Ethical Investment Dilemmas Probed by World Press
Jul 14th, 2008 • Posted in: NewsThe subprime meltdown, speculation on food supplies, and investing in China’s building boom capture the attention of financial and professional publications
NEW YORK and LONDON
There were some interesting moral takes on investment news last week. Among them:
- The subprime mortgage crisis, exceeding even the most pessimistic forecasts, continued to broaden and deepen last week with news that the two U.S. quasi-governmental agencies that own or guarantee $4 trillion in mortgages — Fannie Mae and Freddy Mac — are themselves struggling. Fortune reports that while there is no immediate sign of collapse, the agencies may be damaged to the point where they could be seriously impaired, making loans even more difficult to come by and possibly shifting billions of debt onto taxpayers. The mortgage crisis remains one of the most visible ethics issues in finance because of alleged malfeasance by multiple parties, including lenders who sold mortgages that could not reasonably be expected to be repaid and by securities agencies that sliced and diced mortgage obligations into a dizzying array of investment vehicles that obscured the risk. The resulting troubles have raised questions about the so-called moral hazard invoked when the government bails out private business that made reckless investments.
- The U.K. version of the Motley Fool investment website last week raised a newly emerging ethical-investment question: Is it morally right to speculate on food. Rising food costs, sometimes called “agflaton,” have been blamed at least in part on food speculators — investors who can, depending on their strategy, make a profit when food prices go up or down. Fool columnist Padraig O’Hannelly concludes that while speculators may profit from soaring prices, which are a direct result of food shortages, speculation does not have a cause-and-effect relationship to shortages. But O’Hannelly admits it’s a complex area and invites readers to correct him if he’s wrong by posting a response on the Fool site.
- The influential, century-old publication Architectural Record last week pondered whether it is ethical for architects, builders, investors, and developers to profit from China’s building boom. According to the Record’s Dorian Davis, while the building-boom money is flooding in, there are ramifications: “In Beijing, the government has allegedly displaced more than one million people since 2001 in order to construct new buildings and infrastructure, according to the Geneva-based Center on Housing and Eviction Rights. Additionally, it has razed traditional courtyard housing complexes known as hutongs, regarded by many as historic relics that merit preservation.”
Sources: Fortune, July 10 — Architectural Record, July 10 — Motley Fool, July 3.
For more information, see: Related Newsline Commentary, July 14 — Related Newsline story, July 7 — Related Newsline Commentary, June 23 — Related Newsline story, June 9 — Related Newsline story, June 2 — Related Newsline story, May 27.
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