Goverment Bailouts

The government bailouts were most likely unenviable. But were they unethical? We were on the brink of complete chaos. The banks were going broke and the auto makers were not far behind them. But how did we get to this point in the first place? Chuck Gallagher discusses this point in an article entitled “Business Ethics, Bank Failures and Government Bailouts-are they Compatible? ” He talks about how people and businesses all “over borrowed” and how that got us in the mess that we still are cleaning up today.

When you have banks giving out loans to people that don’t make enough to repay them, is that ethical? When homes are being appraised for around $240,000, that just five short years prior was only valued at $65,000. (My first home) And the bank sends you approvals and wants you to refinance for the much higher amount, is that ethical? Home loans that started off low and then the payments skyrocketed after a few short years later. Low interest rates and loose regulations on how much a person can get a loan for, is irresponsible and of course unethical!

All of these things are not only bad business, but very unethical and in my opinion were very wrong. So after all of these “bad loans’ started going bad, the banks and lenders got a very rude awakening. So who do they call for help? Good old Uncle Sam! Now I know that they really did not have a choice but to call for government help, without it the economic system would have certainly have collapsed. So maybe it was necessary to bailout the lending institutions, but there were a lot of companies that received bailout help from the government.

According to the “Bailout Tracker” on Propublicia. com, 927 companies in all, not including Fannie mea or Freddie mac received government assistance. Now I understand helping the banks and lending institutions out, but I really did not agree that the Government bailed out businesses that were managed so poorly. If I had started a small business and ran things the wrong way and conducted business unethically, I really don’t think someone would come in and hand me a bunch of money. I would have to either sell my business to someone or I would have to go into bankruptcy.

So who was the unethical party? Was it the Banks who told customers they could afford homes that cost way too much? Or was it the government that let it all happen, and then handed them billions of the taxpayer’s money. I believe if a business is going to fail because of bad management, then it should fail. And if the government is going to dish out tons of money it should be under a new regime. I’m not saying the government should take the business over, but that money should have some kind of stipulations on how it is used.

So did we fix the problem, or did we just put a Band-Aid on a very big wound? Are the banks still lending out too much money? Are we borrowing too much money? If the problem happens again, maybe the government will step back in, but this time they may want to run it for themselves! Sources used: http://chuckgallagher. wordpress. com/2008/10/05/business-ethics-bank-failures-and-government-bailouts-are-they-compatable/ http://projects. propublica. org/bailout/list.