An Eroding Moral Code

Kevin Hassett expresses the interesting concern that a second wave of financial crisis may be in our future if homeowners (or, rather, home mortgagers) decide simply to walk away from houses on which they owe more than their worth. All losses would thereby transfer to banks’ bottom lines, eliminating more of the future wealth that is currently flowing through the current economy.
The essay’s worth reading on those grounds, alone, but here’s an intriguing bit of evidence about the mechanics of morality:

And there was an interesting twist: Of the students who had the chance to cheat, half were asked beforehand to list ten books that they remembered read­ing in high school, while the rest were asked to write down as many of the Ten Commandments as they could remember.
The results were stunning. On average, students in the control group answered 3.1 problems correctly. Students in the second group took the opportunity to cheat–under certain conditions: The ones who started by listing ten books from high school cheated, on average reporting that they had answered 4.1 problems correctly. The students who were asked to recall the Ten Com­mandments, by contrast, did not cheat, reporting on average 3.0 correct an­swers.
Apparently, thinking about the Ten Commandments put students in a moral frame of mind.

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Russ
Russ
11 years ago

So now its a moral issue from the American public to keep paying for assets no longer worth what is still owed on them? Answer me this, what corporation operates like that? By your definition, every publicly traded company is an amoral “knave” (couldn’t agree more), although I usually say that if corporations are “people” under law they are correctly considered sociopaths.
What would Ayn Rand say?! Matt Allen must love this line of BS you’re shoveling.
Also this line is hilarious…
“…eliminating more of the future wealth that is currently flowing through the current economy.”
How exactly does “future” wealth flow through anything? Buoyed on the ebb and flow of free market pixie dust of course!

Dan
Dan
11 years ago

Corporations and their limited liability are an abomination to free-market libertarians, Russ, so you’ll get no argument here.

Stuart
Stuart
11 years ago

It’s hard to understand what point you are trying to make?
Are you saying that someone who walks away from an underwater home is breaking a moral commandment?
Your post once again sounds like that of a person who things people are below Corporations – like our Supreme Court conservatives do!
Not THAT is immoral and unethical.
I’m not pointing the finger until I am sure that is how you feel, but if true that is very disturbing. You seem to be saying that the poor homeowner who is going broke due to medical costs and no job is going to break the ethical code because Goldman Sacks will then have to give out only 120 billion in bonuses instead of 150.
Please – tell us this isn’t what you saying? Please

BobN
BobN
11 years ago

I’ll say it: reneging on a deal just because the asset you bought has dropped in value is breaking a moral commandment.
Real men honor their commitments.
Stuart, I can see how this would be hard for you to understand.
What exactly is the connection between an individual in financial crisis and Goldman Sachs? There appear to be several dots not connected in your argument.
Would it be correct to gather that in your example the unfortunate homeowner lost his health insurance because he lost his job? The tyrannical system of employer-paid health insurance that we have today is a creature of your beloved Government, which made the premiums tax-deductible expenses for employers but not for people. This is a sterling example of how economic central planning yields unintended negative consequences that far exceed the originally intended benefits.

Justin Katz
11 years ago

It is not immoral to pull out of a mortgage, of itself, considering that money may be needed for more crucial things. It is, however, immoral to leverage the inability of banks to pursue payment beyond foreclosure (“nonrecourse loans”) to skip out of the deal simply because the asset that the loan purchased has lost value. Consider: if that becomes a normalized action, then banks will begin treating mortgages as joint gambles with the borrower and raise rates (and barriers) accordingly. In some respects, that would be a positive thing, but it would result in deepening of wider gaps of haves and have nots.
I’d note, too, that it’s also immoral for companies to renege on agreements for financial gain. They do it all the time, of course, and it’s immoral all the time.
I’m not sure, by the way, when it became a truism that nobody around here ever disagreed with — even harshly — President Bush.

Monique
Editor
11 years ago

“which made the premiums tax-deductible expenses for employers but not for people.”
Now here’s a good point. Substantial healthcare reform without the destruction of our healthcare system could be accomplished by the implementation of individual portability of coverage, tort reform and the erasing of state barriers. Instead, if the vote takes place in the House on Sunday, we appear to be headed towards a Soviet-style healthcare system.

Russ
Russ
11 years ago

Banks already require mortgage insurance on many loans for exactly that reason (I used to pay it). So you’re in effect saying that when the banks compete by not requiring that expense of borrowers, it’s someone else’s fault, er, I mean “sin” when the deal goes bad? It’s not like borrowers are rewriting the mortgage contracts to put one over on those poor, uniformed bankers.

