vivian shaw

“Antisocial and perhaps amoral”

Roger Lowenstein, author of The End of Wall Street (due out in April), wrote an incredibly interesting article in today’s New York Times about a growing trend among homeowners—that is, to cut their losses and voluntarily default on their mortgages.

Lowenstein takes an interesting look at how morality shapes mortgage trends in consumer behavior and as well as in the industry’s anti-default tactics. Apparently, business and political leaders, Obama included, have been using morality-infused rhetoric to motivate homeowners to stay on course with their mortgages. It’s truly fascinating how assumptions about morality move so smoothly from theory into policy, given that the nature of morality is itself widely controversial. In this case, entrenched in the mortgage industry’s statements is a belief that “appearing moral” is a form of social currency, therefore potentially enough to motivate homeowners not to default, when in fact, defaulting would better serve their financial interests.

This is a particularly direct discussion of morality, and I admire Lowenstein’s very elegant and open-minded handling of the topic. Here are two choice quotes from the piece:

“Nobody has said Morgan Stanley is immoral — perhaps because no one assumed it was moral to begin with. But the average American, as if sprung from some Franklinesque mythology, is supposed to honor his debts, or so says the mortgage industry as well as government officials.”

“There are two reasons why so-called strategic defaults have been considered antisocial and perhaps amoral. One is that foreclosures depress the neighborhood and drive down prices. But in a market society, since when are people responsible for the economic effects of their actions? Every oil speculator helps to drive up gasoline prices. Every hedge fund that speculated against a bank by purchasing credit-default swaps on its bonds signaled skepticism about the bank’s creditworthiness and helped to make it more costly for the bank to borrow, and thus to issue loans. We are all economic pinballs, insensibly colliding for better or worse.”