Should Wells Fargo lose the latest DOJ lawsuit, Were they ethical in Research Paper

Should Wells Fargo lose the latest DOJ lawsuit, Were they ethical in there practices with the Mortgages - Research Paper Example Recently, the company has been facing a lawsuit that requires them to pay for damages, because of acting unethically toward offering substandard mortgage loans, which might have powered the financial crisis in the region (Raindi & Timiraos, 2012). This paper will examine the lawsuit, and if the company is justified in claiming they acted within their financial ethical boundaries. In October 2012, the Department of Justice was at the forefront in trying to prove that Wells Fargo & Co. acted unethically by providing shoddy mortgage deals to insurance programs in the U.S., hence; creating a loss of millions of dollars. An Act enacted in 1989 allows the government to sue any financial institution if the affected party is insured by the federal government. The Department of Housing and Urban Development in US is accusing Wells Fargo & Co. of offering shoddy loans to first-time buyers (Raindi & Timiraos, 2012). According to the Department of Housing, this was done with complete disregard a s to whether the parties being given loans had the ability to pay or not. The probability of Wells Fargo losing the lawsuit There is a likelihood that Wells Fargo & Co. might lose the lawsuit. This is because under the various laws that govern the operations and functions of financial institutions, the company may have gone against the law in their undertakings. The law of restrictions under the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA), is still a factor to consider, where the company is still liable for prosecution by the state even after the period that has elapsed. The company can also be prosecuted under the federal False Claims Act. The refusal of the banking institution to report the defective loans has played a vital role in the escalation of the financial crisis (Raindi & Timiraos, 2012), which still rocks the U.S. and countless other regions to this day. The company claims that since it was the only institution affected by its actions, there is n o possible reason why it should be prosecuted for unethical practices within the organization. This claim was thrown out of court as the judge presiding over the case indicated that even if the only party affected by such actions was the one under prosecution, it still had to face the charges leveled against it. It is the belief of countless individuals that the simple act of choosing not to report these defective loans meant that the company knew about the issues they faced, but did not bring them to the HUD’s attention. This is tantamount to fraud, according to the court, and that is probably why the company may lose the suit by the U.S. Department of Justice. It is unethical for any financial institution to hold out on information (Jennings, 2011), which may be done to save money and disregard the integrity of the organization they serve. The ethical nature of the company’s lending practices There were some unethical undertakings by the company during the lending of loans to people. It is the task and duty of a financial institution to properly vet the people it is meant to serve, especially when dealing with loans. This is so as to see the chances of the loans being paid by the parties offered loans. In the company’s case, they were sure that any failure by the parties to pay would be bailed out by the Federal Housing Administration, which often bailed out first time buyers (Raindi & Timira