Ethics Bank bailout
Abstract
This paper explores the ethics of bank executives receiving large bonuses despite the fact that they received a bailout. I identify the utilitarian and deontological implications of these executives’ actions. This paper also examines if the executives deserved the bonuses, did the banks need a bonus, and how the banks should have been regulated by the banks. Keywords: bailout, utilitarian, deontology
Ethics of Bank Bailout Bonuses
Currently the economy is still in “The Great Recession” largely due to the fallout caused by banks. Banks caused this fallout by giving out home loans to unqualified borrowers. The banks approved loans they know could not be repaid by the borrower because of the terms such as adjustable rates. These home loans started defaulting; which started a domino effect of bank failures, further driving the economy into a downward spiral. In came the government, armed with astronomical sums of money determined to rescue these large financial institutions. Enrich, Hilsenrath, and Solomon (2009) state that 700 billion dollars of taxpayer money was used to bailout these banks under the Troubled Assets Relief Program (TARP). It wasn’t long after these bailouts that these banks continued to reward the executives with large bonuses. Should have these top executives of these major banks that received the bailout money been allowed to receive large bonuses? I say definitely not because it was wrong under the provisions of utilitarian ethics which I believe should have been applied in this situation. These executives were at the helm when these banks failed. Bonuses should be rewards for success not compensation for a title or position. If these banks had enough money to give bonuses then the question of do they really need a bailout should be asked. Furthermore, this bailout money did not belong to the banks to give out as they pleased, it belonged to the taxpayers and the money should have been accompanied by stringent
This paper explores the ethics of bank executives receiving large bonuses despite the fact that they received a bailout. I identify the utilitarian and deontological implications of these executives’ actions. This paper also examines if the executives deserved the bonuses, did the banks need a bonus, and how the banks should have been regulated by the banks. Keywords: bailout, utilitarian, deontology
Ethics of Bank Bailout Bonuses
Currently the economy is still in “The Great Recession” largely due to the fallout caused by banks. Banks caused this fallout by giving out home loans to unqualified borrowers. The banks approved loans they know could not be repaid by the borrower because of the terms such as adjustable rates. These home loans started defaulting; which started a domino effect of bank failures, further driving the economy into a downward spiral. In came the government, armed with astronomical sums of money determined to rescue these large financial institutions. Enrich, Hilsenrath, and Solomon (2009) state that 700 billion dollars of taxpayer money was used to bailout these banks under the Troubled Assets Relief Program (TARP). It wasn’t long after these bailouts that these banks continued to reward the executives with large bonuses. Should have these top executives of these major banks that received the bailout money been allowed to receive large bonuses? I say definitely not because it was wrong under the provisions of utilitarian ethics which I believe should have been applied in this situation. These executives were at the helm when these banks failed. Bonuses should be rewards for success not compensation for a title or position. If these banks had enough money to give bonuses then the question of do they really need a bailout should be asked. Furthermore, this bailout money did not belong to the banks to give out as they pleased, it belonged to the taxpayers and the money should have been accompanied by stringent
References: Alexander, L., & Moore, M., (2008, Aug 29). Deontological Ethics. The Stanford Encyclopedia of Philosophy, Fall 2008 Edition. Retrieved from http://plato.stanford.edu/archives/fall2008/entries/ethics-deontological/>. Andre C., & Velasquez M. (1989). Calculating Consequences: The Utilitarian Approach to Ethics. Retrieved from http://www.scu.edu/ethics/publications/iie/v2n1/calculating.html Despite Bailout, Bank Chiefs Received Bonuses. (2008, Dec 22). The Washington Times. Retrieved from http://www.washingtontimes.com/news/2008/dec/22/despite-bailout-bank-chiefs-received-bonuses/?page=2 Freifeld, K., (2009, July 30). Banks Paid $32.6 Billion in Bonuses Amid U.S. Bailout. Retrieved from http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aHURVoSUqpho Solomon D., Enrich D., & Hilsenrath J. (2009, Jan 29). New bank bailout could cost $2 trillion. Retrieved from http://online.wsj.com/article/SB123319689681827391.html Waller, B. (2005). Consider Ethics: Theory, Readings, and Contemporary Issues. New York, NY: Pearson Longman.