Housing plan raises ethical questions
Mortgage relief is on its way, but not everyone who will receive help from Obama's housing plan may warrant it. Is it fair? Tess Vigeland speaks with ethics columnist Randy Cohen about the questions involved in paying for our neighbors' mortgages.
The New York Times Magazine's ethicist columnist Randy Cohen (Randy Cohen)
More on Housing - Real Estate, America's Financial Crisis
TEXT OF INTERVIEW
Tess Vigeland: So what it is about this particular issue that's got folks so mad that they just don't want to take it anymore. Or, give it I suppose, when we're talking about foreclosure rescue money. Americans, though, have a general history of propping one another up when we're down. So what's so different about this time? And what's that they say about glass houses? With us to sort things out is Randy Cohen, ethicist columnist for the New York Times Magazine. Randy, welcome to the show.
Randy Cohen: Thank you for having me on.
Vigeland: Let's start with a little definition. How do you define ethical behavior?
Cohen: Ethics concerns are the effects of our actions on other people. And so ethical behavior is that which has a benign effect on other people, or certainly doesn't do harm to other people.
Vigeland: Given that definition, you know, as we've just heard from Nancy, there's a lot of, shall we say, frustration out there from people who say, "Look. I did nothing wrong. I was responsible. My neighbor's going to get a bailout. Where's mine, even though I don't really need it?" How are we supposed to reconcile, I guess kind of the greater good, versus individual fairness, especially when it comes to the dollars in our pockets?
Cohen: It's an understandable feeling, but it's a poor guide to public policy. Once you start conjuring up this Victorian notion of the undeserving poor. Look, we help people who make mistakes all the time. When someone goes to the emergency room, the doctors don't question their moral worth, they make a medical decision. We send the fire department to someone's house without asking why did their house catch fire? What it is to live in a community is to shoulder the burden of responding to the needs of those around you, without making moral judgments.
Vigeland: But, you know, there seems to be this notion that helping people in trouble is equivalent to rewarding them for bad behavior. But, as you said, we choose as a society to help people all the time. Why is this different?
Cohen: Here's why: To make a bad financial decision, isn't a moral failing. It's a practical failing. It's a financial failing. There were people who made moral failings who should be scrutinized. A banker who has a sworn duty to issue prudent mortgages and who is negligent about how much down payment should I demand? What's a reasonable monthly payment for someone with this income? That person has morally transgressed. A person who takes a mortgage on his or her home and gets in over their head has not morally transgressed.
Vigeland: I feel like some of this is similar in many ways to the anger that you saw during the debate over the bank bailout a few months ago. Then it was, you know, corporate America versus the population. But, at a certain point, people became very resigned to the idea that, "OK, we're going to have to do this." Now, it's almost household versus household. How, if at all, does that change the ethical debate?
Cohen: Significantly. The banker we were just talking about has a genuine professional duty to issue prudent mortgages. The federal regulators who are overseeing the financial sector have a sworn duty to make sure prudent practices are observed. If those people deliberately fabricate those responsibilities, they've committed moral failings, and we're rightly angry at them and should tax them for that. If an individual makes a foolish financial decision, that's ignorance. They acted unwisely, but not unethically. You know, in my view it's -- you're not going to succeed at social policy that, that takes people out and flogs them for this. We tried that. It was called debtors prison. We saw being poor as a moral failing, and responded punitively. Didn't work out so well. We've had much better luck with prudent banking law. That kind of regulation seems a much more practical response to how human beings behave.
Vigeland: So for those who are feeling more than a little angry about all this, you're suggesting maybe just chill out?
Cohen: Yeah. That's a very natural feeling, and I feel it too. If I've played by the rules, if I've led a frugal life, it's hard not to resent the people who have done so and are now people helped, at my expense, in part. We should recognize that those feelings are also not that which is best about us. We should look to the better angels of our nature.
Vigeland: And I guess who have to wonder what a world would look like where we all got what we deserved.
Cohen: A terrible thing, or a fine thing. We'd all be in Hell if we got what we deserved.
Vigeland: Randy Cohen writes the ethicist column for the New York Times. Thanks so much.
Cohen: I enjoyed talking to you.
Comments
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From Los Angeles, CA, 03/23/2009
Never have I been so incensed by the stupidity of comments made by a person on the radio that I felt compelled to take immediate action. Don’t get me wrong, I hear inane discussions on the radio all the time. But for a NYTimes writer--posing as an “Ethicist”—to make such sweeping and inaccurate statements about intentions behind people’s financial decisions and how we should subsequently respond. . . For the first time in my life, I stopped in the middle of what I was doing, took out a pen, and wrote down the name of the person making the comments. I thought to myself, “I need to voice my opposition to this loon, Randy Cohen, and then steer clear of him for the rest of my entire life.” I will never read the NYTimes again. I feel that strongly.
The crux of Cohens argument is that people who have gotten in over their head have not morally transgressed because they were ignorant and acted unwisely, but not unethically. Are you kidding me!?! Are you trying to tell me that none of these people knew full well the virtues of frugality and the perils of improvidence.
