The Mortgage Bailout 'Is Not About Trying to Create Fairness'

Jacob Sullum | October 31, 2008

The New York Times discovers the moral hazard lurking in the various plans to save homeowners from their bad investments. "Experts say it is difficult to devise programs to aid distressed homeowners without giving everyone else a reason to mail the keys back to their lenders," it reports. You think?

The story opens with Todd Lawrence, an airline pilot in Norwich, Connecticut, who "has a traditional 30-year mortgage that he has no trouble paying every month" but who "owes more on his house than it is worth, like millions of other people." Lawrence feels like a chump, continuing to pay his mortgage while his taxes go to more reckless people who overborrowed and have begun to miss their payments. Such homeowners can take advantage of government programs that reduce their interest rates and principal. "Why am I being punished for having bought a house I could afford?" Lawrence asks. "I am beginning to think I would have rocks in my head if I keep paying my mortgage."

Financial experts agree that there is some sort of hard, naturally formed mineral or petrified matter where Lawrence's brain should be. "From a purely economic standpoint, there's not a whole lot to be gained from staying," says one. Another "says he thinks just about everyone who is underwater and has few other assets should stop paying." The Times does note in passing that "many people...consider paying their debts a moral obligation."

The story closes with an unnamed homeowner who owes $350,000 on a house in a Los Angeles suburb "that is worth only $150,000." As a former Los Angeles resident who looked into the housing market there a few years ago, I find it hard to believe you can buy a house anywhere near L.A. for $150,000 even today, but never mind. The point is that the homeowner who owes more on the house than it's worth realizes he is more likely to get government help if he stops regarding paying his debts as a moral obligation. "I guess they are forcing me to deliberately stop paying to look worse than I am," he says. "Crazy, don't you think?"

Under John McCain's mortgage bailout plan, you don't even have to default. He is promising anyone with negative equity a fixed-rate, 30-year mortgage at 5 percent, with the principal reduced based on the decline in the home's market value. If you're lucky enough to have made a really bad gamble on rising home prices, this deal might be enough to root for a McCain victory.

But even the government's current mortgage assistance programs provide plenty of reason to grumble for taxpayers who don't qualify. "This is not about trying to create fairness," says a Federal Deposit Insurance Corporation official who is working with the Treasury Department on its latest homeowner rescue plan. "The goal is to keep people in their houses." The implication is that they don't necessarily deserve to stay in their houses, but allowing foreclosure would further undermine house prices, which in turn would make economic conditions worse. McCain makes a similar argument for his plan, although he also implies that homeowners are in distress through no fault of their own and therefore deserve taxpayer-funded assistance.

For all the talk of a "foreclosure epidemic," foreclosures remain rare. "Estimates are that foreclosures will surpass one million this year," the Times reports. That's a rate of around 1 percent. Although the overall rate is up from about 0.6 percent in 2006, the increase has been driven almost entirely by subprime borrowers in particular parts of the country. The government (OK, one guy at the FDIC) now concedes that digging them out of the holes they dug for themselves is "not about trying to create fairness." But is the claim that it's about reviving the economy any more credible?

Comments

|10.31.08 @ 11:44AM|#

From the article:

"The goal is to keep people in their houses."

Isn't that the same idiotic policy that started this mess in the first place? Incentivizing people into houses?

There was a need to re-inject liquidity into the marketplace. That's been done. TARP may further enhance this. I have no issue with liquidity injections as a policy to stabilize credit markets. But as a policy to keep people in their homes? Bah!

|10.31.08 @ 11:45AM|#

If you have a no-recourse mortgage, you can send your keys in and screw the bank. Now of course that would probably not do your credit much good. My question is why did the banks ever agree to no recourse mortgages. By doing so they assumed all the risk of the home declining in value.

The lesson here is asset deflation sucks. Perhaps we should have considered that fact when we were artificially pumping up the values of homes. In every other commodity, price stabity or something close to it is always the goal. For the last 10 years or so, we decided that homes somehow are different and are now paying the price.

Gilbert Martin|10.31.08 @ 11:49AM|#

"The New York Times discovers the moral hazard lurking in the various plans to save homeowners from their bad investments."

