Thursday, January 12, 2017

Critique of the Role of Leadership Decision-making in the Subprime Loan Financial Crisis

The subprime loan financial crisis would have been avoided if the leaders of the companies involved made the right decisions. Obviously, the leaders were driven by profit motive, but blinded by greed, the lending companies went overboard and decided to loan money to people that may not be able to repay the loans. Gilbert (2010) gives an in depth analysis of the parties involved in this crisis. The following were responsible for the subprime loan financial crisis:

  1. Mortgage brokers who failed to validate incomes through asking the right questions among other things
  2. Borrowers who lied in their applications
  3. Securitizers who combined individual mortgage loans into bundles and the subsequent collateralization of mortgage obligation 
  4. Rating agencies who gave higher rating to the collateralized mortgage obligation
  5. Investors who purchased investment without due diligence.
All in all, the near collapse of the US economy as a result of the failing housing market, the financial crisis was caused by irresponsible decisions by leaders of the lending and investing companies.


Gilbert, J. (2011, Spring). Moral Duties in Business and Their Societal Impacts: The Case of the Subprime Lending Mess. Business & Society Review116(1), 87-107.

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