SOCIAL RESPONSIBILITY

Enterprise and social responsibility

Enterprise and social responsibility

1.3 Using arguments based on the 'maxims' of duty, would you consider the UK banks to have acted ethically in their operations?

The subprime mortgage crisis emerged due to various causes which were interrelated. Especially the purchasing and financing of both the building and homes with an easy lending and low interest credit rates in the United States was the primary reason for the mortgage crisis. This crisis not only impacted the United States but also expanded outside its territories impacted the entire Europe. According to a German philosopher Immanuel Kent, for an action to be morally right, three conditions have to be satisfied: Consistency, Human dignity and Universality (Sahin, n.d, p. 3).

Kantian ethic is based on the fundamental categorical imperatives which are essentially nonutilitarian. Kant believed that an action is morally right if the purpose of the act is morally correct irrespective of the consequences. The dynamics of mortgage market have to placed in the Kantian perspective to analyze the causes of subprime crisis from Kantian perspective. Maxim of the mortgage market can be formed as “anyone will borrow subprime mortgage credits whenever anyone needs money for financing”. A maxim is morally acceptable if and only if it is universalizable. The maxim mentioned above disrupts the first categorical imperative which states that an act is morally right if its maxim is universal” i.e. if everyone starts borrowing even after knowing that he or she won't be able to repay the entire amount it means that the maxim is not universal. Also the UK banks also violated the second categorical imperative which states that all the persons should be treated not as a means but rather an end in itself but UK banks used the mortgage borrowers as a means to achieve more profitability after the deregulation.

Also the lending act by UK banks must have been out of the moral obligation and follow some law autonomously to comply with the second categorical imperative. But the lending practice by the banks was out of the desire to expand the credit among the masses. These motives and also the ones mentioned above render the act to be immoral.

We can safely say that the motives of the customers and lenders are not morally right sine it totally disobey the three categorical imperatives. The immoral acts of the mortgage lenders are the primary causes of mortgage crisis (Farhat, 2010, p. 1)

1.4 What clashes of rights are involved in this situation? Is it possible to judge their relative importance? Whose rights matter most in this situation?

The clash of rights that I can think of in this situation is between the mortgage lender and the mortgage borrower. The basic mechanism of sub prime crisis was that the low credit quality loans granted at the reduced interest rates were then securitized and sold to the investors who were willing to invest in the mortgage sector. The proceeds from the loan were used to pay for the return ...