And when they're through ruminating on that - they can turn their new-found concern for moral hazards to the consequences of about 70 years of liberals advocating an "entitlement" mentality whereby people are encouraged to believe they have affirmative rights to all sorts of goods and services - like healthcare - regardless of whether they can pay for them or not.

Guy Montag|10.31.08 @ 11:52AM|#

Yes, another buggy-whip maker protection act.

I agree that it si not abour "creating fairness", it is about "Hope and Change" and getting a jump on the new Sociaist regime replacing the current one.

SIV|10.31.08 @ 11:52AM|#

The lesson here is asset deflation sucks.

I love it as long as the deflating asset isn't fiat money.I

hotsauce|10.31.08 @ 11:53AM|#

Is there a state by state breakdown of laws governing recourse vs. nonrecourse mortgages?

Guy Montag|10.31.08 @ 11:53AM|#

My question is why did the banks ever agree to no recourse mortgages.

Contrary to the popular belief that bankers control every aspect of government, most States require no-recourse on mortgages within their jurisdiction.

|10.31.08 @ 11:55AM|#

""This is not about trying to create fairness," says a Federal Deposit Tulip Insurance Corporation official who is working with the Treasury Department on its latest home tulip owner rescue plan. "The goal is to keep people with their houses tulips."

FTFY

Turtles|10.31.08 @ 11:56AM|#

FALLING HOUSE PRICES ARE NOT A BAD THING. Seriously, why can't they get this?

Guy Montag|10.31.08 @ 11:57AM|#

hotsauce,

Google.com is your friend.

7th result.

Kolohe|10.31.08 @ 11:59AM|#

The lesson here is asset deflation sucks.

I love it as long as the deflating asset isn't fiat money.

Heck, as long as you're debt free, it's not such a bad thing. It probably is no good for the macro economy though, because most people are not.

Beaker|10.31.08 @ 11:59AM|#

Bah! My mortgage is a contractual obligation not a moral one. Under either McCain or Obama it seems that the future of home ownership includes a heavy federal intrusion into the process.

libertarian democrat|10.31.08 @ 12:07PM|#

People who bought the things they couldn't afford should be screwed in most cases.

I feel bad for people who mistakenly made major investments in houses that are declining in value... but that's life. They agreed to pay what they thought a house was worth to them, so should be at least comfortable in that.

|10.31.08 @ 12:11PM|#

J sub D | September 6, 2007, 10:53am | #

Who am I supposed to bail out? People who took mortages out on houses they couldn't afford, or those who gave them the mortages? To both groups my response is "You made your bed, now lie in it."

Oh yeah, "And quit whingeing".

Nothing in the past year or so changes that opinion. Look fella, you bought that house because you thought it was worth what you were agreeing to pay for it. If you don't keep up your end of the deal, you lose the house deadbeat.

|10.31.08 @ 12:19PM|#

"If you don't keep up your end of the deal, you lose the house deadbeat."


But they want to lose the house and go buy the one next door at half the price. If you have a no-recourse mortgage, they are not being deadbeats, they are acting in their interests.


Thanks for the info on no-recourse mortgages Guy. I didn't know that.

|10.31.08 @ 12:19PM|#

"Google.com is your friend."

I couldn't help hearing that in John McCain's voice. *shudder*

Invisible Finger|10.31.08 @ 12:23PM|#

owes more on his house than it is worth, like millions of other people

Every car loan has been this way forever. People still pay their car loans, they don't get bailed out and no one ever considers otherwise. There is no reason real estate should be treated any differently.

Mr. Peabody|10.31.08 @ 12:27PM|#

My question is why did the banks ever agree to no recourse mortgages.

Set the wayback machine to 1933. Sherman

Citizen Nothing|10.31.08 @ 12:29PM|#

At what point does it become immoral to play the angles to grab as many government goodies as one can, given they are being handed out (and assuming one has played no role in lobbying or voting for those programs)? Surely it's not immoral to take advantage of every tax break to which one is entitled. (Of course, I consider taxes immoral to begin with.)
But if one were ever to reach the point that their lifetime net payments to the government reached zero, would it then be time to stop taking whatever the government puts out there to grab?

