Scandals in the Bank of America

1 Scandals in the Bank of America Bank of America (BOA) is one of the largest banks in the United States. This bank has been involved in several huge scandals some affecting major economic markets. The mortgageservicing industry is one market that was hard hit by the bank’s scandal. The bank owns the Countrywide mortgage company which was involved in very costly deceptive schemes that left home buyers who had borrowed from it with massive debts. This company which was the mortgage lender with the highest number of clients destroyed the dreams of most Americans of owning a home after what they had initiated turned against them. This was through the lender’s deception to its borrowers through lack of proper representation of terms of these loans, and hiding the payment increase that was already in the schedule with an aim of attracting more and more borrowers.

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The first rule in the NSPE Code of ethics demands all practitioners to hold high level of safety and welfare of its clients, who are the general public. The first part of this rule stipulates that in a situation where the judgment is nullified due to instances that may endanger the property of the clients, there is need to inform their clients as this is appropriate (National Society of Professional Engineers, 2011). The BOA violated this policy during the crisis since even after the bank discovered the foreclosure scheme, two years after its launch, they had not informed the many borrowers around the country that they had modified their loans even when these borrowers were eligible. In addition, the bank denied the clients the access to analysis of foreclosure avoidance budget yet this would have been important in assisting the borrowers through Countrywide settlement (Ulam, 2010). The main reason the bank gave for refusing to provide this information was that the bank believed that it did not owe anything to those who required the information. The bank violated the NSPE Code when it failed to advice their clients on the mortgage rates during the three years when the rates remained fixed. This made the borrowers to be hit by unexpected payment when finally the mortgage principle was added to the interest-only payments they had been used to. This met some borrowers unprepared as it rose up to 15 percent of what they had known for a long time. This information only came out after a state lawsuit exposed the Countrywide deal which was aimed at exploiting the customers especially those who were buying the homes for the first time. Countrywide which is an entity of the Bank of America processed fraudulent mortgage applications without the knowledge of the public. Countrywide managed this through involving a large number of its customers. This was through creation of loans that paid the highest interest rate. Countrywide put these loans into mortgage-backed securities which caused a major crisis after the huge drop in house prices (Ulam, 2011).

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The NSPE Code prohibits dishonesty among the engineering field where the practitioners retain information that would be beneficial to the clients or employer. The Bank of America violated this rule as it kept information that would have been beneficial to the public hidden, thus becoming dishonest to their own clients. It was the ethical responsibility of the bank management to remain honest to all its clients especially those who were making the home buying transaction with the bank for the very first time. Most of these individuals were low income earners thus when the crisis hit, they were the most affected.

When one of the employees of the bank brew the whistle on the fraud that had transpired at Countrywide, which was linked to the Bank of America, the bank management fired her claiming that there was a problem with her management style. Eileen Foster was fired by the banks with an aim of covering the fraud scheme. According to the NSPE Code of rules, the professional obligation states that engineers ought to acknowledge their mistakes and shortcomings without changing the facts to hide the truth. By ending Eileen Foster’s employment with the bank, the management was violating this rule through promotion of their self interests at the expense of their profession integrity. This, therefore, meant that they also violated the rule that prohibits practitioners from using malice and false information to damage the professional reputation of other individuals in their team.

The bank violation of the NSPE Code of ethics had very devastating effects on both local and global economic system. The citizens of America especially those who were low income earners were faced with very huge debts after buying their houses from the loans they had received from Countrywide. This made them to live in these homes with much financial strain since all their earnings went to the loan repayment while others lost their homes completely to foreclosures. Even after the bank launched the Countrywide National Homeownership Retention

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Program, it failed to notify those who were illegible, thus leading to another failure of the bank management. The violations also had an impact on the global economy (Pallavi, 2011). This was seen in the effect the banks contributed to the financial crisis that hit even the largest financial institutions making them seek the government help as they were facing bankruptcy.

This was after the loans securities were linked to the dangerous CDOs and announcement of a huge drop in the house prices, making the lenders’ subprime loans lose their legality. This almost led to total collapse of the country’s financial institutions. It also affected the global trade and economic status.

Life-long learning is very essential to most managers since they are able to attain practical examples where they can learn how to avoid ethical violations (Mitchell, 2011).

Through continued training, the managers are able to understand the importance of following priorities like the public safety among other rules of engineering ethics. Training provides life examples where the managers can learn from; thus avoid pitting their organizations in crises like the way the Bank of America did.

Scandals in the Boa

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Mitchell, S. (2011). How to solve problems in engineering ethics. Retrieved 28th Nov. 2011 from http://www.ehow.com/how_8538590_solve-problems-engineering-ethics.html National Society of Professional Engineers. (2011). NSPE Code of Ethics for Engineers.

Retrieved 28th Nov. 2011 from http://www.nspe.org/Ethics/CodeofEthics/index.html Pallavi, G. (2011). Robo-signing scandal may date back to late ‘90s. Associated Press. Retrieved 28th Nov. 2011 from http://www.msnbc.msn.com/id/44365184/ns/businessreal_estate/t/robosigning-scandalmay-date-back-late-s/ Ulam, A. (2010). The Bank of America mortgage settlement fiasco. November 1. Retrieved 28th Nov. 2011 from http://www.thenation.com/article/155380/bank-america-mortgagesettlementfiasco