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Case 4: Countrywide Financial: The Subprime Meltdown

MAN 4120 - Leadership Challenges and Supervision
by

Anaum Iqbal Rai

on 14 December 2013

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Transcript of Case 4: Countrywide Financial: The Subprime Meltdown

Countrywide Financial
ANGELO MOZILO.
Provider of home loans to minorities and lower in come.
In 1969 largest provider of home loans in US.
Other services.
WE HOUSE AMERICA PROGRAM(2003).

EFFECTS
Countrywide Finanical

CHAPTER 1

'Sarbanes-Oxley Act'
Balancing their desire for profits and desire for society
Conflict of interest
Defective products
Companies based on ethical issues are attractive to the
(a) employees commitments
(b) investors loyalty
(c) customer satisfaction
For attaining long term profitable relations ,ethical code of conduct should be maintained



UNDERSTANDING SUB PRIME LOANS:
No condition for sub prime loan .
sub prime have three categories.
rate of middle -and -upper income sub prime loan borrowers rose dramatically from 2004 to 2006.
THE SUB PRIME CRISIS:
''SOME THING HAPPENED THAT NO ONE HAD CONSIDERED''
US ECONOMIC CHANGES:
Gas prices increased
Health insurance issues
Bank began to foreclose
Interest rate increased
Less earning
REASONS FOR FAILURE
ACCORDING TO ANALYSTS:
violation of sarbanes- oxley act
lack of effective risk management
poor communication
CFO was not doing his job
BANK OF AMERICA PLANS A RECOVERY
Stream of lawsuits.
FBI's Investigation.
Barbara Doeser.
THE ROLE OF COUNTRYWIDE’S CEO ANGELO MOZILO
SEC's investigation and Mozilo's defense.
Federal securities regulators and congressional investigators.
Mozilo's Apology
ISSUES RELATED TO THE BANK OF AMERICA ACQUISITION:

BANK OF AMERICA.
ACQUISITION.
ANALYSIS REGARDING ACQUISITION.
DAVID SAMBOL RETAINED.
INVESTIGATION.



The topic executive should have a strong grip .
Properly established culture based on ethical rules and principles .
Proper system system of reward and punishment should be allocated.
Customers should be provided complete information about the product or services.
Interest of customers and corporation both be considered when making a transaction.
SUGGESTIONS
CHAPTER :2
PRESENTERS:
Haseena Batool
Owais Anwar
Anaum Iqbal Rai
Qazi Khubaib
Mariyam Ashraf
Countrywide Financial:
The Subprime Meltdown
QUESTION NO :1
Discuss the ethical issues that
caused the downfall of
Countrywide Financial?
QUESTION NO. 2
How should Bank of America
deal with potential ethical and
legal misconduct discovered at Countrywide?
US economy began to slow.
prices became to increase ,due to increase in demand .
lost of significant money by banks.
selling of insurances ,car etc ,to cope with the situation .
tension was created ,all over America.
automobile ,insurance ,material companies faced negative effects.
bank of America acquired it ,as it was unable to solve the crisis situation.
major loss of human assets .
(a)Business ethics ,revolve around relationships.
(b)Stake holders orientation.
(c)Social responsibilites.
(d)Directors.
(e)Corporate goverance.
(f)Control.
CAUSES
(a)increasing profits.
(b)liar loans.
(c)miss commuciation.
(d)no effective risk management.
(e)no authority of top executives.
(f)woking more earning less.
(g)violation of SARBANES-OXLEY ACT.
(h)VIP programs.
(i)false encourgnment of scales persons.
(j)unfair lending practies..
(k)customer unaware of hidden fees and risky terms.
Conclusion
Numerous Wall Street companies are being investigated for unethical practices
Contrywide as key contributor of financial crisis
Many alleged Countrywide:

ANGELO MOZILO.


(a)"WORST AMERICAN CEO OF ALL
TIMES ",in which angelo ranked 2nd.
(b) one of the most culpurit personality
of 2008.
(c)he was an unethicl leader.
Conclusion
Numerous Wall Street companies are being investigated for unethical practices
Countrywide as key contributor of financial crisis
Many alleged Countrywide:
Knowingly engaged in risky loans
Offered subprime loans even to those who qualify for regular loans
May have helped falsify lender information, allowing those with no assets to obtain loans
RESULTS
Surplus housing
High housing prices
Large number of foreclosures
Placed US economy in precarious state
Thus US lost global credibility as an economic superpower of free world.

Countrywide failed majority of its stakeholders
Question No. 1
Are subprime loans an unethical financial instruement or are they ethical but misused in a way that created ethical issues
Question No. 3
How should Bank of America deal with potential ethical and legal misconduct discovered at Countrywide
SUB PRIME:
Means lending to borrowers, who are at lower income level, at higher interest rate.
Key factor for country wide's success and rapid growth.
source of country wide's failure
Countrywide's Involvement in the Subprime Crisis
Full transcript