Fluffy|10.31.08 @ 12:29PM|#

It's not even about reviving the economy or stopping housing price declines. It's about catering to a particular type of upper middle class constituent who overpaid for his house in one of the hot real estate markets.

They could stop the decline in housing prices by taking the plunge and explicitly extending the full faith and credit of the US over Fannie and Freddie's debt, and then sticking to that statement, rather than dancing around it rhetorically. Fixed rates would drop into the 4's and there would be a wave of refinancings and foreclosure purchases that would put a bottom under prices. I don't favor intervention, but if we have to intervene we should at least do it in a way that actually will accomplish something.

Gilbert Martin|10.31.08 @ 12:30PM|#

"People still pay their car loans, they don't get bailed out and no one ever considers otherwise."

Not in the new age of Obama.

Check out the video clip of the female Obamamaniac who thinks she won't have to pay her car loan or her mortgage anymore (it's posted a few topics down in the Hit & Run list).

|10.31.08 @ 12:31PM|#

"Every car loan has been this way forever. People still pay their car loans, they don't get bailed out and no one ever considers otherwise. There is no reason real estate should be treated any differently."


Of course car loans are not no recourse loans. If you made them that way, people would be turning in the cars all the time and buying new ones. It would be great until banks stopped giving car loans and then it would kind of suck. But I guess we could get the government to make the banks give us loans. Yeah, that will work.

rhywun|10.31.08 @ 12:31PM|#

FALLING HOUSE PRICES ARE NOT A BAD THING.

The "house" as "place to live" - how quaint!

As a renter, I am richly enjoying the spectacle of people gambling--and losing--on their residences. More, please.

Kenneth|10.31.08 @ 12:34PM|#

Since I am one of the mortgage holders who don't even remotely benefit from any bailout, I have been trying to convince my wife to shoot herself. Not fatally mind you, just in the leg or foot and then claim she was trying to commit suicide because she was despondent over the mortgage.

Based on the old woman in Ohio that shot herself...and got her mortgage forgiven when there was enough negative publicity generated about it, I felt thst this was a viable option to get our house for free.

Unfortunately my wife suggested that instead I should shoot myself and she promises not to try and get her mortgage forgiven. Gosh I love that woman!

|10.31.08 @ 12:34PM|#

"As a renter, I am richly enjoying the spectacle of people gambling--and losing--on their residences. More, please."


Me too. I know plenty of people who told me I was crazy to rent and to buy a house even though I would moving in a couple of years and had other debts. Go ahead John, take the crack, everyone is doing it, we all know housing prices never go down.

Fluffy is right. A certain breed of middle aged upper middle class voter owns both parties lock stock and barrell. Their interests will always be takend care of regardless of who is in power.

Citizen Nothing|10.31.08 @ 12:37PM|#

rhywun,
You sound like a friend of mine who has been renting for the past 15 years because he knew there was a housing bubble. Hey. He was finally right.
Still, even after the bubble, the beautiful house I bought 15 years ago, which is practically paid off, is still worth twice what I paid.
And he's now paying more in rent than I am for my monthly mortgage.

|10.31.08 @ 12:46PM|#

I may not be following this right, but we are talking about McCain's bailout plan, correct?

How is McCain's plan Obama's or everyone liberal's fault?

BDB|10.31.08 @ 12:46PM|#

"Fluffy is right. A certain breed of middle aged upper middle class voter owns both parties lock stock and barrell. "

Amen!

|10.31.08 @ 12:48PM|#

As a renter

HA HA! SUCKER!!!

|10.31.08 @ 12:50PM|#

Cit0,

That is the problem with bubbles. Even if you know the bubble exists, you end up losing money if you don't go along for the ride.

A couple of years ago, I was toying with the idea of buying puts on Crude Oil futures because I knew there was a bubble there. Of course, had I done it, I would have gotten wiped out. Not because I was wrong about the bubble but because there is no way to know when the bubble will burst.

|10.31.08 @ 12:51PM|#

My mortgage is a contractual obligation not a moral one.

So you see no moral dimension to keeping your word and doing what you promised to do?

