Question

Hello, I need some advice on the case below. I need to know some arguments for how Kant's ethics applies to this case, and why other people who believe in the Kantean theory of ethics would also support the arguments. I need to use Kants theory to determine if this is morally correct or incorrect.

Casino Gambling on Wall Street Case 4.5 Casino Gambling on Wall Street

CDO stands for “ collateralized debt obligation,” and before the financial meltdown of 2008, hardly any nonspecialists were familiar with this arcane acronym. A CDO is a collection of individual debts ( for example, home mortgages) that are bundled together in one investment pool. That pool can then be divided into different sections ( or “ tranches”), representing different degrees of risk, and sold to investors. An individual lender, such as a credit card company, may put together a CDO, or an investment firm may create a CDO from a package of loans from different lenders. Although abused during the housing bubble, CDOs perform a useful economic function. They allow lenders to focus on loan origi-nation and investors to buy interest- earning securities. 86 What serves no obvious economic function, however, are so- called synthetic CDOs, which represent a bet on the of a package of loans owned by others. For exam-ple, Goldman Sachs brokered a synthetic CDO, known as Abacus- 2007 AC1, based on the performance of a group of subprime loans. But unlike a normal CDO, a synthetic like Abacus contains no actual bonds or mortgage loans; it merely references assets owned by other people. As with other synthetic CDOs, one side of the option was betting the value of a bundle of assets ( owned by other people) would rise; the other side of the option that it would fall. In principle, it’s no different from wager-ing on the Yankees vs. the Dodgers or on a cricket fight. “ With a synthetic CDO, it’s a pure bet,” says Erik F. Gering, a former secu-rities lawyer and now a law professor at the University of New Mexico. “ It is hard to see what the social value is.” In the two years before the financial meltdown of 2008, over $ 100 billion in synthetic CDOs were issued, and ­everyone agrees that, by increasing the instability of the system, they were an important factor in that crisis. Moreover, their use represents a shift in the culture of investment banks from a focus on finding the most produc-tive allocation of savings to an emphasis on maximizing profit through proprietary trading and arranging casino- like wagers for market participants. For these reasons, many business writers and financial experts are critical of syn-thetic CDOs and other purely speculative derivatives, believing that they should be severely limited or even pro-hibited. However, companies like Goldman Sachs and oth-ers make $ 20 billion a year putting them together, and these firms lobbied strongly and successfully to see that the financial reform bill of 2010 didn’t significantly restrict them. In their defense, one industry insider says, “ I believe that synthetic CDOs have a very useful purpose in facilitat-ing the management of risk. . . . Such instruments facilitate the flow of capital.” But it is difficult for even the heartiest champion of syn-thetic CDOs to defend the Abacus- 2007 AC1 deal with a straight face. Goldman Sachs put it together for hedge fund tycoon John Paulson based on a group of lousy mortgage loans that he had selected for the sole purpose of betting that their value would go down. As with any synthetic CDO, of course, Goldman Sachs needed to find investors who would take the opposite position, which it did— the two largest being ABN Amro and IKB Deutsche Industriebank— and it was paid $ 15 million for closing the deal. Those companies, however, were not told that Paulson was betting against them nor that he had selected the underlying subprime mortgages only because he believed they were sure to lose value. And, sure enough, Abacus- 2007 AC1 soon produced a $ 1.5 bil-lion loss for ABN and an $ 840 million loss for IKB— but a $ 1 billion gain for Paulson. Goldman Sachs’s defenders say that ABN and IKB were sophisticated investors who should have known what they were doing and that who is on the other side of a CDO is not something that is routinely disclosed. So perhaps ABN and IKB deserved what they got— after all, one might argue, they had no real business undertaking a synthetic CDO as opposed to underwriting or ­insuring actual subprime loans. But, still, it’s hard to square Goldman Sachs’s treatment of them with the principle displayed on the company’s website: “ Our client’s interests always come first.” Goldman Sachs, of course, is not the only financial institution to manipulate its customers. The Securities and Exchange Commission has accused Citigroup, for exam-ple, of putting together a package of mortgage backed securities without telling investors that it was betting against them— that the fund was designed to fail. When it did, Citi earned $ 160 million while its investors lost $ 700 million. On the other hand, spread across the country are thousands of small community banks and not- for- profit credit unions. Believing that their job is to serve the com-munity, they often take a personal interest in their cus-tomers, making loans to local businesses, lending small sums to individuals who have fallen into financial trouble, or bending over backwards to help those who can’t keep up their mortgage payments. “ They support you person-ally,” says one customer. “ Customers . . . can walk in and talk to the president,” adds another, “ and know he isn’t sucking in their money and betting against them on pro-prietary securities.”

Answer 1

Kantian Ethics theory.

1.He did not attempt to prescribe specific action, but instructed that reason should be used to determine how to behave.

2. In his combined works, Kant constructed the basis for an ethical law from the concept of duty.

3. Kant began his ethical theory by arguing that the only virtue that can be unqualifiedly good is a good will. No other virtue has this status because every other virtue can be used to achieve immoral ends. The good will is unique in that it is always good and maintains its moral value even when it fails to achieve its moral intentions

4. Kant regarded the good will as a single moral principle which freely chooses to use the other virtues for moral ends

5. For Kant a good will is a broader conception than a will which acts from duty. A will which acts from duty is distinguishable as a will which overcomes hindrances in order to keep the moral law. A dutiful will is thus a special case of a good will which becomes visible in adverse conditions. Kant argues that only acts performed with regard to duty have moral worth. This is not to say that acts performed merely in accordance with duty are worthless

6. Kant’s conception of duty does not entail that people perform their duties grudgingly. Although duty often constrains people and prompts them to act against their inclinations, it still comes from an agent’s volition: they desire to keep the moral law. Thus, when an agent performs an action from duty it is because the rational incentives matter to them more than their opposing inclinations. Kant wished to move beyond the conception morality as externally imposed duties and present an ethics of autonomy, when rational agents freely recognise the claims reason makes upon them.

7. Applying the categorical imperative, duties arise because failure to fulfil them would either result in a contradiction in conception or in a contradiction in the will. The former are classified as perfect duties, the latter as imperfect. A perfect duty always holds true—there is a perfect duty to tell the truth, so we must never lie. An imperfect duty allows flexibility—beneficence is an imperfect duty because we are not obliged to be completely beneficent at all times, but may choose the times and places in which we are.

8. Kant believed that perfect duties are more important than imperfect duties: if a conflict between duties arises, the perfect duty must be followed.

Believing that their job is to serve the com-munity they often take a personal interest in their customers, making loans to local businesses, lending small sums to individuals who have fallen into financial trouble, or bending over backwards to help those who can’t keep up their mortgage payments. They support your person-ally says one customer. Customers . . . can walk in and talk to the president adds another and know he isn’t sucking in their money and betting against them on pro-prietary securities.