The Subprime Meltdown - Movie Review Example

The Subprime Meltdown The movie Inside Job unravels varied unethical practices that spiked the economic downturn in the world economy and gave way to a debilitating recession. One of the unethical acts of omission that precipitated the housing bubble bust was the subprime meltdown. The low interest rates ushered in by the Federal Reserve in the wake of 9/11 to boost the American economy led to positive developments in the local real estate markets. Many Americans wanted to profit from the soaring real estate prices and they did not mind availing loans at exorbitant interest rates.

Many banks, carried away by the rising real estate prices, extended loans to even those people who had a compromised credit history or did not qualify to secure such loans. The banks went extending such risky loans to profit from the high interest rates agreed upon by such people. Being too overconfident that their creditors will eventually be able to honor such mortgages, considering the rising real estate prices, these banks did not care to be particular about the credit history of many of the creditors.

By omitting this cardinal practice they not only compromised the eventual financial health of their banks, but also betrayed their share holders. The irony was that many Western investment firms also gave in to this opportunistic greed and readily purchased these loans from the erring banks to repackage them and sell them as Mortgage Backed Securities to their customers. The net result was that when in 2007 many customers started defaulting on their mortgages, it gave way to a chain reaction, leading to many banks and financial institutions going bankrupt.

This avoidable economic debacle was caused by the basic unethical decision made by many banks to extend risky loans to customers with poor credit history. Simply speaking, defaulting customers, irresponsible banks, and unrealistically speculative investment firms were responsible for this fall.Primarily, the parties involved in these acts of omission were guided by ethical egoism. It is an ethical philosophy that lays stress on validating the rightness or wrongness of any action in relation to the extent to which it serves one’s self interest.

The banks and their customers opted for risky mortgages led by their greed for higher profits, even at the cost of forsaking sound financial practices.In contrast if the investors and financial institutions had pursued a philosophy of ethical utilitarianism, which favors such decisions that enhance positive outcomes for the maximum number of people associated with such a decision, things would have turned different. Such an approach would have made the banks and financial institutions consider the impact of their decisions on their financial health, the interests of their shareholders and all the customers and their responsibility towards the larger economy.

This would have certainly prevented them from engaging in greed and opting for subprime mortgages. Similarly by affiliating to ethical deontology the banks and financial institutions could have again avoided this crisis. Ethical deontology judges the rightness of any decision in relation to the extent to which it makes an institution or individual fulfill recognized duties towards one and others. Thereby, if the banks and financial institutions had adhered to ethical deontology, they would have certainly fulfilled their duty of following sound ethical practices and would not have extended loans to customers with poor credit history.

This would also have made banks consider their duty towards their total customer base, their shareholders and investors. No doubt, the subprime mortgage meltdown was the end result of an allegiance to a wrong ethical philosophy by the concerned parties.