At what point does it become immoral to play the angles to grab as many government goodies as one can, given they are being handed out (and assuming one has played no role in lobbying or voting for those programs)?

Really, this is, in part, just a tax cut, so its perfectly OK. You see, as long as you pay taxes, any check you get from the government up to the amount of your taxes is a tax cut. Just ask Obama!

LarryA|10.31.08 @ 12:56PM|#

The New York Times discovers the moral hazard lurking in the various plans to save homeowners from their bad investments.

[yawn] This is the same government that urges parents to lie to their children about youthful drug use, and that needs "ethics legislation" to keep representatives "honest."

The lesson here is asset deflation sucks.

The lesson here is that your home isn't an "asset." It's a place to live. As my wife says of my gun collection, "It's not an investment until you can sell it and spend the profit." You can't sell the place you live and make a profit if you then have to spend the profit on another place to live.

|10.31.08 @ 12:56PM|#

If McCain gets to implement his plan, I'm going to take advantage. I'll be paying for it anyway. fwiw, I promise to look sheepish about it.

"many people...consider paying their debts a moral obligation."

Damn it, these moral obligations have been holding me back my whole life. I curse the day my parents decided not to raise me to be a sociopath.

|10.31.08 @ 12:59PM|#

In all seriousness, regarding McCain's plan, I'm not quite underwater on my condo yet. Doesn't his plan put me in a weird situation where I should hope that housing prices go down further?

It's a moot point, of course, as they almost certainly will. Almost there!

|10.31.08 @ 1:04PM|#

Also, I'm under the impression that lenders can still take borrowers to Civil court to get at the difference between what the home is sold for and the outstanding loan in cases where there is a no recourse loan. The trick apparently is to have that amount not be worth it to the lender in lawyer's fees.

That's what I have heard anyway. Feel free to admonish me over it.

Oh, and sorry for the triple post.

Guy Montag|10.31.08 @ 1:04PM|#

CN,

At what point does it become immoral to play the angles to grab as many government goodies as one can, given they are being handed out (and assuming one has played no role in lobbying or voting for those programs)? Surely it's not immoral to take advantage of every tax break to which one is entitled. (Of course, I consider taxes immoral to begin with.)
But if one were ever to reach the point that their lifetime net payments to the government reached zero, would it then be time to stop taking whatever the government puts out there to grab?

No, it is not immoral to accept things offered. The immorality is on the side of the offeror(s), taking property/money at gunpoint and giving it away to others.

Gilbert Martin|10.31.08 @ 1:05PM|#

"The lesson here is that your home isn't an "asset." It's a place to live"

Indeed.

If you want real estate representation as an asset class in your portfolio, buy some shares in a few REIT's

Guy Montag|10.31.08 @ 1:07PM|#

John,

Of course car loans are not no recourse loans.

There are many no-recourse car loans.

|10.31.08 @ 1:08PM|#

How about we advocate for adding this to any bailout plan:

We'll help keep you in a home, but before we do that we will put your house up on a website where responsible homeowners can see if your house is better than the one they live in. If so, you have to switch with them.

Sound good?

Guy Montag|10.31.08 @ 1:10PM|#

mk,

Of course. Because it would only be proper social and economic justice.

|10.31.08 @ 1:12PM|#

We're fucked. With both major parties responding to the economic situation in similar manners, there's no way things are ever going to improve long-term.

|10.31.08 @ 1:12PM|#

But they want to lose the house and go buy the one next door at half the price. If you have a no-recourse mortgage, they are not being deadbeats, they are acting in their interests.

Good luck getting a mortgage right after you defaulted on one. What will its value be when the kids move out and you decide to downsize is a more realistic calculation. Default and get an apartment.

Housing prices have declined (a very good thing) but hardly by 50%. At least not anywhere I'm aware of.

|10.31.08 @ 1:18PM|#

The worst offenders in all this, those who took out "liar" loans, had bad credit anyway.

Curse you Lucky Ducky!

Seward|10.31.08 @ 1:29PM|#

The lesson here is asset deflation sucks.

The broader lesson is that the "subjectivist" position as far as value is concerned is the correct one. Score one for the Austrian school.