It is the subject of some of the oldest tales of morality. Who hasn’t heard some variation of The Ant and the Grasshopper fable?
From Wikipedia:
The fable concerns a grasshopper who has spent the warm months singing away while the ant (or ants in some editions) worked to store up food for winter. When winter arrives, the grasshopper finds itself dying of hunger, and upon asking the ant for food is only rebuked for its idleness.
No one is saying that some of the mortgagers were not thieves. But by implying that customers had nothing to do with this, Cohen has shown how completely out of touch with reality he is. The major financial decisions of one household DOES have a direct impact on other households. This has always been true. The current financial crisis is only one giant example of this. And by Cohens own definition, if you know you are acting in a manner you know may eventually impact your neighbor, you are morally transgressing.
Granted, turning the grasshopper away in his time of need is also morally questionable. So in variations of the fable where the “grasshopper” is not turned away, some payment arrangement is made in return for the ant granting room and board. But Cohen tries to make the case that we should not get what we deserve and not be punitive. “We’d all be in Hell,” he said.
Right. Let’s not hold people accountable for their financial decisions. Let’s see how long the ants will continue to feed the grasshoppers for free. Let’s see if we can create and enforce enough laws to keep the grasshoppers in check. That will be Heaven! NOT!
If I didn’t know better, I would say Randy Cohen is a grasshopper. Ignore this grasshopper!!!!
From Phoenix, AZ, 03/03/2009
I am shocked about the hateful and judgmental nature of many of the comments left regarding this article. I thought Mr. Cohen's comments were right on - and many people completely missed the point. As someone who also saved for many years, got a house well below the amount I was approved for, and pays above the mortgage payment amount regularly, I too could also be on my "moral high horse" like some of these people think they are. I absolutely loved this story and think it was time someone got it right! Some of the comments in earlier posts to the contrary are ridiculous and beyond stupid. Bankers are "supposed to be greedy" and, therefore, aren't at fault with this mess? Are you kidding me? Talk to me when your home or car are burglarized - after all, burglars are also "supposed to be greedy"! Can't blame them! When people realize that they can't be like five year olds when it comes to public policy and that doing what is more painful can also be better, we will become a better society and world. People use money as a judgment for good character, and it's time they finally realized otherwise. Bravo for this wonderful story that tells us why we need to do what's right - Mr. Cohen makes me want to read more of his columns!
From Belmont, MA, 02/25/2009
This is a great conversation. I can only hope something like it is going on all over America.
I'm impressed by Scott Mackey's opinion that there are reasonable alternatives, like supporting homeowners in peril to transition to renters, to increasing the ranks of the homeless.
Gregory Sacchetti, who claims he "signed a mortgage seven or eight years ago it was like 200 pages who could possible understand," also gets my sympathy. In my exchange with gb-gb, we seemed to disagree that home buyers should be able to understand the paperwork they have to sign. Gregory seems to underscore my point that home deals undermine consumers rather than supporting their interests.
By all means, let's be individually more responsible. But should we go along with Patrick Owens when he asserts that "I cannot blame the businesses for being greedy"?
Well, if it's OK for businesses to be greedy, then shouldn't we all ignore the commandment and rush to commit this sin? Even if we all did, the biggest, greediest businesses with the most resources would always win, and grow into institutions that are "too big to fail," and therefore merit being bailed out.
If it was greed that got us into this sorry situation, should we accept that as a given or as a good and perpetuate it? I think a new ethos is called for, and that's what the president said last night.
From st. david, AZ, 02/24/2009
How do you know I'm not about to lose my home? You think money grows on trees and someone put a fence around it? The freedom to choose comes and is connected with the freedom to succeed or fail. I'm just willing to take my lumps when I fail, not push it off on my neighbor or paint anyone that objects to helping me as evil. You want your kind of society' I hear Cuba has some marvelous mansions (just a little restoration needed), all kinds of freebies and you can't fail.
From ardmore, PA, 02/24/2009
#1 how could anyone afford to rent a 1.2 million dollar house if thy can't buy one?
any of you geniuses who bought your houses twenty thirty years ago realize what has happened to real income for working families in the last twenty years. what has happened to job security in the last thirty years your geezer butt may have had the same job at a living wage for a life time with a real petition I don't know anyone who dose now. and how a bout you coots who are so smart give back you S.S> financial wizards such as your self shouldn't need the handout and if your a ww2 vet why not pay the Gov. back for your free college lunch ww1 vets didn't get what you got-freeloaders. and i signed a mortgage seven or eight years ago it was like 200 pages who could possible understand that and like c.card contract your not suppose to. get off you high horse frankly you sicken me. go back to fox network where you belong
From ardmore, PA, 02/24/2009
#1 how could anyone afford to rent a 1.2 million dollar house if thy can't buy one?
