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Ethical misconduct in the mortgage and property market triggered the 2008 global financial crisis: another catastrophic breach in financial ethics. Big banks and other lending
Ethical misconduct in the mortgage and property market triggered the 2008 global financial crisis: another catastrophic breach in financial ethics. Big banks and other lending institutions had issued bad credit risk or subprime mortgages. These were forms of credit that ought to have been issued only to homebuyers with the greater ability to pay. Subprime borrowers bore a higher risk of defaulting on their mortgages, or so the banks assumed. Meanwhile, other financial actors, most typically very large and wealthy institutional investors, bought derivatives of the loans, so-called mortgage-backed securities (MBS). MBS are more complex financial products that are produced by assembling the loans (see Borgogno Colangelo 2020). As homeowners default on their mortgages, MBSs crumble in value - costing investors and financial institutions trillions of dollars. Following the ensuing crash, millions lost their homes, many of them their jobs, and their countries an economic depression. Take the case of Bernie Madoff. The much-hyped Ponzi scheme by the popular US banker Bernie Madoff was the biggest of its kind. He swindled investors of approximately $65 billion, assuring them of very high dividends and taking money from new customers to return what the other investors had reaped from their investments. After his 2008 plan broke down, hundreds of staffers, pension funds, companies, and families lost everything. A good number of those who made substantial deposits have had to grapple w
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