Who says I feel sorry for them? I’m talking about the principle of the thing. Like I said earlier
“You shouldn’t walk out on a mortgage if you can afford it.”
and
“The banking industry often acts like scum.”
are not mutually exclusive.
Individuals are obliged to obey the law, which implies that they should uphold the contracts that they make. If the contract sets out penalties for “Jingle-mail”, they should pay them. If bankruptcy law permits them to dodge those penalties, bankruptcy law may be used. The same goes for laws applying to home mortgages.
This is the approach taken by corporations. This is the approach taken by the wealthy with respect to bankruptcy and taxes. Those who do not do this are, arguably, saps.
Where do I draw the line then? Contracts can never be complete, so I think its fair to take into account implicit considerations when you are dealing with business partners, friends and family. That might even apply in some cases to a local banker. But when a bank loans you money, then turns around and flogs that somebody else, who in turn bundles your mortgage with a bunch of others and trades it on the open market, this personal aspect is lost. The idea that you owe anything extra-contractual or extra-legal to Wall Street is absurd.
You owe it to your family to get the best deal possible. You owe it to your country to support laws and procedures that advance the nation’s wealth and probity.
ETA: Following Nobody, reputation matters. To some extent. But not an infinite extent. And I can imagine a highly trustworthy person playing jingle-mail, depending upon context.
Nobody, you haven’t really responded to the idea that the whole purpose of a contract is to make explicit the various options of the involved parties, just to remove the deal from the moral realm. That is to say, from the realm of any other obligations.
The purpose of a contract is to make explicit what is permissible and what is not permissible, and nothing else matters with respect to the resolution of that contract. You haven’t really made an argument why anyone should feel any obligation above and beyond the black letter of the agreement.
I guess if keeping your word and dealing in good faith don’t mean anything then I guess I’ve got nothing.
When I signed my mortgage, I didn’t sign something that said, “I will pay back this money no matter what” or “I will pay back this money if it’s humanly possible” or even “I will pay back this money if there’s any way I can afford to do so.”
I signed something that said, “If I don’t pay back this money, you get to take my house.”
If I stop paying and allow them to take my house, I am keeping my word.
If I start shooting at them as they come up the drive, I’m not.
It’s risky to lend to people who default on loans. It’s not personal, it’s just business.
Only if the bank is unaware that default is a legal option under the mortgage. Is the credit card company untrustworthy when they raise my rate, just because I convinced myself they wouldn’t?
Incidentally, most mortgage holders take their extralegal considerations pretty seriously, far more than their banking counterparties do. The business press is full of allegations by banks that consumers are adopting a practice of “Ruthless default”, the industry term for walking away from your mortgage when you can afford to pay. But the substantiation of this claim -even anecdotal- is remarkably thin. Read critically, and the examples tend to be those of house flippers who genuinely cannot afford to pay (and probably should not have been loaned money in the first place).
Calculated Risk is the go-to place for finance and housing issues. The late Tanta wrote some expert pieces on this subject. Here’s one: Let’s talk about walking away.
This position is sometimes called Ethical Nihilism or Moral Nihilism.
The history of this conceit is presented here:
http://www.iep.utm.edu/nihilism/
A critical discussion of ethical skepticism and its variants is here:
http://plato.stanford.edu/entries/skepticism-moral/
IME, for those who believe that it’s ok to torture babies just for fun --or rather that this is a mere matter of opinion-- there is little that one can say, except to ID those holding such positions.
Most people in this country are unhappy about the big bonuses that upper management of banks and other financial institutions keep getting. These bonuses are contractually obligated and are not illegal. And while the federal government should have made rejecting the bonuses as part of a condition for receiving TARP money, they didn’t.
So, because the bonuses are allowed by contract, that means that no-one should be upset by them, right?
I honestly can’t even figure out your argument at this point.
I didn’t agree to do what you claim I agreed to do when I signed a mortgage contract. I didn’t agree to pay for it even if it caused me financial hardship, or even if I decided it was no longer in my best interest to do so for any possible reason. I didn’t sign what you say I signed. There’s no such thing as the mortgage you claim I signed. Changing the topic to Wall Street bonuses will not change the fact that I did not agree to pay the bank back no matter what. I agreed to pay them back or they would take my house. It’s like you’re ignoring that very important distinction.
Where’s the risk? The borrower chose a valid option. All the lender has to do is resell the house for the remainder of what they’re owed, and if legally allowed, sue the original borrower for the difference if there is any. Wait, I take that back. The borrower did nothing wrong, so there’s no reason to sue them.
There were laws approved (obviously not yet enacted) which will make it very difficult for credit card companies to raise people’s rates on a whim. So as a matter of fact the general public did find credit card companies untrustworthy for raising rates for things other than late payments or going over the limit.
I said several times that I’m not talking about those who cannot afford to pay back the loan. Only those who can.
But that’s exactly what I’m saying. I didn’t sign something that says, “I will pay this money back if there’s any way I can.” I signed something that says, “I will pay this money back or you will take my house.”
That doesn’t follow. What might follow is that individual CEOs do not deserve a pitting for doing the best they can under the existing legal framework. But they would still deserve condemnation for lobbying for favorable tax treatment and the like.
I don’t see a lot of pit threads directed against wealthy or even incompetent CEOs. It’s a pity, really.
But the real analogue would be cases of opportunistic corporate bankruptcy, such as practiced by Dubai and the like. Do big investors in those concerns deserve condemnation? They sure receive less of it than small mortgage holders.
I see this as less of a morality play. Furthermore, credit card companies have been exercising deceptive business practices for years (their credit card contracts are not especially transparent even for experts, which most people are not). Democrats supported additional regulation not to punish the wicked but to set up a better, more efficient and less deceptive financial infrastructure.
Say something happens to your car. Because of the credit crunch and other reasons you can’t afford a new one. I happen to have a car for sale, pretty cheap. We sign an agreement that says:
I, jsgoddess, agree to pay $200 on the first of every month for five months. At the end of the five months, once the car is paid for in full, I will receive the title to the car.
Now say that the third month I get my $200 on the second of the month. I come over and take back take car claiming you breached the contract. You ask about getting the money back that you paid me, but I point out that nowhere in the contract did I say I’d give the money back. Now, because I followed the letter of the contract and you signed it, then you’re OK with what I’m doing, right?
People don’t get sued because they did something “wrong”. Lawsuits are civil law, and no judgement of right or wrong attaches. It’s just business.
The credit card companies were not untrustworthy for following the rules of the credit card. The law was changed because the consumer demanded a law that was in their financial interest, not because it was “wrong”. It’s just business.
Is this one of those conversations where the hypotheticals will continue to escalate until we’re talking about Martians stealing my mother’s eyeballs after she signs a contract to buy a golf course on the moon?
So even though they’re following their contracts and the law, they would still deserve condemnation. So just because something is contractually allowable and legal, doesn’t necessarily make it OK?
Uhm, OK. Not sure where you’re going with that.
I haven’t heard about these opportunistic corporate bankruptcy’s, and a lot of other people probably haven’t either, so it’s not surprising that there isn’t, well, any opinion on the matter from most people, since they don’t know about it.
I said that they were not seen as being trustworthy, and If you’re deceptive, you’re not trustworthy, right?
Everything I said is well within the realm of possibility. Nothing about it is paranormal, science-fiction-y, or metaphysical.
Well, what if you say you’ll give me your first born child unless you can guess my name?