any of you geniuses who bought your houses twenty thirty years ago realize what has happened to real income for working families in the last twenty years. what has happened to job security in the last thirty years your geezer butt may have had the same job at a living wage for a life time with a real petition I don't know anyone who dose now. and how a bout you coots who are so smart give back you S.S> financial wizards such as your self shouldn't need the handout and if your a ww2 vet why not pay the Gov. back for your free college lunch ww1 vets didn't get what you got-freeloaders. and i signed a mortgage seven or eight years ago it was like 200 pages who could possible understand that and like c.card contract your not suppose to. get off you high horse frankly you sicken me. go back to fox network where you belong
From Sunnyvale, CA, 02/24/2009
I too have to add my voice to the chorus of those who find Cohen's analysis of the situation overly simplisitc and just plain wrong. It seems, however, that I don't agree with either side of the discussion going on here. The discussion is simply the wrong one. The question of blame is completely irrelevant. The only ethical question here is do we, as a society, help the stupid and/or ignorant. I think the obvious answer is, Of course we do. That only leaves the question of how. The seemingly ethical problem arises because the choices that have been put forth are incomplete. The choices are not simply do we help them stay in a home that they cannot afford or do we throw them in the street. There are other options, such as providing assistance with getting these families into rental housing, i.e. first and last month's rent and security deposit, not something ridiculous like a year's worth a rent. They are thus not "on the street", and for most of them they will actually be paying much less for rent than they are paying for their mortgage. At, say, $3000 per forclosure, that would only cost us $3B for 1M forclosures. It would really be tough for anybody to complain too much about that. We then get all these houses back on the market at a price that is reasonable for people who can actually afford them. Seems to me like everybody wins--except for the banks which will need to be nationalized and sold off, but that is another dicsussion altogether.
From Olive Branch, MS, 02/23/2009
I am pleased to see in this society which has very recently turned hard-left in its politics that there are still some who believe in personal responsibility. There are a few who put the lion’s share of the blame on the mortgage companies and banks.
I wanted to share a personal story about our neighborhood. We live in a in an average subdivision in a growing community. The home prices range from $220K to $300K. I spoke to our new neighbor as they were moving in two years ago. The man drove a soft drink truck and stocked the shelves at convenience stores. His girlfriend was a secretary. After chatting with them for a while, I discovered that they purchased the $239K home with an interest-only loan. I used an online calculator which said they were paying about $600 per month. Their plan was to use the loan until the payment went up to its full value, then refinance with another interest-only and do it all over (“its cheaper than renting” he told me). The problem came when they could not refinance and the house was worth less than they paid for it. They walked away from it.
About 50% of our subdivision has “For Sale” signs in the lawn. It was the same story over and over.
I cannot blame the businesses for being greedy. They are in business to make money any way they can that is within the law. It would be like blaming McDonalds/Rally’s/Burger King for giving people heart failure. Everyone knows its bad for you, but people gamble with their health. Should we nationalize health care for the irresponsible ones? Ummm wait, I guess that’s next on the agenda.
The question is, consumers should know “Buyer Beware!” Businesses are expected to maximize profits- and consumers are to pay attention to what they are signing.
From ST. DAVID, AZ, 02/23/2009
It is amazing, I'm unethical because I don't want some smooth talking pol to confiscate my money, for a neighbor that made some very stupid decisions? But it is perfectly ethical for the same pol to take my money to buy my neighbors vote? It is not the governments job to maintain my or my neighbors house value, or to see how some pol can use the system to buy votes. It is their job to provide a clear, simple, framework that leaves us free to pursue our individual pursuit of happiness. Government "charity" is not charity at all, it is enslavement. Charity (very ethical)is a private decision that when rendered has its own built in controls and accountability. We're not upset because of some "give me mine" mentality or can't see the argument for the "protect my home value" crowd. It is immoral (unethical) for the neighborhood goon (smooth talking pol) to come to your home and take money for his buddies in the neighborhood. And to claim we're immoral(unethical) for saying no!!!! The height of orwellian speak.
From Powell, OH, 02/23/2009
Well, When you brought Mr. Cohen in for a discussion about ethical behavior that raised my blood pressure. For Mr. Cohen to compare examples of emergency room visits and fire department responses to the irresponsible behavior of both the buyer and the lending institutions is beyond my comprehension. My wife and I have have bought homes ourselves with the understanding that we knew what we were getting into. We are like most home owners in that purchasing a home is going to be one of the biggest investment we'll ever make. We read the contracts, figured out what payment we could handle and that is if only ONE of us is working. And if we didn't understand portions of the contract we sought advise. What I am saying is that we knew we had to live within our means "Not Keep Up With The Jones". What happened to those 8 percent of the buyers who can't ADD or SUBTRACT let alone do MULTIPLECATION to figure out interest rates? The rest of the 92 percent figured it out! So why is it that we 92 percent have to bailout the 8 perecent(along with the lending institutions) that were irresponsible. This is a deliberate and premeditated act; not an emergency room visit as Cohen thinks. Now if that person(s) looses his or her job NOW that's an emergency situation. Signed: Sleeping well in Ohio!
