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Major Integrity Issues

1. “The financial crisis of 2008 was the first major integrity crisis”. The homeowners took
out mortgages that they knew were unlikely to replay later on. The culprit behind this
crisis were the mortgage lenders who lent the money knowing it was unlikely to be
repaid and their integrity was under question. The result of that integrity unraveling was
an economic contraction that it affected every American together with vast populations
around the business world.
2. “The 2008 Chinese milk scandal was the largest food safety integrity issue”. Thousands
of children got sick due to the chemical melamine, found in milk and infant formula. This
happened because there are many people involved in the processing of the milk. Just
because of few who are involved in milk processing chain who did not do their job
correctly, this issue occurred. Their integrity was questionable. Later it was found out that
traces of melamine was present in other food products imported from China such as
eggs, fish, pork and chicken. As a result, the whole world heard about the scandal, lost
trust in the things made in China in general which affected China’s business today.
3. “For almost a century and a half Americans were suspicious of banks and had very few
direct dealings with banks because what they heard about banks wasn’t good. In
addition to that, the economic crisis in 1920 swept the nation. The integrity of the banks
small and large was undermined as much of the public’s savings in those banks were
wiped out”. Rebuilding public’s trust in banks was a mammoth task that involved some
changes and those changes have long lasting benefits in businesses today. If that
situation was not taken care of then probably today there would’ve been no banks or
ATM’s.
4. “The credibility of the Federal Reserve Bank of New York earned as guardian of the
world’s gold has played a role in building credibility in global financial markets”. Behind
the integrity of the Fed, it’s the people who work there who oversee the operation of the
vault, ensuring the safety of the world’s gold. If the integrity of the Federal Reserve was
doubtful, then it would have impacted the ability of the United States to borrow money
from other nations. Without the ability of the nation to borrow freely from abroad, the US
economy would look very different today. The integrity of the Federal Reserve has
helped in achieving the readiness and willingness of the rest of the world to do business
with Americans until today.
5. “Brands are perceptions about promises a company makes regarding its product or
service and the ability to deliver on that promise. GM had promised to deliver large and
powerful cars like SUVs that captured the imagination of Americans but fell out of favor
when the oil prices skyrocketed”. GM and other U.S. car companies tended towards
gimmicks like size, powerful engines, anything to make a sale. While doing so they did
not pay attention to the cars being sold with defects. This resulted in dishonesty with the
customer. They claimed to focus on quality but were not able to deliver it. The U.S. car
maker’s reputation for integrity was thus impacted, making their selling difficult, and
ultimately affected doing profitable business today.

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Critique Bernaseke’s perspectives

1. The mortgage lenders were behind the 2008 financial crisis. The author continues to
argue that it is very easy to lay a finger on them and criticize their lack of integrity. She
continues to argue that value of integrity is not personal or individual, it’s collective. I
agree that it takes time to build integrity and is passed through generations. From the
credit crisis, it is evident that integrity is fragile and can be destroyed. But the author
further argues that we need to protect and promote integrity so that such crisis don’t
happen in the future. I agree with the author that we need to invest in integrity. Integrity
has economic value.
2. With respect to the milk scandal, I agree with the author that integrity is much more than
a personal value. It is a set of relationships. There needs to trust on both sides. If
anyone tries to cut corners to make money or exploit the trust of others then everyone is
going to suffer else everyone benefits. In case of milk chain, if all the participants act
with integrity then all benefit. Buyers are confident that they are purchasing safe milk
product and sellers are also enjoying increased sales and customer loyalty.
3. The author suggests that in order to rebuild public’s trust in the bank, significant changes
need to made in the banking industry. Some changes made continue to exist even today.
The most important was the establishment of Federal Deposit Insurance Corporation in
1933 because of which Americans no longer fear that they can lose money kept on
deposit at banks. Integrity doesn’t happens all of a sudden. It takes efforts from many
people over a long time to build.
4. The author believes that today the Fed holds a unique position among central banks.
This gives the Fed significant power and influence in the financial system as well as
valuable knowledge of the international marketplace. The integrity built up over the
decades by the Federal Reserve benefits American businesses and consumers
promoting economic growth. Another benefit is that the Fed has helped build New York
City into a global financial hub.
5. According to the author, damaging the trust with the customers destroys the brand and
ultimately the ability of the company to generate wealth. If the customers get something
less than expected then they don’t buy the product again. Integrity lies in the fact that the
company is offering customers what it is conveying through imagery and advertising,
nothing less than that.

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Lessons Learned
1. From the financial crisis of 2008, I learn that prudent financial institutions used loopholes
in rules to turn themselves into risk takers and in the process ran their firms off the road.
Banks said that they were solvent, only to reveal later they weren’t. In the end, those
individuals in charge compromised the integrity of their institutions ultimately harming the
integrity of the entire financial system in 2008. I can relate this concept I learned from the
book “Economics of Integrity” in Executive Seminar. If everyone in the financial system
do their job right then the entire financial system benefits.
2. From the milk scandal, I learn that if the buyers are confident of what they are buying
and sellers are enjoying customer loyalty then this mutual integrity overall strengthens
the economy. This integrity leads to long term relationship marketing which I learned in
Strategic Marketing.
3. From “Behind the ATM screen”, I learn that Americans feel safe that their money is safe
even if the bank is at the brink of failure due to FDIC. I think that this a strategy by the
banking system to encourage customers to have faith in them. It’s a strategy to keep the
customers loyal to their service. I learned this concept from Advanced Marketing
Communications.
4. From “Good as Gold”, I learn that every employee at Federal Reserve is doing their job
correctly, they are loyal to their job because of which gold of other nations is safe in the
vault. I can relate this to one of the articles I read for Strategic Marketing. The name of
article was “Lead for Loyalty” and it said that a company engenders loyalty in its
employees which in turn helps the company to generate profits.
5. From Trusted Brands, I learn that building a brand increases the ability of a company to
generate health. I can relate this to Advanced Marketing Communications where we
figure out how to make the customers loyal to the product or service offered by the
company. Only then the company can generate wealth and compete with other rival
companies.