I’m so unsophisticated
http://www.slate.com/id/2239555/
There’s no doubt that homeowners are defaulting strategically. And the surprise may be that, given market conditions, there aren’t more strategic defaults. A paper by University of Arizona law professor Brent White suggests that bourgeois values are actually keeping people from walking away from bad home loans.
Well, duh.
It’s also these “bourgeois” values that are keeping people from raping, stealing, and lying.
Of course, corporate managers and financiers don’t suffer from these neuroses.
“Neuroses” ?
I prefer to think of it as “honor”.
…but what do I know? I’m not a sophisticated left-winger writing a financial column for Slate; I’m just a dumb grunt who thinks that a man’s word counts for something.
December 23rd, 2009 at 3:35 am
Ha! Great Spam comment – “bourgeois” boots for “bourgeois” people. Historically “bourgeois” referred to the middle class – independent merchants and proprietors. In other words “Main Street” business owners and wealth producers. Of course, Marxists and socialists hate these people.
I find it unbelievably tiring how much crap gets flung at the productive members of society – this “groundbraking paper” included. The examples Daniel Gross cites in his articles are individuals who are not bailing out companies they own a modest to middling stake in (Six Flags, 11% owned by Bill Gates). Or Morgan Staley passing top-dollar buildings to debt-owners in SF. So what?
A corporations’ highest moral obligation is to its shareholders. Not vice-versa. Just because shareholders or owners aren’t liquidating other investments to shore up corporations does not mean they are acting dishonorably. Bankruptcy is just another tool of business.
An individual home-owner is a different breed of cat altogether. If personal honor and reviled “bourgeois values” are keeping personal finance rolling along, so be it. It speaks more of a person’s moral bankruptcy to draw a false analogy to wage class warfare than it does to validate Marxist “theory”.
My two cents.
December 23rd, 2009 at 9:03 am
A paper by University of Arizona law professor Brent White suggests that bourgeois values are actually keeping people from walking away from bad home loans.
I dunno bourgeois values from a breeding pair of guinea pigs. What keeps me from walking away from my bad home loan (which I don’t have) is that I’d have pack up all of my _stuff_.
Also, finding a rental property that would take children and a cat and four dogs .. that would be a chore.
December 23rd, 2009 at 9:26 am
there is absolutely nothing wrong with strategic default. there is no honor among thieves, and the banks are about as thieving as you can get. I see no reason to keep a promise to a bank, as long as you can shield yourself from negative consequences legally.
December 23rd, 2009 at 9:42 am
[quote comment="229297"] banks are about as thieving as you can get.[/quote]
I’ve never had a bank steal anything from me.
Nor have I ever seen a bank steal from anyone I know.
Is your experience different?
[quote comment="229297"]I see no reason to keep a promise to a bank[/quote]
I see two reasons to keep my promises to a bank:
* I feel that my word is worth something. (Others may evaluate the worth of their word differently).
* by keeping my promises, I help create a stable culture where credit, commerce, and decency can flourish.
I think that these two reasons are more than enough to keep paying on debts, even when it might be tactically beneficial to walk away.
(I note, of course, that true bankrupcy is legitimate, if there really is no ability to pay).
December 23rd, 2009 at 9:49 am
Banks who feed at the window of the federal reserve are engaged in theft just like any other counterfeiter engages in theft. They are “first in line” when new money is printed, so they are stealing from all the hard-working people who work and save money, by devaluing the money that they are saving. In this way the banks steal from everyone.
The banks take this “fake money” that they have gotten for free from the fed, then loan it out to you, and in return they want you to pay them “real money” that you earned from your hard work. It’s a ponzi scheme.
A separate issue, which I didn’t address in the original comment, is that strategic default is generally not a violation of my promise. I signed a contract that said if I don’t pay the bank takes my house. When I don’t pay, I am not violating the contract in that I am still letting the bank take my house. If I were to try to prevent the bank from taking my house, that would be a strict violation of my promise.
You keeping your promises really has no impact on a stable culture where decency can flourish, because we live in a culture where the banks are taking free money from the fed, Harry Reid can use your money to pay bribes to his fellow senators, and no one cares. I understand that you might want to “do your part”, but you’re trying to swim upstream against the niagara falls.
In fact, people defaulting on mortgage debt is good for the country. It forces banks to write-down their balance sheets to their true values. It drives home prices back down to affordable levels where regular people can afford to buy them without requiring free money and insanely low interest rates created by the fed and the bank’s counterfeiting activities. Only when the excess debt is removed from the system can our economy recover.
December 23rd, 2009 at 9:55 am
here is a relevant article
http://market-ticker.denninger.net/archives/1788-Thou-Shalt-Steal.html
December 23rd, 2009 at 11:00 am
“* I feel that my word is worth something. (Others may evaluate the worth of their word differently).
* by keeping my promises, I help create a stable culture where credit, commerce, and decency can flourish.”
Well said. I’m with you, TJIC.
