Yes, I have hammered away at the current Administration’s subservience to the interests of Wall Street and the large banks. See for example Is the Administration Determined to Make the Elderly Poor? The bailouts themselves have had a clear perverse economic effect, and certainly have not been the economic solution we have been led to believe. But now banks have “recovered” and bank executives have large bonuses to show for their self-serving efforts. However, what the Administration has not, and perhaps cannot, calculate is the long term non-financial effect of its bailout policy: in negative motivational change, declining belief in our system of government, and higher levels of cynicism among beleaguered American middle class workers.
Why Keep Paying Your Mortgage
Bruce Krasting, a contributor on Zero Hedge (zerohedge.com), chronicled his assistance to a young couple who bought an apartment with a low down payment and a large mortgage. To continue making payments on the mortgage, the couple took a second mortgage. Despite their ever growing debt burden, the couple tried to remain up to date on payments but fell behind. Mr. Krasting advised them to stop paying their mortgage bill. To obtain any mortgage relief or assistance they needed to be behind in their mortgage payments, so reluctantly the couple gave up and stopped making payments. This article was appropriately named “A New Wave of Defaults?”
Stoking the Anger of the Middle Class
Other commentators have written about walking away from one’s mortgage. See “Strategic Defaults” a Mortgage Broker Comments on Fear and Shame Tactics. Mr. Krasting’s post was published on the day when the Obama Administration unveiled another “bold” program to assist homeowners:
March 25 (Bloomberg) — The Obama administration plans to announce programs to help homeowners avoid foreclosure, including subsidies for borrowers who owe more than their home is worth. See US to Widen Homeowner Aid, Subsidize Mortgage Reductions.
Angry reader comments are more interesting than Mr. Krasting’s article itself:
- I have done everything right, played by the book, been responsible, and I get nothing while those who behaved like idiots get bailed out all around me, with my tax dollars! [I want a mortgage reduction too]
- I think this is the trend that actually brings down the country, and it ain’t that far away. Seriously, I can see your point. It is a good one. Why should you be treated LESSER than someone who acted LESS responsibly? You shouldn’t, simple.
- Now all these irresponsible people … want, no, expect me to bail them out of their speculation. Yeah, their speculation. They decided to go shopping for a house. Now it’s the banks fault for lending them the money, and the appraiser’s fault and the real estate agent’s fault, and everyone’s fault but their own that they bought more than they could afford, with no plans for down times, and the ones that really get me are the ones who took money out to buy soft consumables and put their jet skis on their mortgage. Now they want to stick their grubby hands into my pocket book and yank out my hard earned money…It infuriates me.
- While wearing out the mortgage, we also wore out seven or eight vehicles. I didn’t buy them to make money on either.
With those obligations also came the full costs of the tuition bills for the children. If you are up to date on a modest home, you don’t qualify for any discount coupons on that either. I can promise that I’ve paid for a whole lot of tweed, just didn’t get to wear it myself. Health insurance, oh yeah, I paid that too and got to pick up the tab for those with the pre-existing condition of lazy. And all with those after tax dollars.
- Now these dumb butts age getting to make their tuition payments. Who knew that doing a refi to pay for ski trips, fine wines, boats, and nice jewelery could be such a good deal. Spend after tax money for everything, then get the debt forgiven with no tax on that either. How sweet. sweet. The government steals money from me and literally gives it to bankrupt banks so they can pay out bonuses for performance. Now they steal more money from me and give it to banks to bail out people who bought as much house as they could afford based on better-than-perfect economic conditions, but who can’t make payments when the economy goes in the tank (who’d've thunk it?).
- But Jim Sinclair has it right today, “When the Devils are in charge, virtue become a crime.”
- The problem our government and the banksters keep changing the rules. Concepts like “good faith”, “rule of law”, “honest exchange”, etc… have been tossed out the window.
- Another vote of someone who bought only what they could afford even if they had a financial setback, and is current on it, and is getting raped from all directions by being honest and responsible. Course I also paid nearly 50% in cash so walking away doesn’t seem like a good idea at the moment. I want my bailout. I want my “entitlements”.
- This is something different. A bigger trend is emerging, where the silent majority of responsible, fairly conservative middle Americans are making a business decision.
The above quotes excerpt comments and delete expletives.
Pushing Into the Danger Zone
A societal breakdown does not occur only because of war or famine. Our society was founded on concepts of fairness and the rule of law. Rule of law requires certainty and consistency. Through “bailout nation” tactics both the Obama and Bush administrations have changed both rules and ideas of law and fairness. As a result, America is rapidly becoming two classes: those who played by the rules, worked hard and met their obligations and those who acted recklessly (whether banks or individuals) and now feel entitled to a bailout.
Worse, we have now given moral license to hardworking people in the former category to walk away from their obligations. As Mr. Krasting concludes about this new default phenomenon, a rising trend is about to become a rogue wave.
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Related posts:
- Bailout Nation Lives
- Shredding the Social Fabric
- Bank Bailout v. Rule of Law
- One Year of Blogging
- Above the Law: Too Big to Jail
Tags: bailout nation, Bruce Krasting, homeowner assistance progams, homeowner defaults, mortgages, Zero hedge
