Baum's Ethical Dilemma

Baum’s storyline is filled with ethical decisions, blind spots, and rationalizations. A critical decision into the ethics of Baum comes just after he speaks with the CDO manager in the Las Vegas restaurant. As the CDO manager explains synthetic CDOs, his convenient relationship with Merrill Lynch, and that fact $1 billion is bet on the housing industry each night, Baum begins to understand America’s economy may be on the brink of collapse. He immediately stands up, tells his team to buy $500 million more in swaps, and looks to find salvation at the roulette table. His decision to purchase that $500 million is the characters most defining ethical moment. The other characters commented that he looked like he might explode during his conversation

His brother’s recent death sent him on a mission to bring justice to the world and stick it to the banks. He refuses to sell his short position longer than most of the investors because he wants “to wait, and make them bleed”. Any chance to hurt the bank, he will take. His second ethical blind spot is his position as the manager of a hedge fund. He makes a living off making trades in the market. Therefore, he may not initially look at this situation from an ethical perspective, but rather a financial perspective of just doing his job. He was so confident that the mortgage backed securities would fail, he felt comfortable betting $500. Baum rationalizes his decision with the denial of responsibility. Throughout his entire Vegas trip to, no one takes ownership for their negative contributions to the system. His entire investigation yielded the realization that not a single person in the chain is acting responsibly. The dancer bought 5 houses and condo without any intention of fully paying for it, the mortgage brokers wrote loans they should not have knowing they could sell them to banks, and banks knew the loans were bad and still sold them to

Their trip to the securitization conference gave them enough evidence to be confident that they were correct in shorting the housing market. The problem was, the banks were charging them ridiculous prices for swaps on the BB tranches. They needed a cheap trade. This leads Charlie to have the genius idea to short the AA trance. The idea will be so ludicrous to the bankers that they will think they are stealing candy from babies. Charlie points out they could make 200 to 1 returns on the trade. Each banker they approach takes their bet, and Charlie and Jamie realize they just made a trade of a lifetime. As they walk out of the casino with Ben, they and happily dancing in celebration. Ben suddenly gets angry, and reminds them they are acting unethically by pointing out their rationalization they are unaware of. Ben reminds them that they just bet against the American economy, and that people will lose their houses, jobs, and lives if what they bet on becomes true. He explains this is why he hates banking, because it reduces actual people to numbers. He is directly pointing out the boys rationalization through denial of injury. They aren’t seeing how people might actually be affected if the collapse is large enough to affect the AA tranches. After Ben scolds them, Jamie reflects on his words. Finally realizing the full scope of his decision, he says, “Whoa. I just got really scared”. They too made the unethical