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The Subprime Loan Crisis

The Subprime Loan Crisis. Delphine Agnor Wolsker Northcentral University October 5, 2013. What is a Subprime Loan?. Borrower has substandard credit risk Lender fears borrower default. Ethical Implications of Leadership :. Banks Benefit Maximize profit versus balance risks Cost

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The Subprime Loan Crisis

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  1. The Subprime Loan Crisis Delphine Agnor Wolsker Northcentral University October 5, 2013

  2. What is a Subprime Loan? • Borrower has substandard credit risk • Lender fears borrower default

  3. Ethical Implications of Leadership: • Banks • Benefit • Maximize profit versus balance risks • Cost • Lender or securitizer insolvency • Balance • Ethical duties beyond strictures of law

  4. Ethical Implications of Leadership: • Borrowers • Benefit • Chance for homeownership and equity to ease credit card burden • Cost • insolvency • Balance • Ethical duties beyond strictures of law

  5. Strategies for Ethical Resolutions • Emotional regulation • Self reflection • Forecasting future outcomes • Information integration

  6. Social Responsibility • actions of the organization; • actions of management and employees; • actions as they relate to customers, employees, creditors, lenders, regulatory agencies, stockholders, and the communities business is in; • sustainability to remain viable • corporate citizenship – societal goals (Schwartz & Carroll, 2009).

  7. Averting Risks of Subprime Loans Larger capital requirements may mean that when borrowers fail, their mortgage notes will not be upside down, leaving lenders with enough capital to convert to cash to cover the loss.

  8. Basel III Accord: Avoid Jump from Pan to Fire • Monitor credit growth • Benchmarks • Augment compliance with individual national data http://www.basel-iii-accord.com/

  9. Conclusion • Risk management • Organizational readiness • Attention to social responsibility • Consideration of long term consequences to borrowers, lenders, and the constituent society

  10. References

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