Stuart
Stuart
11 years ago

So, Justin, what you are saying is that if the appraisers lied and misled to pump up the value of the house so the buyer could get in, the Realtor pumped up the values for a large commission, and 4 levels of mortgage brokers and loan originators made their money by putting a loan through which someone was not qualified for……and the final Citibank or Washington Mutual sold the loan 10 times over even thought they knew it was bad….. that is OK, but the homeowner who got screwed when the house was never worth that, their income doesn’t support the loan – THEY are committing a sin against God. Somehow you don’t see your selective vision. You really need to paste that parable about casting the log out of thine own eye (in this case , the eye of the bankers and corporations you so support), and add to it the one about casting the first stone! You are applying religious tests to matters where they do not belong. One could only think that you would say the drug pusher has committed a moral outrage by diluting his heroin more than normal before selling it to you and I. Take those blinders off. You are, in effect, a promoter of slavery and an apologist for their masters. After all, a slave WAS legal property (of Christian men) and if that man runs away he is stealing money from his master. This mortgage mess was a vast shell game – musical chair in which the PEOPLE lost and the corporations won. Yet you feel it important to further defend the billion dollar bonuses, while castings the FIRST STONE at the disappearing middle class. I have a hard time understanding how you consider yourself a modern religious person….well, maybe you don’t.… Read more »

BobN
BobN
11 years ago

“Instead, if the vote takes place in the House on Sunday, we appear to be headed towards a Soviet-style healthcare system.”
Possibly not. It could also trigger the most massive civil disobedience action in history and the swift retirement of a substantial fraction of the medical profession as doctors Go Galt (as revealed by a recently published poll in the New England Journal of Medicine).
(Note the “civil”. I’m not willing to speculate here on what would follow if that doesn’t work.)

Stuart
Stuart
11 years ago

I sinned today.
I negotiated a deal with a client, therefore paying him less for his services!
In just the same way, millions of homeowners are sinning when the bank offers them a deal to hand over the keys and leave….and even pays them!
Heck, hell is going to fill up real fast.
Based on this logic, I really should figure out how to steal as much as possible from as many people as possible, because it seems that according to Justins logic, I can only go to hell once. I’d rather go to hell as a Citi CEO with millions in bonuses, than as a cancer victim who lost their house……
My goodness, I wish I could have that perfect world view of what is wrong and what is right….that seems so prevalent here. Maybe I will have to start attending church again.

Justin Katz
11 years ago

Stuart, you don’t appear to do so well with subtleties and distinctions. Actually, that’s an understatement. Sorry, I don’t have time to waste teasing apart what I’ve stated and believed from your frenzied view of what I must believe in order to disagree with you.

Stuart
Stuart
11 years ago

Fine, Justin, I’m just saying….. Neither you nor Monique seem to be able to carefully and accurately either defend or sharpen your positions. It seems you like tossing out these generalities as mental masturbation, but then are unable to take it to climax. That’s what debate is all about! As to your basic premise – should an honest man pay back an honest loan? – that is a easy question. I have paid back every dime I every borrowed and I have the highest respect for my friends and business partners who do the same. In fact, I sold one multi-million dollar business to a couple of whom I said “they will pay be every cent, even if the business fails because of circumstances, etc.”. That is the way I think and run my life. But when it comes to this “Madoff Mess” and real estate and sub-prime bubbles, this is more comparable to the poor ghetto dweller borrowing money from the local loan shark – and then finding out the 50% monthly interest rate could not be met! Is that fella, who borrowed the money to buy medicine for his kid, also guilty in your eyes? Ok, let me preach instead of querying. The world today has changed because the people who can do damage to us – instead of just damaging a few (like the Mafia loan shark), can now stick it to millions of hard working Americans. In other words, as Warren Buffet says, these financial deals are “weapons of mass destruction”. So, Citi and Morgan Stanley and Lehmans and friends dropped financial ATOMIC BOMBS on us. Some people ran away instead of staying and cleaning up the mess for Citi. You then complain about the victims. Let your readers think about it and make their own… Read more »

Justin Katz
11 years ago

Here’s the point: With just about every post on which you comment, you make all kinds of assumptions about what I believe and what I’m saying when you clearly haven’t read the source material that I’ve already provided. The objective of shorter posts in blogging isn’t to offer a fully developed argument dealing with all angles of metaphysical relevance with every post. The objective is to point to interesting ideas and offer extremely narrow statements of opinion.
Nothing in what I’ve said, written, or linked to endorses the idea that people are morally obligated to pay their loans above all other expenses and despite every difficulty. It would be, however, detrimental all around were it to become a common practice to cash out of loans simply because the amount owed is less than the value of the house. That’s a creeping of the utilitarian and usurious immorality of the business world into quotidian culture.
At any rate, the bulk of the post actually had to do with the discrete study having to do with “the mechanics of morality.” I’m more interested in the evidence of how religion functions in fostering a moral society than in the financial calculations of individuals, although I did find Hassett’s argument “interesting.”
Alright. I’m on to other things.

