Corporate Indignities and Freddie Mac Scandal
Corporate indignities happen all the time in the worldwide, whether it’s written on paper or hidden within closed doors. Freddie Mac, a home mortgage corporation, was able to get away with billions of dollars hidden within their financial statements. After further review of the company, it was found that they misstated five billion dollars, which was done intentionally by understating and misstating numbers on the books. They were trapped through an SEC exploration, which led to millions of dollars in penalties and fines along with the firing of major role players in the scandal. This happened because the guidelines of Freddie Mac were unfastened and those executing assessments didn’t explore enough (Freddie Mac settles accounting-fraud charges, 2007).
U.S. Department of Housing and Urban Development Oversight
U.S Department of Housing and Urban Development (HUD) had the mandate of making sure that businesses like Freddie Mac and Fannie Mae (Another mortgage company involved in a similar scandal a year after) were making, “50 percent of its loans for affordable housing, 30 percent for underserved rural or urban areas and 20 percent for low-income families. (Mafruza Khan)” Regrettably, HUD has disregarded Freddie Mac capitalizing in the more profitable middle class, which allowable them to not reach the low-end goals, but rather give an emphasis on their income. HUD was also responsible for overlooking some things that should have raised some red flags, to begin with. Office of Federal Housing Enterprise Oversight (OFHEO) is also responsible for not making sure that it maintained, “safety and soundness. (Mafruza Khan)”
The Aftermath of the Scandal
The result of the whole thing that befell was a rebuilding of Freddie Mac, the investigation of everybody interrelating with Freddie Mac and then changes in OFHEO and HUD were made as well. David Glenn, Leland Brendsel and Vaughn Clarke were all fired from their positions with Freddie Mac. These three played the roles of president, CEO, and CFO; all major roles in the business and deceitful actions that Freddie Mac took place in. Along with these firings, there were nearly 30 other members from Freddie Mac that were replaced due to an assumption of involvement with the scandal. The company also faced a fine of 125 million dollars. Another interesting effect that this scandal revealed was the similar misstated earnings of Fannie Mae. Fannie Mae was actually caught one year later. Both of these companies were supposed to be held accountable to HUD and OFHEO, which also brought to light an issue of the accountability system as a whole. Scandals like these bring more rules, guidelines and watching eyes to businesses and corporations. The SEC responded to these misleading numbers by making them change their whole company structure and accountability system. This put a pause on growth, making the Freddie Mac backtrack and start over. The consequences to the individuals and to the companies were pretty severe, but also much deserved. This scandal not only impacted those who took out loans but additionally, it negatively affected the housing industry and the stock market. It is good that SEC did an investigation when they did and made the necessary changes (Weinberg, 2003).
A Biblical Perspective on Business Ethics
Seeing commerce front-runners white lie people just for some additional money is unacceptable, but one day that could easily be me. It might not be a large-scale company that is hiding bi, millions of dollars, but even a lying about a dollar is still against anything in the Bible. When thinking of a Bible verse I am always reminded of Romans 13:8-10. Specifically in verse 9 where it says, “For the commandments, “You shall not commit adultery,” “You shall not murder,” “You shall not steal,” “You shall not bear false witness,” “You shall not covet,” and if there is any other commandment, are all summed up in this saying, namely, “You shall love your neighbor as yourself.” (NKJV)” I have grown up in the church and always been taught how to act in a way that would honor God, but it has to come from the heart, which is why this passage is more than just following rules; it talks about loving one another and making sure that we try to lift others up in how we act, even from a business platform.
The Challenge of Maintaining Biblical Standards in Business
If I was placed in a situation where I was within management or owning my own business I could see it being very difficult to hold to a Biblical standard. I tend to be very focused on success in business and the increase in the potential of money to be earned. It is something to be mindful of, as being higher up in a business there is more opportunity to skew the truth to make the business and myself look better. It can always go back to the quote talking about how with more power comes more responsibility, and even with that, it will be more of a spotlight to shine for Christ. Presence of faithfulness from a business perspective can be very challenging because of what the world wants to see. In any Christian based business the goal is to serve others, but in order to be able to also stay in business, there has to be growth. Although fast growth and greater profits can be possible by making moral and ethical decisions, there are often shortcuts that can get businesses there faster. As a Christian, I would argue that one should never take shortcuts for quicker growth, even if the organization prioritizes serving people, sharing the gospel or donating large sums to the church. Cutting corners comes from laziness, sin nature and pride. Trusting God to run and grow your business takes a lot more faith than just doing all the work yourself.
The Impact of the Freddie Mac Scandal
In investigating this precise scandal, how individuals get wedged up in the triumph of their industry and making sure they are on top I learned a lot about the business world in America. I have always known that success and power can cause people to be corrupt and even abandon their moral principles, but I didn’t realize how impactful one person could really be. Just a few members of one business skewed five billion dollars and it affected millions of people, the stock market the housing market and investigation group’s nationwide. This all occurred because they wanted their business to look good and make sure they stayed on top. This is what drives American business these days though, unfortunately. It’s not about people, morals or what a business can do to deliver a service. It is about how to make people need your service and get the most money out of them for it. Obviously this isn’t every business, but in general American’s are focused on money and ego. The scandal with Freddie Mac is an impeccable sample of the fraudulent business world we live in.
Works Cited
Freddie Mac settles accounting-fraud charges. (2007). Retrieved from Freddie Mac settles accounting-fraud charges: http://www.nbcnews.com/id/21027918/ns/business-us_business/t/freddie-mac-settles-accounting-fraud-charges/#.VIYKVEtkKbA
Weinberg, A. (2003, December 11). Shaking Steady Freddie. Retrieved from Shaking Steady Freddie: https://www.forbes.com/2003/12/11/cx_aw_1211freddie.html#500261873835