From Belmont, MA, 02/22/2009
gb-gb, I never refuted your comments because you have a responsible position. Yet for whatever reasons, you seem to believe that every American has to be as diligent and well-informed as you are, and you seem to judge them on that basis. I don't judge them so harshly, because I see how marketing suckers people in to making bad decisions. The institutions that victimized home buyers were not punished by market forces or regulations until it was way too late.
Just like I would never tell a woman "you would not have been raped if you hadn't dressed so provocatively", I won't accuse householders I never met of primary responsibility for the mortgage crisis.
In a similar vein, Tom Kaz posits that "the free market and democracies can, without government intervention, punish bad actors of every stripe." That would be nice if we had free markets, but we haven't had them in my or even my grandparents lifetimes. It's a nice theory, but lopsided inequalities of wealth and power and the lobbying and campaign financing machines make assuming "market discipline" will fix everything is a fantasy like the tooth fairy.
The Bush administration looked the other way while sellers of mortgage backed securities ran amok, and then shoveled a boatload of money in their direction. Now that the Obama administration seeks to re-balance the situation, some irresponsible home owners may get help they don't deserve, but nothing on the scale of the rewards for corporate irresponsibility that have already been spewed out of Washington (by free-market Republicans, by the way).
If the free market works so well, why doesn't it exist?
02/22/2009
Geoff Dutton:
Just because banks/real estate agents/mortgage brokers made bad does not mean people should make too.
First of all, i never said banks/real estate agents/mortgate brokers did not make mistakes. They did and they always will do. They are more like con artists.
As person, you need to take decision based on the facts available to you. You never refuted any facts presented by me.
As a person, you know the price of the house, interest rate on 30 year mortgage etc, and income. Is it that difficult for you to figure out the house you can afford. There are literally hundreds of free online calculators, to figure out this.
Inspite these, people gambled. You can repeat as many time as you want, but people can not absolve from their mistakes and responsibilities.
Sociliam is great for people like these, but people who want to play by the rules and better their lives it is diffucult.
If you are going for socilism, at least go 100% and do want communists do. They give the houses to all the citizens. In that case i too dont have to worry about housing because govt takes care of it.
But it should not be selective, where privileged few get benefits and people who play by rules are screwed.
02/22/2009
I don't think you can apportion blame by percentages. It is important to understand the free market and democracies can, without government intervention, punish bad actors of every stripe:
- Banks and other financial institutions, including management, would lose their reputations and jobs. Shareholders would lose also.
- Bush administration appointees, losing both reputation and elections
- Mortgage lenders and real estate brokers lose reputation, their jobs, and stock value.
Here's what everyone seems to be missing: In a capitalist society, those who stand to gain from good financial decisions, be they bankers or individuals, also stand to lose from poor financial decisions. When the government arbitraily interferes in this risk/reward ratio, they create not only economic dislocation, but moral hazard. Bailouts rewarding bad decisions make it more likely bad decisions will be made in the future. That isn't a lesson our government should be teaching.
From Belmont, MA, 02/22/2009
gb-gb can rail all s/he wants about the moral hazards that borrowers ignored, but the plain fact is that many of them were misled. At the end of 2008, the State of Washington filed to revoke Countrywide's license to operate and impose heavy fines on Countrywide on many counts of fraud. See http://ml-implode.com/viewnews/2008-06-25_DownloadWashingtonsCountrywideIndictment.html and open the docket if you care. Countrywide was also exposed for offering sweetheart VIP mortgage loans to influential members on Congress. They knew hpw to play the game. What is the bigger problem, irresponsible borrowers or deceitful and corrupt lenders? You have one answer, I have another.
02/22/2009
You dont know me, but i was against what was going on in 2002, when Alan Greenspan was pumping cheap money into market to build a bubble. I have posted my opinions in different forums.
Coming back to your argument that people didnt know what they were doing:
1. They knew what the price of the house they are buing was.
2. They knew what their income was.
3. They knew what 30 year fixed mortgage was.
4. They knew what ARM was.
5. They knew what Option ARM was.
6. They knew what lying about income was. Dont tell me they didnt know what lying means.
7. If you knew these facts, you could have bought a house you could afford on 30 year mortgage and dont worry about short term price variations.
8. Even if price declines short term, their payment WOULD NOT change.
You see despite these facts they GAMBLED and a bought a house they could not afford.
They could have rented. But no. They needed to have a house.
Why should i pay for their mistakes. Why am i being punished and continue to rent. Now i need to work even harder to afford a home and in addition to additional work to pay for other peoples mortgage.
The people who made mistakes are being rewarded. Are there any requirements such as for these people such as:
1. Any future profits from their home sales should go to govt, first until the amoutn they recived from the govt is paid back. Hell no.
2. Is there any requirement that these people sell their flat screen TVs. Hell no.
I could go on.
You seem to have problem when people protest about fairness, but okay about irresponsible people getting bailed becuase, there were irresponsible becuase of somebody else. Gimme a break.
