Answered: Who Has the Money—The Democrat or The…

Business/Professional Ethics Directors/Executives/Acct

8th Edition

ISBN:9781337485913

Author:BROOKS

Publisher:BROOKS

Chapter8: Subprime Lending Fiasco-ethics Issues

Section: Chapter Questions

Problem 4.4EC

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Who Has the Money—The Democrat or The Republican?

Ethical dilemma:

Sunflower Manufacturing has applied for a $10 million working capital loan at The Democrat Federal Bank (known as The Democrat). But the person who is evaluating the loan application, Sheli, has determined that the bank should lend the company only $2 million.

Sheli’s analysis of Sunflower suggests that the company does not have the financial strength to support the higher loan.

However, if Sunflower is not granted the loan for the requested amount, the company might take its banking business to a competitor of The Democrat.

Also, The Democrat is having financial difficulties that might result in future layoffs. Sheli might be affected by the bank’s layoffs if her division does not meet its quota of loans. As a result, it might be in her best interest to grant Sunflower the loan it requested even though her analysis suggests that such an action is not rational.

Discussion questions:

What is the ethical dilemma?
Do you agree with Sheli or Henry concerning the importance of loyalty as a factor in loan decisions?
Should The Democrat lend Sunflower the $10 million was requested?
What would you do if you were Sheli?

Expert Solution