contributions. They also eliminated dividends on preferred and common stock leaving the stock outstanding and continued payment on the debt instruments (Oesterle 2011). Finally in 2012, the U.S District Court dismissed the charges against the three Fannie Mae top officials ruling that there was no evidence to suggest that they intended to deceive anyone (Fiderer 2014).
Effects and consequences
According to Woiceshyn 2011, making an ethical or unethical decision is not a serious issue for anyone. The problem with making such a decision is the effect it has on their lives and that of others. The unethical decision made by the management of Fannie Mae affected the management and a lot of people. The effect it had on the management was not as severe as that it had on the people. The risky business that Fannie Mae engaged in not only caused losses to the company and eventual takeover of the …show more content…
What triggered the recession was the enormous increase in default on mortgages on residential property. Oesterle A 2011 stated that states like Arizona, Nevada, California and Florida were hit the most in which the default caused losses that was beyond their nominal amounts because the mortgage were in reference to the asset of numerous types of derivative which loss its value due to high default rates.
Another effect of the Fannie Mae scandal was the increase in home foreclosures as subprime borrowers were unable to meet their mortgage payments. The prices of homes also declined due to large foreclosures in the market. Also, there were tight lending standards which made it difficult for borrowers to get mortgages. Banks that held Fannie Mae preferred shares had to take a large write down (Oesterle 2011). The Wall Street firms and other affiliates financial industry which were among Fannie Mae largest mortgage sellers also ran into debt as a result of the
Effects and consequences
According to Woiceshyn 2011, making an ethical or unethical decision is not a serious issue for anyone. The problem with making such a decision is the effect it has on their lives and that of others. The unethical decision made by the management of Fannie Mae affected the management and a lot of people. The effect it had on the management was not as severe as that it had on the people. The risky business that Fannie Mae engaged in not only caused losses to the company and eventual takeover of the …show more content…
What triggered the recession was the enormous increase in default on mortgages on residential property. Oesterle A 2011 stated that states like Arizona, Nevada, California and Florida were hit the most in which the default caused losses that was beyond their nominal amounts because the mortgage were in reference to the asset of numerous types of derivative which loss its value due to high default rates.
Another effect of the Fannie Mae scandal was the increase in home foreclosures as subprime borrowers were unable to meet their mortgage payments. The prices of homes also declined due to large foreclosures in the market. Also, there were tight lending standards which made it difficult for borrowers to get mortgages. Banks that held Fannie Mae preferred shares had to take a large write down (Oesterle 2011). The Wall Street firms and other affiliates financial industry which were among Fannie Mae largest mortgage sellers also ran into debt as a result of the