From Belmont, MA, 02/22/2009
The "gun to peoples head to buy home they can not afford" that gb-gb says didn't exist was actually sophisticated marketing by lenders and brokers. It consisted of come-ons and bait-and-switch tactics that were driven by pure avarice. Irresponsible real estate agents and loan originators heavily marketed to unsophisticated buyers who were unprepared to evaluate the promises, much less the reality they signed on the dotted line for.
Companies like Countrywide would still prosper if they hadn't been consumed with greed. Their actions and those of the investment bankers who gobbled up the bad loans created most of this huge mess. Where is your outrage toward these corrupt players who made all this possible?
Americans like to think that individual effort and responsibility is what matters, but when huge corporations in charge of the economy entice people to act irresponsibly, "just say no" doesn't have much effect. Just look at the levels of usurious credit card debt we have, another house of cards ready to fall. Capitalism has to change its ways or we'll all go down.
02/22/2009
Geoff Dutton: You can blame whom ever you want, but in the end nobody gun to peoples head to buy home they can not afford.
You are saying as if people didnt have any choice but to buy a home. What is wrong with renting, when you can not afford a house. Despite the facts people bought the homes they could not afford. Even now what is wrong with people moving out and renting? Instead they want people like me who were prudent and never participated in the bubble to pay they mortgage. What do i get in return: I get to continue to rent and get the satisfaction of funding the mortgage of these idiots.
Another point this Cohen guy supposed to be ethicist and he says it is ethical for people who played by rules to fund the mistakes of these idiots.
From Belmont, MA, 02/22/2009
This is a good discussion. I tend to agree with most of the comments about Randy Cohen being rather naive, and perhaps making political rather than ethical statements. But I'm sort of put off by all the tut-tutting. It's easy to condemn the behavior of home buyers who got in over their heads by ignoring gut feelings that they were asking for trouble by taking on more debt than they would be able to handle. But we should not forget that there were reasons that the system made them behave like that.
My family and I have been looking to buy a house for five years and held back, because our guts told us that prices were overinflated and my banker told me to avoid getting an ARM. I'm glad I stayed out of the market, but I don't pass judgments on people who bought houses thinking that their value could only go up. After all, almost everyone connected to housing was saying that up until 2007, and marketing efforts to reel in new mortgages were intense. This type of groupthink is why politicians, capitalists and consumers make poor decisions.
Here's how I would apportion the responsibility for what happened during the housing/credit bubble:
* 25% Financial wizards of securitization, for creating a bubble of wealth based on debt
* 25% Bush administration appointees and members of Congress, for dereliction of oversight
* 20% Mortgage lenders and real estate brokers, for enticing unwary and unqualified buyers
* 20% Most Americans, who naively thought house values could only go up
* 10% Cash-poor home buyers, who should have known that the deal they were getting was too good to be true
Does that make sense to you?
02/21/2009
I have never listened to a radio segment that made me more angry than this one. This guy is an ethicist?
I'm sorry, greedy bankers and real estate speculators weren't the only ones exhibiting unethical behavior during the housing bubble.
And don't tell me all these people who took out ARMs, Interest Only mortages, and liar's loan we're all ignoramuses who just fell off the turnip truck. Most of these people knew in their gut they were buying more house than they could truly afford; families with $50k annual incomes were buying $250k houses with nothing down...and they knew better. But the allure of living-it-up and the greed of making a "risk free" investment was more powerful than logic or their conscience.
Granted, everyone makes mistakes. Paying for your mistakes has nothing to do with retribution. Americans who took out responsible mortgages aren't saying these people should be marched in front of a firing squad. Will there be foreclosures? Yes. Will these people have to downsize, and Got forbid, rent? Yes. Will they have a bad mark on their credit history? Yes. But none of this is a death sentence. Nor is it mean or unfair. It's life Mr. Cohen. People live, learn, and recover...stronger and wiser.
To mask life's lessons with government intervention ultimately hurts everyone. Why is that so hard to understand?
02/21/2009
To Randy Cohen:
The houses in my neighbhorhood are around 1.2 million because of good school district. I can not afford to buy, so i am renting.
I want to buy a 1.2 million home. I want govt (tax payer) to give me 600K free and i will take mortgage for rest of the 600K. I promise i will pay the monthly payments. I dont see anything unethical comared to what is happening to current bailout of home owners. I want to be bailed out upfront. What do you say?
From Rochester, NY, 02/21/2009
I've never been bothered enough by an interview on Marketplace to post a comment, until now. What has happened to us as a society when we believe it's the government's duty to not only regulate commerce but bail out consumers? Whatever happened to personal responsibility? When I purchased my first home (at the age of 43), I was told by the lender that I was approved for an amount well in excess of what I knew I could afford. Before I closed on my home, I took the time to read the loan documents. At closing, when I had a question, I did not continue the process until the question was answered to my satisfaction. I'm not implying that I'm better than anyone else. I have made mistakes, and my credit rating could use some improvement. What I am saying that owning a home is not a right, it is a privilege. To believe otherwise is folly. As humans, we have avoided personal responsibility since Adam & Eve ate the apple, but that doesn't make it right. At the end of the day, we will each have to give an account of our actions. How about starting now? What would it look like if we owned up to our mistakes and started living within our means? I'd really love to see that!!
