Following the financial crisis that greatly affected the world economy, the government decided to give bailout funds to financial institutions, mostly banks, in order to try and improve the state of the economy. However, over the past few months, major banks have rejected the federal bailout money arguing that they did not appreciate the stringent rules that the government has placed on them if they decided to take the cash infusion. This paper seeks to reaearch and find out what inspired the decisions to reject the bail out money and how self-serving reasoning could have played a part in the making of these decisions.
According to Bazerman, (2009), if everyone behaved optimally, benefits and costs would always be weighed accurately with no disregard to relevant information, no one would be impatient and moral behavior would always go hand in hand with moral attitudes (Bazerman & Moore, 2009). In order to try and achieve an optimal decision state, therefore, preferences should be consistent with the stated preferences and therefore any mathematical errors are unlikely to arise (Bazerman & Moore, 2009).
Financial institutions that had been approved for the government bailout funds were asked to conform with a number of rules such as the following:
The financial institutions were asked to put off all evictions and modify any mortgages that they had on their distressed home owners. They were also supposed to let the shareholders vote on the executive pay packages. In addition, they were also supposed to slash dividends to shareholders, cancel any on-going morale building exercises and employee training and lastly, cancel any open career opportunities to foreign citizens (Labaton, 2009).
According to the government, these conditions were put in place in order to stop Wall Street executives from spending money on lavish bonuses and purchasing corporate jets. Some experts, on the other hand are of the opinion that these rules go beyond protecting the taxpayers interests. Other bankers such as TCF Financial Corporation, Goldman Sachs and Wells Fargo say that these rules have become so burdensome that they have no option but to return the bailout money (Labaton, 2009).
Other financial institutions such as Johnson Bank Of Racine who had shown interest in seeking bailout funds but have now changed their minds after analyzing the rules to access these funds. The reason being to prevent any kinds of interference on the role the bank plays in the local community such as supporting the zoo or the opera company if they want to (Labaton, 2009).
References
Bazerman, M., & Moore, D. A. (2009). Judgment in Managerial Decision Making (7th ed.). (7 ed.). Hoboken NJ: John Wiley and sons, Inc.
Labaton, S. (2009, March 10). The New York Times. Retrieved from http://www.nytimes.com/2009/03/11/business/economy/11bailout.html?pagewanted=all&_r=1&
