Thursday, February 14, 2013

Bank of America "Robo-Signing" Causes Thousands to Lose Homes

Bank of America: The "Robo- Signing Scandal" (2011)

Based on a paper by Corey Johnson (2012)
Summary by Geoff Brennen

Bank of America Corporation is an American multinational banking and financial services corporation headquartered in North Carolina. Forbes listed Bank of America Corp. as the third biggest company in the world in 2010. Bank of America’s acquisition of Merrill Lynch in 2008 made them the world’s largest wealth management corporation. Between 2008 and 2011 Bank of America was involved in a “robo” signing scandal that caused 750,000 homeowners to lose their homes through illegal foreclosures. “Robo- signing" refers to the illegal practice of banks signing off on documents and affidavits without really going through and verifying the information. Rather than going to court to legally acquire the foreclosed property, Bank of America employees signed off on document without truly knowing what they were signing. The "robo-signing" crisis happened because Bank of America's management failed on enforcing lower-level employees to thoroughly go over foreclosure documents before writing them off.The “robo-signing" scandal resulted in a shortage of foreclosure properties for sale. There are thousands of cases where people may potentially lose their home because it was not the legal property of the bank to sell.

According to the four basic ethical theories, Bank of America acted irresponsibly and unethical when they “robo- signed” off on foreclosures. The individualism theory states the primary goal of a business is to maximize profit for shareholders without deception or fraud. Even though Bank of America profited over the years from the “robo-signing” scandal they did it illegally and it cost them $25 billion legal penalties. The economic theory would view Bank of America’s actions as unethical because they used illegal methods in order to achieve profits. Similar to the economic theory, the utilitarianism theory would believe that Bank of America was in the wrong and behaved unethically. The utilitarianism theory has the goal of maximizing overall good and achieving the greatest good for the greatest amount of people. The stakeholders in this case are Bank of America management, Bank of America employees who signed off on illegal foreclosures, and the homeowners. The only people who benefited from this scandal are top executives who benefited with money. Bank of America’s actions caused 750,000 homeowners to wrongfully lose their homes. The utilitarianism theory would believe that the amount of pain suffered by homeowners outweighs the overall good achieved by top executives.

Kant's  ethical theory states one must act rationally and be motivated by good will. Under Kant's theory everybody should follow the same rules and no one should ever act out of self-interest. Kant would view Bank of America’s actions as unethical because they acted out of their own self-interest rather than out of good will. The employees who were doing the “robo-signing” were not acting rationally because they did not take the time to examine each document and did not have enough information to make a rational decision. Bank of America engaged in illegal activity and broke rules. Bank of America’s actions strongly contradict the Kant's theory and therefore would be viewed as unethical. According to the virtue theory there are four “good virtues”, honesty, courage, temperance, and justice. Bank of America violated three out of the four virtues. They did not act honestly when they lied about fully examining all documents they signed off on without really reading. The executives of Bank of America acted very cowardly by initially denying the allegations. Bank of America did not act with any temperance or self-restraint by taking advantage of the foreclosure system. Their business practices were unfair and illegal and go against the virtue of justice. Millions of people trust Bank of America to protect their life savings; however, when they act unethically it makes it a lot harder.

Based on paper written by Corey Johnson on April 12, 2012

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Forbes. “Bank of America on the Forbes Global 2000 List.” Information for the World’s Business Leaders–

“Bank of America Heritage.” Bank of America 

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