From San Marcos, TX, 02/21/2009
One struggles to find the appropriate superlative to the describe this journalistic atrocity. Thank you for the vivid illustration of the fact that Randy Cohen knows even less about free market economies than he does about ethics. And when it comes to uncritical swooning, Market Place shows itself to be positively avant garde in its reportage of the economy and the Obama Administration - no mean feat when one considers present main stream media environment.
02/21/2009
To "PA Observer":
Where was your head buried when real estate prices were bubbling and rasing where incomes can not sustain. You thoutht that was normal. If you didnt speak out then, why is your hear bleeding now. The prices need to adjust where incomes can support.
So many bleeding hearts are coming out now to pay for irresponsible. Why dont you bleeding types set up a charity fund and send your savings to that charity. That charity can help the irresponsible. People like you can fund to your hearts content, and get satisfaction that you are helping the losers.
From PA, 02/21/2009
Whoa.....lots of moral condemnation on this site. I can't speak to the morality of the issue, but I've seen the impact of property value crashes in the early 1980's and they rarely ever come back, (i.e., travel through any town in the midwest). So, all of these outraged people should consider what they will do when the house next door becomes a multi-unit rental or a parking lot for trucks on blocks. See, property value is proportional the interest level of the local government. Those zoning law enforcement and police patrols also decline with property values.
From London, 02/21/2009
I'm heartened to see a chorus of intelligent dissent to Randy Cohen's poor logic and ideologically-tainted reasoning.
He implies that not bailing out someone who lied on a mortgage application, or at best made foolish financial decisions, is equivalent to 1) denying them emergency room care, 2) allowing their houses to burn, or even 3) throwing them in debtor's prison.
This is ridiculous. The consequence of poor financial management is not physical harm or prison. It's bankruptcy protection and welfare.
The US has solid bankruptcy laws for a reason. Our sudden reluctance to make adequate use of them is only prolonging the pain, eroding personal responsibility, and punishing those who do act responsibly.
It has been suggested a number of times that it would be fairer to assist all home owners equally. Ironically, this is even more unfair to those who do not own a home. This large demographic seems to reside in a permanent blind spot to journalists and policy-makers alike, despite the fact that they pay their taxes, did nothing to contribute to the housing crisis, and benefited the least from the hysteria of the housing boom.
02/21/2009
To: Geoff Dutton "Whatever misrepresentation mortgage borrowers may have made, they only did it because someone was offering a deal, pretending to look the other way." What part of knowingly don't you understand? Your own rebuttal suggests a lying borrower is doing it with an implied nod-nod-wink-wink. They know their lying. Why don't you? If you leave your car keys in your running car and I drive off with it should I be charged with being duped into stealing your car? Oh, wait! I forgot before Massachusetts came to its feeble senses in the 1990s what every other state called grand theft auto Massachusetts called "unauthorized use of a car." a misdemeanor while wondering why it had the highest rate of "unauthorized" car use in the nation. The rest of us paid dearly in car insurance and property loss thanks to these confused, duped souls. I don't have a problem with helping victims of clear mortgage fraud. There are brokers who forged signatures and changed documents. I don't have a problem with helping renters who paid their bills but are suffering homelessness because their landlord didn't pay his. However, if you can't clearly show your income wasn't enough to sustain your home style go live with you relatives. Tuff Luv.
From Edgewater, MD, 02/21/2009
The ethisist Cohen is yet another in a line to allow their ideology to cause them to make a bad arguement.
He argues mortgage brokers have a "sworn duty" to make good loans (I have no idea to what oath he's referring) and if they make bad loans, they're unethical. However if consumers take out a loan they could not possibly pay for, they may be ignorant but they are not unethical.
I would have liked to see the journalist make an observation about how many foreclosures are in conforming, conventional loans and ask if the mortgage bankers were unethical in these cases. Is subprime lending inherently unethical -- think about the social costs of an affirmative answer to that question.
I would have liked the journalist to have observed the percentage of foreclosures that defaulted on their first payment or in the first 90 days and asked if the consumer was blameless in these cases.
The New York Times reported in April of 2008 about a securitized mortgage pool in which 6% of the loans were in advanced stages of delinquency within 180 days. This is not caused by some exotic teaser rate mortgage with an exorbinant 'go to' rate. These people were intending to flip the houses, never planned to live in them, and when the housing values started to flatten and decline, these people simply walked away from their mortgages. This is ethical behavior or is this greed?
Is a consumer who puts no money down on a mortgage and then pulls all of the equity out over time through a HELOC simply unwise, or might there be a touch of avarice in this?