JD|10.31.08 @ 1:31PM|#

It's things like this that make me realize what a world of difference there is between conservative economists and their ilk, who actually think about things like moral hazard and adverse selection, and the rest of the world.

Take this guy, for example:
http://letitsink.blogspot.com
His tag line is (in part) "People should walk away from their homes and mortgages if their homes are worth less than what they owe. As home prices drop, many people will owe tens and hundreds of thousands more on their homes than they are worth. These people should look at mortgages the same way the lenders do, as business agreements not as sacred bonds."

The banks might look at mortgages as business agreements and not sacred bonds, but if they decided to walk away from peoples' accounts because they didn't like the balance sheet anymore, mobs would descend on them with kerosene and matches.

T|10.31.08 @ 1:34PM|#

Good luck getting a mortgage right after you defaulted on one.

I suspect credit standards are tightening, but I know a guy who declared bankruptcy twice and got a house loan. At an interest rate I felt was absurd, admittedly, but he still got a loan.

|10.31.08 @ 1:56PM|#

"Housing prices have declined (a very good thing) but hardly by 50%. At least not anywhere I'm aware of."

Look at the HPI numbers for Merced, Stockton, and Modesto, CA. And remember, that's the end of June, and it's year over year. As of now, from the peak, I'm pretty sure those areas have seen
a 50% haircut. This article backs that up.

|10.31.08 @ 2:03PM|#

So McCain can come out with proposals like this one and still get away with claiming that Obama's economic policies are 'way to the left' and the Obama is a socialist.
What on earth does that make McCain's position -- what is more extreme in that direction than socialism? Whatever it is, McCain's got it.
And I don't want it.

This election is a choice between Sauron and Saruman, and McCain has proven himself to be Sauron. I'll take the wannabe if I have to choose...

no hugs for thugs,
Shirley Knott

Mike Laursen|10.31.08 @ 2:13PM|#

Thanks for posting the foreclosures map. I've been looking for something like this and couldn't find it anywhere.

It confirms that Cato and others who have argued that the housing price bubble is due to land use regulation are confused about which real estate regions they are talking about. Land use regulation is contributing to high housing prices in desirable areas, but those aren't the same areas where there was a lot of new housing driven by sub-prime lending. The sub-prime lending was driving housing construction in exurbs where there are fewer regulations and it is relatively easy to build cheaply.

|10.31.08 @ 2:24PM|#

What's wrong with undermining house prices? They need undermining.

This is not about helping homeowners (or would-be homeowners) - this is about enriching banks. Again. As always.

|10.31.08 @ 2:30PM|#

The story closes with an unnamed homeowner who owes $350,000 on a house in a Los Angeles suburb "that is worth only $150,000." As a former Los Angeles resident who looked into the housing market there a few years ago, I find it hard to believe you can buy a house anywhere near L.A. for $150,000 even today, but never mind.

At the peak of the housing bubble, you'd be surprised what was being built and marketed as a "Los Angeles suburb". Ever been to Victorville?

|10.31.08 @ 2:31PM|#

"The goal is to keep people in their houses."

Maybe we should just nail the doors shut. It would be a lot cheaper.

|10.31.08 @ 2:44PM|#

Look at the HPI numbers for Merced, Stockton, and Modesto, CA. And remember, that's the end of June, and it's year over year. As of now, from the peak, I'm pretty sure those areas have seen
a 50% haircut. This article backs that up.

I stand corrected. Thank you. Still a good thing though.

Mike Laursen|10.31.08 @ 3:01PM|#

Ever been to Victorville?

Had to Google it to refresh my memory of where it is. That high desert area is starkly beautiful but forget about finding a job out there -- someday, though, if/when the private space flight industry takes off, the Mojave area may have lots of jobs. Someday.

|10.31.08 @ 3:02PM|#

Guy,

I stand corrected again on car loans. Wow. Things you never learn in secured transactions in law school.

That foreclosure map is really interesting. A lot of the housing bust is concentrated in California and Denver where they built houses in areas insanely far away from metro areas and sold them to people under crazy mortgages. Long term, the best sollution may be to just tear the places down.

Neu Mejican|10.31.08 @ 3:04PM|#

Ever been to Victorville?