December 23rd, 2009 at 11:07 am
Sameer,
I have a metric that I often use to evaluate whether something is a good idea or not. It is not always appropriate to use, but most of the time it works pretty well. The metric is this- what would happen if everyone did it?
A nation of TJICs, I believe, would work pretty damn well. Trust would develop, and the many benefits that follow from trust. A nation of Sameers, on the other hand, would go to hell in a handbasket. The right choice is obvious.
P.S. My metric is what made it instantly obvious that the practice of giving kids the hyphenated last names of both parents was stupid.
December 23rd, 2009 at 12:42 pm
[quote comment="229308"]
A nation of TJICs, I believe, would work pretty damn well. Trust would develop, and the many benefits that follow from trust. .[/quote]
I’m not so sure this would work out as well as you imagine.
(quietly deploys the anthropic principle)
It seems to me like it must take all kinds.
(returns the anthropic principle to its hiding place)
December 23rd, 2009 at 12:48 pm
[quote comment="229308"]A nation of TJICs[/quote]
Where would they put all the wood shavings?
December 23rd, 2009 at 3:31 pm
They’d feed the wood shavings into power plants just to make global warming alarmists cry. That is, unless they hadn’t already fed the global warming alarmists to the power plants.
December 23rd, 2009 at 4:33 pm
Nonsense. If you staple the wood shavings onto trees, you’re recyc–no, let’s try again. Dumped in the ocean they (probably) provide an excellent filler to increase landmass, as the Japanese did with their constructed-island airport.
December 23rd, 2009 at 8:51 pm
[quote comment="229313"][quote comment="229308"]A nation of TJICs[/quote]
Where would they put all the wood shavings?[/quote]
I store mine in the woodstove.
December 24th, 2009 at 11:33 am
[quote comment="229302"]Banks who feed at the window of the federal reserve are engaged in theft [/quote]
If
(a) taxation is theft (which I agree with)
(b) taking tax dollars from the government is receipt of stolen property
(c) it is morally legitimate to brake one’s word, lie, cheat, etc. from anyone who is in receipt of stolen property
…then may I steal from any retired person, on the theory that they are on social security, and have taken money from me, and thus I am free to take it back from them?
That’s a serious question – what are your thoughts?
If the answer is “yes”, then that seems quite consistent and reasonable. If the answer is “no”, then what is the line where I * can * treat certain entities as beyond the pale of natural law?
December 24th, 2009 at 3:25 pm
I’ll grant that point, that I would agree that the answer to (C) is no. My basic point underlying the fact that strategic default is not immoral is that there is a clear contract that states the consequences of default. A home mortgage is not a pure promise to pay the lender $X every month for so many years. It is a very complex agreement with many embedded options. One option is that the mortgagee has the right to prepay and refinance if interest rates move lower. Another option is that the mortgagee has the right to stop paying and surrender the title to the lender. This is a key part of the contract and if it were not a part of the contract mortgages would be priced differently. Therefore there is nothing immoral about strategic default, even independent of the theft issue.
I think the theft angle comes into play merely to point out that you should not cry for these banks. If the banks were not thieving, strategic default would still be moral, but I might feel sorry for them, and maybe choose not to default out of goodwill, rather than a moral obligation. Given the situation though, I feel no goodwill, so the banks can bite me. Everyone should default and they should all fail.
To sum up: not honoring your promises is always wrong. Strategic default does not fall into that category.
December 24th, 2009 at 3:28 pm
To be clear, I am backing down from statements made in earlier comments. Those comments were made in a state of anger, whereas TJIC’s question was able to invoke rational thought, so I was able to see through the red haze briefly and answer rationally. That state will not last long, I’m sure the red haze will return in a couple minutes.
Carry on.
December 24th, 2009 at 10:56 pm
[quote comment="229308"]
P.S. My metric is what made it instantly obvious that the practice of giving kids the hyphenated last names of both parents was stupid.[/quote]
If it’s done by Cantabridgian lefties, I agree.
If it’s done by Hispanics, in a tradition going back 500+ years, then that’s “old school”, as the kids say, and the William F Buckley in me applauds it.
December 25th, 2009 at 5:13 pm
More from my old buddy Karl: http://market-ticker.denninger.net/archives/1791-Finally-Mainstream-Press-Intentional-Defaults.html
In other words I will change my tune if and only if and when those who destroyed the social contract of a man’s word being good on its face change THEIR tune. Until that time it is my assertion that you are not only within your rights to deal with them as they deal with you BUT YOU HAVE A MORAL AND ETHICAL OBLIGATION TO DO SO AS IT IS THE ONLY MEANS AVAILABLE TO THE COMMON MAN SHORT OF UNLAWFUL VIOLENCE TO STOP THE SCAMS!
Let me be clear: There is no argument to be made whatsoever in the current environment for a “moral or ethical obligation” to pay your debts. Those debts were incurred in an environment where asset prices (which you used that debt to finance) were fraudulently inflated in “value” through the intentional concealment and bogus “underwriting” and packaging noted above.