Ethics and Finance Ronald F. White, Ph.D. Professor of Philosophy College of Mount St. Joseph

Introduction Trust in Financial Institutions Banking – Lending money – Mortgages – Credit cards Financial Services – Securities Stocks and bonds

Basic Approaches Stockholder Theory (Market-Based) – Less governmental regulation Legality Stakeholder Theory (Morality-Based) – More governmental regulation Legality Morality

Moral Principles Ethics Individual behavior- – Bankers, financial advisors, accountants, Systemic behavior – Instruments- Stocks and Bonds – Practices – Institutions- Banks, securities dealers and brokers, pension funds, accounting firms, mutual funds companies, insurance companies. – systems Moral Principles Justice-( Market Fairness) Merit Equal Information Equal Freedom Liberty- Utility- Categorical Imperative (Exploitation)

Classic Issues Individual and Collective Behavior – Deception (buyer and seller) – Fraud in the Inducement – Manipulation of Stock Prices – Conflict of Interest agency – Churning – Insider Trading Arguments in Favor Arguments Against – Hostile Takeovers

Recent Issues Mortgage Fraud – Sub-prime loans Payday Lenders Credit Card Fees Bank Bailouts – National Banks – Private Banks Shareholder Activism – Sisters of Charity

Fairness in Financial Markets Information Freedom Competition – Equal Bargaining Power – Efficient Pricing

Problems Legality – National v. Global Legal and Moral Standards – Complexity – Monitoring and enforcement of standards Effectiveness of governmental regulators – Securities and Exchange Commission – Federal Reserve – Federal Trade Commission Effectiveness of Global Regulators – World Bank Effectiveness of private regulators – Independent Auditors Cost of monitoring and enforcement Morality – National and Global Moral Standards