Friday, February 20, 2009

Mortgages and Morality

In his New York Times column this morning, David Brooks begins his attack on the proposed government program to slow the foreclosure rate by observing:

"Our moral and economic system is based on individual responsibility. It’s based on the idea that people have to live with the consequences of their decisions. This makes them more careful deciders. This means that society tends toward justice — people get what they deserve as much as possible."

What he means is that the market determines what people deserve. And that (believe it or not) is what he calls justice. So the people losing their homes are getting what they deserve, and the people who got rich on hedge funds got what they deserve. And CEO’s deserve to be paid 300 times as much as their workers. And the Wall Street folks who got $18 Million in bonuses (partly subsidized by the bailout) got what they deserved. If we upset all this fairness by helping people who are about to lose their homes, then the sky will fall. And we will all be poorer (morally) for it.

My first reaction was to wonder whether Mr. Brooks is as familiar with Reinhold Niebuhr as he claims to be. That’s about as anti-Niebuhrian (can that be a word?) as a statement could possibly be. Unfortunately, as Niebuhr pointed out, people tend to get what they can, unless they are restrained by countervailing social (including moral and religious) or political forces.

Once when Ohio State was way ahead of their arch rival, Michigan, Woody Hayes had his team go for a two point conversion after another touchdown. When reporters asked why he would go for two points when he was already so far ahead, Woody said, “Because I couldn’t go for three!” Why did the Wall Street traders get $18 Million? Because they couldn’t get nineteen.

In football, it may be amusing and add to the rivalry. But in economics, it is unjust. That’s not the biblical vision of Amos and Micah and Isaiah. And it’s not the vision of Jesus. When the rich get richer and the poor get poorer, that’s not a biblical vision of justice. When those who have more than enough won’t share with those who don’t have enough, that’s not justice.

In the mortgage bailout, some undeserving people will be helped. And inevitably, some deserving people will be left out. But if we can slow the losses and keep a significant number of families in their homes, that will be a very good thing.


  1. In a perfect world, only the worthy would be assisted by the bailouts. There will always be those who take advantage and benefit from the gifts intended for the less fortunate-punishments may also affect the unintended. This is the way of the world we live in. Inaction equals tragedy. Attempts to aid the needed must be given to all in the hopes that the goodness of the gesture will be understood and appreciated at some point by all who benefit. Thanks for the blog.

  2. I think related to the credit issue is the whole concept behind predatory lending. Bank loans and mortgages are devastating because of the amounts involved, but what about credit cards? Just about anyone can get one. Promotional offers with a small APR quickly rise to 25-30%.

    The credit card industry is a business that makes money off of keeping you in debt and gives you nothing in return other than the hope that maybe next month will be better.

    The entire concept is to offer you a line of credit for just a little more money than you actually have available to spend. If you use it for convenience and pay it off at the end of the month (like most people do) it isn’t a problem. But credit card companies don’t make money off of those who can pay off everything every month. They rely on people who CAN’T pay it off and stay in debt.

    A good month of profits involves finding people who are in trouble and then, as a matter of business, putting them in even deeper trouble. Ideally the pit is deep enough that those who are poor can’t get out but not so deep that they don’t stop trying.

    People should be more careful with their credit but something must be done about a market that targets and feeds upon those who are in the most need.

    How can such a practice be called anything but evil?

    By Brooks's reasoning perhaps we should not put con-artists in jail. If they can grift some money off of some unsuspecting individual, then the individual deserves to lose his money. Lying to people encourages quick wit and cleverness. Those who are fooled should be more careful in the future.

    Along that line of reasoning maybe Madoff shouldn't be charged with a crime. People should have investigated him more. By Brooks's code of ethics they deserved to lose their money. Next time they will be more careful.

    I guess when someone takes advantage of you it is unfair, but when it happens to someone else it is justice.