Writing Homework Help
University of Portland Banking Truthtelling or Compassion Case Study Paper
These papers should be double-spaced and submitted on Canvas, not by hard copy or email. You will be graded on the basis of evidence that you have interacted with the material in a thoughtful manner. Furthermore, the clarity of your argument and writing will be a significant consideration. These papers are due during the week that is reflected on this syllabus. Late cases are not accepted.
Banking: Truthtelling or Compassion?
You work for a major bank that extends commercial lines of credit to auto, RV, and marine (boat) dealerships for the purpose of stocking their inventory to be sold on a retail basis. The inventory that is purchased by a dealer is financed through the credit line and serves as collateral for the loan. The loan is paid off immediately following the sale of the unit, allowing room on the credit line for additional orders. A line of credit like this is the life-source of a dealership, for, without it, business failure is almost certain.
You manage and underwrite a portfolio of loans serving dealers primarily based in the Midwest. Your job is to evaluate both the risks and mitigating factors on each account and draft a write-up with a recommendation to continue, terminate, and/or adjust the terms of a credit line. The recommendation gets approved by at least two levels above you in the bank’s corporate offices. It is common for you to come into contact with most dealers numerous times a month – sometimes on a daily basis.
Recently, a small RV dealership was due for a standard annual review, in order to determine if credit will be continued or terminated. This dealer was one of the many RV dealerships that were severely affected by the economic recession in 2008 (as well as 2009 for many RV dealers).
The dealer had taken a loss in the previous year, which had weakened the balance sheet. In a conversation with the dealer, he revealed to you that he was using personal credit cards to help fund the business but had already significantly reduced the credit card balance in the last six months, when his credit bureau report showed he had racked up $60K credit card debt to fund the business. Another two or three-quarters of losses could very well put the dealer in an insolvent position, requiring the Bank to pick up the inventory and potentially take a loss on the auction sale of the inventory.
Despite the recession, the dealer had been doing the right things to get back on the right track and had verbally reported that in the current year, numbers were doing much better. Numerous measures were taken by the dealer to cut costs, including laying off additional employees and reducing his personal salary to minimal levels. The most promising mitigating factor, however, was that dealer had owned real estate property adjacent to the dealership that had been vacant for numerous years but was recently leased on a two-year contract that would bring him new $2000 monthly cash flow.
After evaluating all factors, you conclude that the dealer would make it through the difficult season and that the bank could be confident that no losses would occur. Furthermore, you believed the majority of higher management would agree except for Amanda, who held the highest level of approval authority, and who would automatically elect to terminate the account, simply because the owner used personal credit card debt to fund the business.
You are wondering whether to omit the information about the owner’s credit card debt on your recommendation and write-up. It is standard practice to put down every detail and lay all risks, yet I also knew that Amanda was would likely lose all objectivity and rationality after knowing the business was partly funded by credit card debt for a season. Both the bank’s capital as well your job could be at risk if the bank took a loss. The owner had done everything the Bank had asked her and she had already seen recovery. Furthermore, a decision to close the credit line would likely force the dealership out of business.
Questions for Reflection and Discussion
- Is it ethically appropriate to omit the information about the owner’s credit card debt on credit assessment, for the sake of the dealer’s survival as a business? Was a number of jobs potentially saved worth omitting the information?
- How strong is your obligation to my employer when you don’t agree with what will likely be their decision? How do you balance compassion for the dealer with your covenant obligation to your employer?
Rubric
Ethics Essays 2021
Criteria | Ratings | Pts | ||||
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This criterion is linked to a Learning OutcomePresentation |
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20 pts |
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This criterion is linked to a Learning OutcomeOrganization and Structure |
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20 pts |
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This criterion is linked to a Learning OutcomeInteraction With Readings and Videos |
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20 pts |
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This criterion is linked to a Learning OutcomeSubstantive Content, Mature, Critical Thinking |
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20 pts |
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This criterion is linked to a Learning OutcomeBiblical and Faith Integration |
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20 pts |
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Total Points: 100 |