[shudder]

Neu Mejican|10.31.08 @ 3:07PM|#

MK,


Curse you Lucky Ducky!

Thanks for that obscure pop reference.
Amazing what trivia lies buried in people's minds.

8^)

Alan Vanneman|10.31.08 @ 3:19PM|#

It's the bailout that causes moral problems. Frankly, I don't see why I have a moral duty to make mortgage payments on an "over-priced" house. The contract I made specified that if I didn't make the payments the holder of the mortgage would become the owner of the house. What's immoral about abiding by the terms of the agreement?

Both the lender and the borrower take the risk that the collateral of the loan will be devalued by market forces. The lender, after all, could have insisted on a "hold harmless" clause, and mortgage negotiations definitely fall into the "arm's length" category.

I have a "moral duty" not to trash a house I'm "returning" (that would be tacky if not immoral) but I don't have a moral duty to pursue the financial course least advantageous to me to benefit another. What we have here, I would say, is the instinctive bias on the part of some libertarians in favor of lenders rather than borrowers, landlords rather than tenants, etc.

What would be the impact on your ability to get another mortgage if you defaulted? Dunno. If your credit is good, not much, maybe. You could offer to put in a "hold harmless" clause. If you had the bucks, you could put down 20%. It's a buyer's market right now in most places, right?

ed|10.31.08 @ 3:24PM|#

Critical error #1: Buying a house as an investment and not knowing what "investment" means.

Critical error #2: Assuming somehow that real estate values will always rise, and when they start to fall, assuming that they will never rise again.

Critical error #3: Being a responsible individual who pays his bills and taxes and forgets that his neighbors might, with the slightest bit of encouragement, become parasites.

|10.31.08 @ 3:25PM|#

""""The lesson here is asset deflation sucks."""

Isn't that the lesson they are trying to avoid?

|10.31.08 @ 3:38PM|#

""""Frankly, I don't see why I have a moral duty to make mortgage payments on an "over-priced" house.""""

The moral of the story is to not buy an overpriced house.

There is an aspect of honesty which ties to morals, but cases of default are usually factored into the contract, so I have to agree some with Alan. If you sign a contract covering what happens if you default, and you default, it's not immoral. Immoral would be if you stole the house by not paying and preventing the lender from repossessing.

|10.31.08 @ 3:45PM|#

Had to Google it to refresh my memory of where it is. That high desert area is starkly beautiful but forget about finding a job out there -- someday, though, if/when the private space flight industry takes off, the Mojave area may have lots of jobs. Someday.

You're missing the point. All of the sub-genius "real estate investors" were being encouraged to move to Victorville and drive in to work in downtown L.A. every day. After all, it's only 100 miles or so.

Invisible Finger|10.31.08 @ 4:08PM|#

What would be the impact on your ability to get another mortgage if you defaulted? Dunno. If your credit is good, not much, maybe.

If your credit was good, then you default on a loan and get foreclosed, your credit is now shit.

Shit credit in an era of increasingly tougher underwriting standards means you ain't gettin' another mortgage. You'd be lucky to even get an apartment without two months security deposit.

|10.31.08 @ 4:22PM|#

"The contract I made specified that if I didn't make the payments the holder of the mortgage would become the owner of the house. What's immoral about abiding by the terms of the agreement?"

You're not abiding by the terms of the agreement when you cease making payments. You are breaching the agreement. The contract includes consequences for breaching the agreement. Abiding by the consequences (as specified by the contract) is not the same as abiding by the terms of the agreement.

That being said, I also agree that breaching a contract is not immoral. What is immoral is to breach a contract and then expect to escape the consequences for said breach.

|10.31.08 @ 4:24PM|#

"""If your credit was good, then you default on a loan and get foreclosed, your credit is now shit."""

So it would seem. A decade or so my grandmother filled for bankruptcy. She had no problem getting more credit right afterwards. I was suprised. Creditors realized you just unloaded your debt and freed up cash that you could throw their way.

It's really about keeping you in debt, so if you have no debt for whatever reason companies will find a way to get you back in debt.

If you listen to the argument why the bailout is important, it's not about housing, it's about keeping people in debt. Can't freeze the credit markets, the lending must continue.