There are tens of thousands of unethical mortgage brokers and there are hundreds of thousands of basically decent homeowners caught in a very troubling economy and worthy of assistance. However, to make the kinds of arguments Cohen makes is to ignore the nuances and layers of the real world in order to make essentially a political rather than a substantive point. Stop talking to us like we're ninth graders. Do your job and ask a challenging question or two.
From Seattle, WA, 02/21/2009
Randy conveniently ignores two differences between a doctor fixing a gunshot wound, and handing money to folks who made bad choices.
First, one is at some level zero-sum, the other is not. Saving one person's life doesn't kill someone else.
Second, one is life-and-death, the other is elective.
From NV, 02/21/2009
Despite the comments of your esteemed expert,many average Americans are indeed guilty of ethical transgressions: against their own children. Any of the millions who made Caribbean cruises, giant TV's, four-dollar cups of coffee and, oh yeah, houses more important than personal savings are now absolutely responsible for their own problems. What, exactly, is the "consumer confidence" we are all dying to return to? Will this crisis bring a return to the abiding sacrifice and self-denial that previous generations accepted as a requirement of adulthood? Standing by...
From San Francisco, CA, 02/20/2009
If your neighbor's house gets forclosed on it will drive your property value down especially if there are several forclosures in your neighborhood and especially if the houses sit vacant for any period of time. By pitching in to help your irresponsible neighbor, you're actually helping yourself. Maybe we were all a little irreponsible when we decided to drink the tax-cut/deregulation koolaid. With adequate funding our watchdog agencies could have been properly staffed and could have sounded alarm bells when they noticed that banks had drastically lowered their lending standards. Santelli's trying to divide the working-class because he's terrified we'll rise up and knock him and his ruling-class ilk off of their privileged pedestals.
From Sylmar, CA, 02/20/2009
My goodness, it seems I have a lot of kindred irate spirits. "If you can't afford it, don't buy it." That, and like advice, has proven fiscally invaluable. A lot of other folks' "bad financial decisions" have had a decidely less than "benign effect" on those of us who've tried to live responsibly. Even in community, especially in community, there is a reasonable expectation that the members will act responsibly. When they don't everyone suffers. I feel no ethical responsibility to those who chose not to exercise theirs.
From Fort Worth, TX, 02/20/2009
Thank you Steve and all the other commenters who disagree with premise in this...article?
I don't make moral judgments about people but I do think people are responsible for their actions.
We are witnessing a change in the social contract of our country. The message is the people who act responsible are SAPS and people who act unresponsible will get taken care of. And clowns like Cohen and Vigeland are in the tank for it. But these changes are hard to fix once their flaws become obvious.
From Los Angeles, CA, 02/20/2009
"If a person makes a foolish financial decision"?! That's too rich. I lost a lot of money in Vegas last weekend Mr. Cohen - do you mind sharing some of your tax refund with me? C'mon - it's the neighborly thing to do!
From Newville, PA, 02/20/2009
Mr. Cohen; 1) Bankers have no sworn duty to do anything. Professional, moral, legal, yes, but not sworn. 2) I'm not asking for those that have failed in their personal financial dealings to be "flogged" or thrown in "debtors prison". I just don't want to have to involuntarily subsidize their failings, as I would not expect anyone to be forced to subsidize mine. 3)"...better luck with prudent banking law", oh yeah, look around, we’ve had some real good luck there.
I’ll stop here, there’s just too much to say. Mr. Cohen, rest assured I will never read anything with your name attached to it.
Ms. Vigeland - Your comment of "where's mine, ..." absolutely infuriated me. I guess I’m fortunate, my friends and acquaintances are more interested in trying to figure out how to survive the legislative travesty just hoisted upon us, not how to get a place in line with their hand out.
From Santa Clarita, CA, 02/20/2009
I'm trying to understand how Mr. Cohen can justify taking MORE THAN HALF of the money I managed to save for a down payment on a home so that, among other things, the federal government can bail someone else out of a mortgage they cannot afford. Meanwhile, that person will be able to write off mortgage interest while, as a renter, I have only the standard deduction. This is not the change I voted for.
02/20/2009
I disagree with Cohen when he suggests that our anger over the bailout of irresponsible borrowers is against our better nature. I believe most of us would willingly donate money to help those around us. But I resent being forced to give to this big, inefficient government "charity" which will raise my taxes and my children's taxes and beyond. Who is going to bail us out when we can't afford to pay our taxes anymore?
From NC, 02/20/2009
Mr. Cohen misses a number of people in this mess. First banks were cajoled by policy makers, politicians, and groups such as ACORN to poorly invest other people's money. Now through the bailout, I am being forced at gunpoint to help "my neighbor" a politically favored class, which is hardly ethical.
