Ethical and Financial Risks of Banking Industry Meltdown:

Banking Industry Meltdown: The Ethical and Financial Risks

The 2008 financial meltdown has been rated as the worst global economic crisis after the Great Depression of 1930. It shook the financial fabric of all the nations regardless of their economic status. It also led to the closure of most of the world's renowned banks and other financial institutions. Analysts have related the problems and the causes of this meltdown to the failure of the banks in their use of derivatives (Will, Handelman, Brotherton, 2013). Derivatives are defined as the financial arrangements that financial institutions formulate in order to hedge out against a future loss. The nature if these financial assets are that they are highly profitable and at the same time perilous (Beder & Marshall, 2011). The allure of profits is what baits the managers to adopt and use them in their institutions. This study focuses on the ethical dimensions of the 2008 Global Financial Crisis and the role of corporate culture in its occurrence.

Ethical practices as the moral philosophy

The dominant moral philosophy that appears to be the underlying cause and reason for the 2008 financial crisis is the ethical practices of the managers of the financial institutions of that time. Although the derivatives are themselves perilous, the managers also contributed to the occurrence of the crisis. The desire for profits that come with the use of derivatives clouds their judgment making them to always scheme on how to impose it on the unsuspecting clients. The nature of this trade is that the motive of the managers is to derive the potentially high profits. However, in the event of loss, the investors lose their money (Koslowski, 2011). Cases of uncertainty among the traders often worsen the situation. The trading agencies that are in charge of the business normally get the derivatives to be sold without being fully furnished with sufficient information on their risk portfolio. This exposes them to dangers of loss since they will be making decisions about assets cannot control financially. This is the central failure of the managers and is the contributing cause of the 2008 financial crisis (Will, Handelman, Brotherton, 2013).

Occurrence of the 'white collar, and 'blue collar' crimes

Blue-collar crimes are those crimes that are committed with the use of the effort more than the brain. While collar crimes are the opposite. These two crimes can be applied concurrently or separately. For the 2008 crisis, there is evidence that there was more application of the white-collar crime than the blue collar. The actions of the managers of the then existing financial institutions to hide vital information from the traders as well as the agencies that were selling the derivatives on their behalf amounted to white-collar crime. There was no instance where blue-collar crime was committed in this case (Beder & Marshall, 2011).

The role of corporate culture

Organizational culture is the norms and practices of the company about how business is done. Employees are often expected to act in a particular manner determined by the managers even when it might appear to be detrimental to the organization. In this case, the corporate practices by banks in the 2008 crisis are elucidated. It was the practice of most banks and financial institutions not to disclose the information regarding their practices. Banks also hold the values and risks portfolios of their derivatives as a way of staying safe from the influence of competitors in the market. This led to the emergence of a racket where the managers used this right of secrecy to conduct underhand deals that were meant to defraud the unsuspecting traders (Koslowski, 2011). It was also the common corporate practice of the managers to earn from the share gains in the stocks under their watch. However, these managers misused these express rights by awarding themselves too much money in millions of dollars even as the financial status of their organizations was dwindling. This was one of the most appalling abuses of corporate freedom (Will, Handelman, Brotherton, 2013).

Leader's role in averting the crisis