Should You Feel Guilty About Walking Away?

Discussion in 'Economics' started by richardyu301, Dec 23, 2009.


    Everyone's Defaulting, Why Don't You?, by Daniel Gross, Commentary, Slate: Strategic defaults¡X...people who could continue to make payments on ... their homes deciding to walk away...¡Xare rising. According to the Wall Street Journal, strategic defaults are likely to exceed 1 million in 2009. This is making some worry about the very future of capitalism. Georgetown University business ethics professor George Brenkert told the Journal that borrowers who can afford to stay current are morally required to do so, and that were Americans to conclude they could just walk away from obligations, it would be disastrous. ... Megan McArdle expressed disdain for people who chose to indulge themselves on consumer goods and services while not keeping current with their mortgages.
    Um, do any of these people read the Wall Street Journal? Strategic defaults are the American way... Deep-pocketed companies, billionaires, and institutions that can afford to stay current on payments strategically default all the time.
    Morgan Stanley, for example, is a gigantic corporation. As of the second quarter, it boasted total capital of $213.2 billion. It certainly has the ability to make good on obligations... But earlier this month Morgan Stanley said it would turn over five San Francisco office buildings to lenders rather than pay the debt on them. Why? ... "This isn't a default or foreclosure situation," spokeswoman Alyson Barnes told Bloomberg News. "We are going to give them the properties to get out of the loan obligation." Smells like a strategic default to me.
    It's not just happening in real estate. According to Standard & Poor's, through Dec. 18, 262 corporations had defaulted on bonds they had sold to the public, twice the total of 2008 and "the highest default count since our series began in 1981."... Sometimes companies default on these bonds because they're broke (see: Lehman Bro.). But sometimes they simply default because they don't want to pay out for them. Investors and managers, who have spent hundreds of millions of dollars on personal toys, aircraft, headquarters buildings, and compensation, simply can't seem to find the cash to stay current on debts. ...
    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. Most people underwater on their mortgages stay current "as a result of two emotional forces: 1) the desire to avoid the shame and guilt of foreclosure; and 2) exaggerated anxiety over foreclosure's perceived consequences." In addition, he notes, societal norms push individuals "to ignore market and legal norms under which strategic default might not only be a viable option, but also the wisest financial decision."
    Of course, corporate managers and financiers don't suffer from these neuroses. Do you think billionaire investor Sam Zell feels any guilt or shame because his buyout of the Tribune Co., which had $12.9 billion in debt, ended in a Chapter 11 filing...? Rather than worry about whether Americans will take cues from modest homeowners who make a tough decision not to stay current on debt, perhaps we should worry about middle-class Americans taking cues from billionaires and Fortune 500 companies...
  2. I have friends whom have entertained these thoughts. People whom are debt free, except their mortgage and have lots of equity just want to refi and bail with the cash. They are concerned they can't wait for the cycle to change, it may take 10 years. They were responsible but the neighbors are taking them down hard.

    This is similar to what Trump does not? Pays himself a fat salary and when company BK's so sorry.
  3. xburbx


    walking away is theft as far as im concerned
  4. So, they want to refi and take out their equity... THEN walk?

    How moral is that?

    Non-recourse home financing is just another example of bad policy from the government... much like forcing banks to lend to anyone who could fog a mirror, then allowing the lenders to dump those weak/crappy loans off onto FNMA (aka, US taxpayer)...
  5. ..............................

    The US form of GOVT is the NUMBER ONE PROBLEM....

  6. xburbx


    People are the problem. We are the ones not doing anything about the government. I think people are the number 1 problem and because of that it makes government number 2.

  7. bgp


    i know 2-wrongs dont = a right but when i see how our tax money is being given away and our wonderful lawyers,politions,ceo's legally stealing what is sacred anymore??? :mad:


  8. .......................

    That's a FAIR STATEMENT......

    So just what is it that would create the situation to allow for 100,000,000 people to march in DC ???? And remove the current poly cancer.....

    THE PEOPLE need to have a proper system READY TO IMPLEMENT....
  9. It's a complicated issue, with many variables pertinent to the individual cases. So I'm not going to pass judgement either way.

    However, I will say this:

    When you have the deceit, fraud, corruption, and absolute lack of integrity that is being displayed by our "elected" can you expect anything but the same from the citizens that are being governed ?????

    It's a really simple concept, and it holds true in just about everything. The folks at the bottom take their cue from the people at the top, whether it be a family, a church, a business, or a town, etc. Try running a business the way this gov't is running our country and see how long you keep the doors open.
  10. Its not moral at all. But would you rather be moral and broke than clever and rich. Maybe that shoudl be corrupt and rich. I am all for moral I am really am. But don't you feel like a dolt just a bit when you are the last one standing responsible.

    As you often say should I take the ice cream or not?

    My wife worked for a multi millionaire years ago that did stuff just like that. She didn't know about it til the end. She never did his books. When the punch bowl dried up the lawsuits came hard and heavy. Know what he did bk'd moved to Vegas and set up a new shop. BTW he paid himself a huge salary and then tanked the company. I would name him but don't need a libel suit thanks, since he also bragged how he made money off of sueing companies and ppl. It's cheaper to settle than defend in court. Sounds a bit like Trump to me.

    I really didn't mean to hijack this thread but felt it was quite related.
    #10     Dec 23, 2009