Banking Ethics

In: Business and Management

Submitted By maryamkaz
Words 3823
Pages 16
JOURNAL OF ECONOMIC ISSUES Vol. XLV No. 2 June 2011 DOI 10.2753/JEI0021-3624450213

Banking Ethics and the Goldman Rule
John P. Watkins

Abstract: Insulating people from the effects of the crisis has left intact the habits of thought and the basic institutional structure. The continued reign of pecuniary values leaves intact the Goldman Rule: pursue profitable opportunities regardless the effects on others. Within a culture dominated by pecuniary values, profitable opportunities present a coercive force. Laissez-faire policies allow profitable pursuits without restraint. Subprime mortgages offered an opportunity to tap a new source of profits, namely, the increase in housing prices. Many financial institutions engaged in unscrupulous actions to convert household wealth into corporate profits. Efforts to reign in the industry remain wanting. Keywords: acquisitive society, banking ethics, banking profits, Goldman Sachs, subprime crisis JEL Classification Codes: A13, B25, B26, D63

The bailout of the banks violates the legitimacy of markets, the ethos that profit represents the reward for success, loss the punishment for failure. The outrage over bailouts combined with insulating people from the effects of the crisis has fostered an anti-interventionist reaction and a resurgence of neoliberalism. Insulating people from the effects of the crisis has largely left intact the habits of thought and the basic institutional structure. The continued reign of pecuniary values leaves intact the Goldman Rule: pursue profitable opportunities regardless the effects on others. The Goldman Rule rests on the assumption that increases in profitable opportunities increase the opportunity cost of ethical behavior. Ethical behavior refers to self-imposed actions to avoid taking advantage of others that result in lower profits. The Goldman Rule suggests that financial institutions…...

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