Countrywide’s Unethical Business Dealings
Abstract
It would be convenient to start this research paper by stating that corruption is a challenge mainly for businesses in developing countries and that it is unrelated to the current affliction of the economy in the United States. It would also be convenient to claim corruption has declined in America as a result of awareness raising campaigns and the numerous anti-corruption laws. But none of those aforementioned statements would be true. Corruption is not the exception, but rather the rule in today’s business practices. In 2004, Daniel Kaufmann, a senior fellow at Brookings Institution and former director at the World Bank, calculated an index of "legally corrupt" manifestations which is defined as the extent of undue influence through political finance influencing politicians and policy making. The United States rated in the bottom half among the 104 countries surveyed (Kaufmann, 2009). Enter Countrywide Financial Corporation, who has become synonymous with home loans in America. After a decade of enormous growth, the company ranked as the nation’s largest originator and servicer of consumer mortgages. Countrywide has also become synonymous with the mortgage meltdown, as many Countrywide borrowers have defaulted on their loans. Countrywide has harmed its shareholders and squandered its own corporate net worth on unethical practices and an unsustainable business model (Unknown, 2008). This paper will outline the act that deregulated the financial system that allowed Countrywide to act in the unethical manner they did, Countrywide’s unscrupulous tactics, Bank of America’s merger with Countrywide and inheriting burdens associated with the merger.
On October 22, 1999, an agreement between President Bill Clinton’s administration and congressional Republicans set the stage for passage of the most sweeping banking deregulation bill in American history. The passage of this bill lifted virtually all restraints on the operation of the giant monopolies
It would be convenient to start this research paper by stating that corruption is a challenge mainly for businesses in developing countries and that it is unrelated to the current affliction of the economy in the United States. It would also be convenient to claim corruption has declined in America as a result of awareness raising campaigns and the numerous anti-corruption laws. But none of those aforementioned statements would be true. Corruption is not the exception, but rather the rule in today’s business practices. In 2004, Daniel Kaufmann, a senior fellow at Brookings Institution and former director at the World Bank, calculated an index of "legally corrupt" manifestations which is defined as the extent of undue influence through political finance influencing politicians and policy making. The United States rated in the bottom half among the 104 countries surveyed (Kaufmann, 2009). Enter Countrywide Financial Corporation, who has become synonymous with home loans in America. After a decade of enormous growth, the company ranked as the nation’s largest originator and servicer of consumer mortgages. Countrywide has also become synonymous with the mortgage meltdown, as many Countrywide borrowers have defaulted on their loans. Countrywide has harmed its shareholders and squandered its own corporate net worth on unethical practices and an unsustainable business model (Unknown, 2008). This paper will outline the act that deregulated the financial system that allowed Countrywide to act in the unethical manner they did, Countrywide’s unscrupulous tactics, Bank of America’s merger with Countrywide and inheriting burdens associated with the merger.
On October 22, 1999, an agreement between President Bill Clinton’s administration and congressional Republicans set the stage for passage of the most sweeping banking deregulation bill in American history. The passage of this bill lifted virtually all restraints on the operation of the giant monopolies
References: Associated Press. (2008). Bank of America to acquire Countrywide. Retrieved from http://www.msnbc.msn.com/id/22606833/ Author unknown Author unknown. (2008). Countrywide Financial to Pay $6.6 Million to 3,674 Michigan Borrowers Author unknown. (2010). Charlotte Business Journal. Retrieved from http://www.bizjournals.com/charlotte/stories/2010/05/03/daily55.html Kaufmann, Daniel. (2009). Corruption and the Global Financial Crisis. Retrieved from http://www.forbes.com/2009/01/27/corruption-financial-crisis-business- corruption09_0127corruption.html Miller, Peter Setzer, Glenn. (2008). Bank of American to Buy Countrywide. Retrieved from http://www.mortgagenewsdaily.com/1112008_Bank_of_America_Countrywide.asp Shanklin, Mary. (2010). Homeowners Continue to Chase the “American Dream”. Retrieved from http://rismedia.com/2010-08-05/homeowners-continue-to-chase-the-american-dream Willis, Christopher. (2008). Bank Settles Countrywide Mortgage Lawsuit. Retrieved from http://www.cbsnews.com/stories/2008/10/06/business/main4503045.shtml