentration of mortgage risk in financial institutions. Similarly, once the crisis broke, academic financial experts, financial regulators, and journalists—who communicate information from one branch of the division of epistemic labor to another—converged on a narrative of the crisis that, once again, may plausibly be described as inaccurate, but that nonetheless has come to shape the understanding of the crisis shared by the rest of the polity. (shrink)

This article introduces the concept of “speculative expropriation” to reframe Marx’s analysis of expropriation in the context of settler colonialism and capitalism in the West. I begin by examining Marx’s ideas of primitive accumulation and original expropriation, showing how his incomplete analysis of social relations to land can be extended to the trans-Atlantic context. Drawing on Marx’s pre- Capital manuscripts, I examine his treatment of ground rent and its relationship to feudalism, highlighting how the development of capitalism in the West (...) relied on mechanisms overlooked in conventional readings of Marx’s work. I argue that settler colonialism in the New World did not follow the same logic as European primitive accumulation, where land was taken from peasants. Instead, speculative expropriators gave land to settlers, but only under specific racial and gendered conditions that tied landowners to the financial and political systems of the settler state. The land was often granted with mortgages and preemptive land sales, which placed settlers in debt and subjected them to the control of colonial institutions. This financial framework, grounded in the dispossession and genocide of Indigenous peoples, allowed capitalism to expand through speculative real estate and colonial constructs. By theorizing speculative expropriation, I show how the dynamics of settler colonialism reinvented capitalist accumulation, turning land ownership into a means of controlling settlers through debt rather than directly extracting their labor. This framework provides a new lens for understanding how capitalism expanded across the Atlantic and solidified its global reach in tandem with Indigenous dispossession and population replacement. (shrink)