BobN
BobN
11 years ago

Stuart and Tara are running neck-and-neck for the title of Champion Effin’ Tard Commenter based on the most consistent record of ignorant and irresponsible comments on AR.

joe bernstein
joe bernstein
11 years ago

Since I was growing up,something has changed for the worse in this country. Large corporations were never charitable organizations to begin with-the term “robber barons” didn’t come out of a Crackerjack box. However,these corporations generally had some degree of loyalty to their employees-good wages,job security,health insurance,and pension plans.This didn’t happen overnight,nor without direct pressure by labor unions. large corporations today are run by people that don’t even seem to know what their product is and considers employees as disposable chits.The unions in their turn,have become more political operatives than ever,and more intransigent in their demands. Economics is not my strong point,but I think the hemmorrhage of industrial jobs to offshore locations is a driver of this situation. The environmental movement has also contributed to this outcome because it’s a lot easier to move to a third world craphole,pay crap wages,and zero benefits instead of complying with complicated EPA dictums.The aforementioned third world crapholes haven’t got an EPA nor environmental laws. Our large corporations seem to be those which move paper and don’t make anything. I don’t necessarily think poorly of someone who reneges on a mortgage because they are broke. Why aren’t insurance companies even bigger sinners for such evil acts as denying legitimate healthcare claims,or retroactively cancelling coverage after accepting fees for that very coverage? This healthcare reform debate didn’t arise in a vacuum.The insurance companies come in with very dirty hands indeed. I don’t think a huge centralized single payer system can work here. I could be wrong,but I think serious enforced reforms in the insurance industry and the legal profession could be the answer. It also wouldn’t hurt to treat Medicare/Medicaid fraud the way we treat drug trafficking.It hurts the public as least as much. Maybe more.Almost all of us get sick at some point in time.However… Read more »

joe bernstein
joe bernstein
11 years ago

Maybe Stuart and Russ should ponder this-what is the world’s largest military-complex?China.What form of government does China have?Socialist.
The Chinese military oligarchy also owns most of the major industries.

Russ
Russ
11 years ago

Not sure what the relevance is here. Yes, China has the largest standing army, but we spend nearly 10x as much on “defense.”
The funny thing is, you did a pretty good job punching holes in the socialist smear without my help. The oligarchy owns most major industry? That’s not socialism. Real socialism requires public ownership and democratic control of production and resources.

Tara
Tara
11 years ago

Thanks BobN for putting me up with Stuart. Especially since I had not even commented on this post.
You know you are successful when people talk about you 🙂

Tara
Tara
11 years ago

Maybe the Catholic priests and the pope should tattoo the ten commandments on their arm so they are put in the correct moral frame of mind and reminded not to cheat on their vows of celibacy. Big scandal going on in Europe (mostly Ireland and Germany) with the priests molesting kids.

joe bernstein
joe bernstein
11 years ago

Russ-no kidding.Of course rule by oligarchy isn’t really socialism according to its tenets-but given human nature that’s where it’s gone every time.
Please correct me if you can cite examples where it didn’t happen.
Human nature always trumps theory.

creature [AR codenamed: Assigned Pest]
creature [AR codenamed: Assigned Pest]
11 years ago

Why do BOBN always be needing to come out swinging when someone else be cracking on the dim it blogger. Does BOB have an “issue” for KATZ

Stuart
Stuart
11 years ago

I don’t understand why Joe is so concerned with China – which spends about 1/20 per person on their security as we do….maybe less.
So, by your standards, they are getting the service MUCH MUCH cheaper.
They are also eating our lunch economically – in terms of growth and even in terms of alternative energy.
Unfortunately, your words won’t change that.
I think they are communist, btw, in terms of government – but, again, I don’t know what that has to do with this thread.

joe bernstein
joe bernstein
11 years ago

Citing China isn’t irrelevant to this thread precisely because they have a lrge effect on our economy nowadays.
Since both Russ and Stuart were discussing the irresponsible behavior of corporations(a point I am not in total disagreement with)it serves to show that things are no better when the “corporations”are run by the government.
This isn’t to say I haven’t seen government run some things well.Some of the Eurpoean railway/local transport systems are really outstanding.The high gas proces in Europe was the impetus for that.
However,for the most part,government shouldn’t run businesses.
China spends less per person on defense because their population is much vaster than ours,and they don’t have overseas obligations nor a “seven seas” navy.
China has never been a “seapower”like the US.Read Admiral Mahan for the best explanation of “seapower”I’ve seen.

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