Would it surprise you, boys and girls, to learn that giant financial institution don’t always practice what they preach?
Sorry, grasshopper; they don’t. They’ll give a stern talking to to anybody who defaults and thinks about walking away from a mortgage:
John Courson, president and C.E.O. of the Mortgage Bankers Association, recently told The Wall Street Journal that homeowners who default on their mortgages should think about the “message” they will send to “their family and their kids and their friends.” Courson was implying that homeowners — record numbers of whom continue to default — have a responsibility to make good. He wasn’t referring to the people who have no choice, who can’t afford their payments. He was speaking about the rising number of folks who are voluntarily choosing not to pay.
They are choosing not to pay because their properties are “under water”: they owe more than the property is worth. “Upside down” or “in the hole” or “negative equity.” Courson says this is immoral.
But don’t ask a big institution to live by the same rules:
Businesses — in particular Wall Street banks — make such calculations [to walk away when they could make the payments] routinely. Morgan Stanley recently decided to stop making payments on five San Francisco office buildings. A Morgan Stanley fund purchased the buildings at the height of the boom, and their value has plunged. 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. Former Treasury Secretary Henry M. Paulson Jr. declared that “any homeowner who can afford his mortgage payment but chooses to walk away from an underwater property is simply a speculator — and one who is not honoring his obligation.” (Paulson presumably was not so censorious of speculation during his 32-year career at Goldman Sachs.)
What kind of example is Morgan Stanley setting, Spot?
I don’t know, grasshopper, but let’s hope it doesn’t interfere with the receipt of bonuses at Morgan Stanley!