Imagine how much our government would freak out if we all stopped borrowing money and started using our extra cash to get us out of debt. It would collapse our economy because it's dependent on debt.

Invisible Finger|10.31.08 @ 4:48PM|#

A decade or so my grandmother filled for bankruptcy. She had no problem getting more credit right afterwards.

That was true ten years ago. It ain't true today. The free lunch program is over.

Keeping people in debt only works if the creditors can fool investors into thinking their balance sheets are legit. When investors catch on to the fraud, the capital loss is swift.

Remember the days of annual-fee credit cards? They'll be coming back, too.

|10.31.08 @ 5:02PM|#

That being said, I also agree that breaching a contract is not immoral.

Just playing devil's advocate here, but . . .

When you breach a contract, aren't you failing to keep a promise? Assuming you had the ability to keep your promise, isn't breaking your word in order to benefit yourself a moral problem?

Mike Laursen|10.31.08 @ 5:03PM|#

You're missing the point.

Didn't miss the point. I was just digressing.

|10.31.08 @ 6:15PM|#

When you breach a contract, aren't you failing to keep a promise? Assuming you had the ability to keep your promise, isn't breaking your word in order to benefit yourself a moral problem?

"Your word" and a "promise" are functions of trust. A violation of trust is a moral problem. The whole point of a contract is to remove trust from the equation. If the agreement was based exclusively on trust, as is "your word" and a "promise", there would be no reason to have a contract.

With trust essentially removed, morality is removed. The contract describes expectations and penalties. And penalties are typically arranged such that you can't avoid them.

Unless, of course, an outside force (such as the government) interferes with the contractual mechanism.

Mike Laursen|10.31.08 @ 7:04PM|#

Nice casuistry, MP. You can never cover every conceivable contingency in a contract completely enough to eliminate trust and expectations. When you take on a mortgage, the expectation is that you will try to pay it off.

|10.31.08 @ 7:11PM|#

Didn't miss the point. I was just digressing.

Fair enough. And on your point of digression, it would have to be a wonder job at the level of Playboy photographer to make me want to move to Victorville. You know it's bad when the main tourist attraction is a stuffed horse.

Mike Laursen|10.31.08 @ 7:53PM|#

Never been to see the horse, but years ago I toured the house of an even older cowboy actor, William S. Hart. Don't remember anything specific about it except I remember I liked the house a lot. Apparently, it was near Victorville, too. What's with Victorville and movie cowboys?

CRT|10.31.08 @ 7:57PM|#

Americans need to stop being so naive about the nature of government -- or business. They are living in a corporate state, why in the world should they expect fairness?

There is no surprise in these corrupt companies using our Bailout tax dollars to pay for executive bonuses, junkets, and to buy each other out. No surprise at all. That's what dishonest people do; what people not held accountable do. They've learned that most Americans won't act to stop it. They're not going to jail and they know it.

So how do we start stopping it?

We start by "un-electing" those Senators and Representatives who voted "yes" for the Bailout. They were willing to ignore the 90% of us who were against the Bailout, clearly demonstrating that they do NOT represent us.

A new group called the Constituent Response Team has put together a Bailout Vote Map that makes it easy (as a mouse click) to find out how your Senators and Representatives voted. Check it out -- and then tell all your family and friends about it, so they can find out how their Representative and Senators voted before they cast their ballot on Tuesday.

If you are interested in stopping it, check out Constituent Response at http://www.constituentresponse.com . After the election, with a clean Congress, then we can start thinking about fairness.

patient renter|11.1.08 @ 12:25AM|#

'Is Not About Trying to Create Fairness'

While Shiela Bair or whoever else might not care about fairness, the market does.

The idea that the government can spend its way to prosperity is ridiculous enough, but the idea that you can rob the market of its discipline and still expect a positive outcome just defies common sense.

Bair is an idiot. They all are.

Craig|11.1.08 @ 1:03AM|#

Paying your debts is not a moral obligation, when you're openly and willingly accepted the agreed-upon consequences of not paying them. If the lenders don't like people walking away when the value of the house falls, they should require a big enough downpayment to make that unlikely.

yingge|11.1.08 @ 4:04AM|#

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