From Belmont, MA, 02/20/2009
Rick Evans said "Why should I want to help someone who lied through her teeth about her income to get one of those "No-Doc" interest only mortgages hoping to flip for a profit but got caught in the down draft." Here's why. Whatever misrepresentation mortgage borrowers may have made, they only did it because someone was offering a deal, pretending to look the other way. You need to be a seasoned professional to understand the normal real estate transaction documents, most of which the buyer only gets to see for a few minutes at a closing. The game is set up to baffle consumers, and all too often in the past decade, to deceive them. Are you going to insist that naive home buyers who thought they could game the system -- when in fact the system was gaming them -- need to be put out on the street to make this country act ethically? Who will bear the burden of rehousing them, keeping their families together, paying for their health care and providing education to their children? We will, and it will cost more if they are on the street than if they stay in their homes. Foreclosing on them will depress housing prices in their neighborhood, maybe even your neighborhood, Mr. Evans. So keep your outrage, but ask yourself what is the right thing to do, what strategy for the housing market will help as many people as possible?
From Athens, GA, 02/20/2009
If Mr. Cohen could please take a moment to table his obvious dislike of bankers and focus his grandstanding on an issue that will really help me.
I am an innocent grandchild that needs to be ethically protected from eating too much of my morally bankrupt grandmother's cookies. This unscrupulous temptation of decadently delicious sweets is causing my bloated stomach to ache. Help me, Mr. Ethicist, from the evil of this world! Your one- sided biased approach to rationalizing my stupid behavior is necessary to make me feel good about my lazy overindulgence.
Thanks!
02/20/2009
Regarding the fire fighter analogy, the following was pulled off the web, randomly and without much searching, from Grand Blanc, MI code:
"The fire department shall be entitled to recover all expenses incurred in conjunction with emergency incidents involving hazardous/toxic materials or hazardous conditions. Such expenses shall include, but not be limited to, those associated with incident abatement, cleanup and mitigation, including any related third party costs, which were necessary to ensure the safety of Township and its populace."
Yes, the fire department responds, but if someone doesn't inform themselves of, say, the risks of storing gasoline near a furnace, should they be insulated from responsibility?
From Berkeley, CA, 02/20/2009
Listening to the fatuous blather of Mr. Cohen reminded me of why I stopped reading his NY Times column years ago.
From Los Angeles, CA, 02/20/2009
It seems to me that Mr. Cohen's analysis misses an important point. Stabilizing the housing market at current levels (the true purpose of the measure) places home prices out of the reach of normal (young) people... for the foreseeable future.
Asking everyone to chip in a little to help folks in need is one thing, and something we all should probably embrace. But is it ethically acceptable to jeopardize the dreams of an entire generation so that those who participated in the frenzy of a classic speculative bubble (individual buyers, bankers and investors in mortgage backed securities and their multiplied sequelae alike) can avoid coping with the consequences of its collapse?
02/20/2009
Mr Cohen,
What about the borrowers who knowlingly lied about their income, job and/or assets? Why is this MORAL and LEGAL issue not part of the public debate?
From New York, NY, 02/20/2009
I don't think ethics comes into play here. I have finally come to feel we should simply not penalize people who were imprudent. They were almost without exception not malicious, often deceived or uninformed, and their worst failing seem to have been self-delusion. They would certainly not choose to go through this agony again, so what is to be gained by "teaching them a lesson?"
It does seems a lot easier to punish the bankers and their representatives who got their clients into situations they knew or any reasonable person should have known were unsustainable.
I say off with the heads of the bankers including the odious Angelo Mozillo, and give the little folks a chance. A bit of charity is in order.
From Woodstock, GA, 02/20/2009
Mr. Cohen says we help people all the time and uses the example of people going to the emergency room and not being questioned. What about the higher health insurance premiums charged to people who choose to smoke? That's a bad decision for which the decision maker is punished. In fact Congress has underscored this particular punishment with the TAX INCREASE on tobacco products to be used for the SCHIP program. The government and the media seem to want to have it both ways - punish those who make some "bad decisions" and reward others who make other bad decisions. This society IS rewarding bad behavior and has been for a long time. In the 1970's we frequently heard the term "population explosion" paired with reports about pollution. Yet the federal and state governments continue to encourage people to have children they can't afford through tax deductions, SCHIP, welfare, food stamps, etc. My parents had 9 children when they couldn't afford one. I worked my way out of the cycle of poverty and got a degree through scholarships, grants, and loans and have a decent middle income job. Now I'm wondering why I worked so hard? If the government is going to take what I have achieved and give it to illegal immigrants and irresponsible people who have been living beyond their means - what is the point? There is more proof in the news every day that NO GOOD DEED GOES UNPUNISHED.
From MA, 02/20/2009
Be civil? You make it hard when you trot a shrill bleeding heart like Randy Cohen to comment about who was unethical in the mortgage mess.
Typical of bleeding hearts Cohen can only find blame in stupid, greedy corrupt or irresponsible bankers while seeing ZERO blame and only sympathy house buyers.
Why should I want to help someone who lied through her teeth about her income to get one of those "No-Doc" interest only mortgages hoping to flip for a profit but got caught in the down draft.
There's nothing Victorian about not wanting to reward lying individual with another opportunity to make a financial "mistake".
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