Countrywide Financial: the Sub-prime meltdown

Introduction

The term Sub-prime loan became famous all over the world following the sub-prime crisis in the United States. A sub-prime loan means riskier loans for the lender (and more efficient) than the premium category, particularly to describe a form of mortgage (mortgage).

Prime lending rate is the interest rate granted to borrowers considered most reliable for the lender the benefit is minimal risk but the disadvantage is low efficiency. A sub-prime loan is given to less reliable borrowers who are required to offset a higher rate, the risk for the lender is higher but the performance more interesting, and finally even more risky, but even better performance, there is the junk category. A sub-prime loan for the borrower is interesting, because there are sophisticated fixtures with variable rates and complex financial products could help keep rates low at the beginning of the loan (Ferrell, Fraedrich, and Ferrell, pp. 338).

Discussion

For creditors, sub-prime loans were considered individually risky but overall safe and profitable. This perception was based on a continued rapid rise in the price of the property.

Sub-prime loans have grown primarily in the United States and United Kingdom. In 2006, they represented the United States 23% of all mortgages taken out. In France, the sub-prime market was underdeveloped despite some political favors. In 2007, nearly three million U.S. households were in a default (Rutgers, pp. 74).

An overview

With regard to the ethical case sub-prime crisis, the law did not prohibit mixing sub-prime mortgages with other better quality to be perceived as an attractive investment. However, the law is the minimum standard of acceptable behavior. These entrepreneurs are not acting beyond the law (gray areas), not taking into account the enormous damage to individuals, communities and the environment.

We need to understand why ethical violations continue to occur in business. Here, the reason is obvious, self-interest. The government offers cheap credit is a good opportunity for banks to lend to others, even as someone with low ability to pay. 

The effects of sub-prime crisis have reached not only countries but also the long-term sustainable development of pillars as the environmental, social, or economic. These columns indicate that it must meet the needs of the present without compromising the ability of future generations to meet their own needs. In the social sphere, we see rising unemployment worldwide, and many depend on the demand of the U.S. economy (Arnold, pp. 171). Due to the financial crisis, there was a reduction in investment in unconventional, renewable energy sources, which helped in curbing global warming. Economically, the central banks decided to give sub-prime loans to increase the sale of bank products and earn great profits. Although, they were successful at the time, they proved to be unsustainable and harmful in the long run, thus, causing the financial crisis. 

The Federal bank was not fulfilling their corporate responsibility, and political role, despite being one of the prime banks in the world, was not helping to solve problems of unemployment, rather, concerned they were concerned with their own interests' and only fooling people ...