An interesting piece in L.A.Times today:
Reporting from Washington – Go ahead. Break the chains. Stop paying on your mortgage if you owe more than the house is worth. And most important: Don’t feel guilty about it. Don’t think you’re doing something morally wrong.
That’s the incendiary core message of a new academic paper by Brent T. White, a University of Arizona law school professor, titled “Underwater and Not Walking Away: Shame, Fear and the Social Management of the Housing Crisis.”
The majority of the essay is dedicated to the question of “self-interest” and how walking away from a bad mortgage is not as financially ruinous as it is presented by those who have an interest in people’s not walking away and paying their bills even though it is not financially feasible.
Although it is not very often that one encounters a piece on ethics in the “Real Estate” section of the newspaper, I wonder if it is indeed the time to raise a number of important ethical (and generally political) questions about the responsibilities of those homeowners who, having believed the ideology of “everyone should own a house” during the boom, bought a house they could or could not afford and are now stuck with payments on the mortgage that is much higher than the price of their house. Are they obligated to continue paying their mortgages? Legally, yes, or so it seems. White seems to argue two points, and I’d like to read his original essay as well when I have time (it’s available on SSRN), that are not necessarily connected: a) walking away is not as financially ruinous, you will be back on your feet in a couple of years (although banks seems to dispute the numbers here, but it’s of course in their interest to do so), b) it is not immoral to do so, because you are to act in self-interest and being stuck in abusive bank-homeowner relationship is not good for you in the long run.
It is clear here that ethically speaking one would be screwed if one were a consistent Kantian (as people keep accusing me of being, including sending me annoying emails pointing out how inconsistently Kantian I am even though I keep repeating that I am not in fact a Kantian) – regardless of the consequences of your promise to pay off your debt, you must do so because you promised to do so. What clearly shows Kantian deficiency here is the fact that, according to the article, banks and homeowners are not equal legal or social subjects: banks have all the power, including the police that will come and kick you out of “your” house, homeowners have almost no power, whether now or before when they were getting their mortgage. Of course, it is not in the interest of the banking industry (or financial industry in general) to emphasize that disparity. Remember those commercials for “The Lending Tree” with their slogan – “When banks compete, you win“? Well, it turns out that it might not be that good for you as banks don’t seem to be competing that much.
What seems to be the main assumption here is that banks are people, like in that movie that most Americans seem to enjoy around Christmas without drawing too many implications (“It’s a wonderful life” – what a strange title!), but they are not, not anymore, and they probably never will be. They are large institutions concerned only with their own financial situation. They can fail and they are insured. They can be “too big too fail” and they can be “bailed out” and that somehow helps the economy.
The point about “social shame” I think is the most interesting point in White’s argument, and it is here that we need to look for interesting ethical issues: it is shameful to walk away from a ridiculous mortgage because it is a sign of failure and no one wants to be a loser in this country. This shifting of moral shame and guilt onto the consumer, onto the citizen, is the main ideological mechanism in the contemporary culture of the US, it seems to me. Can’t get a job? Didn’t try hard enough, didn’t go to the right school, didn’t get in the right school, because you were lazy in high school or middle school or kindergarten. Didn’t get a good grade in class? Didn’t listen carefully enough, didn’t read the assigned readings, didn’t think correctly. Didn’t get the perfect life, full of happiness and private property? You are not American enough, you are lazy and unproductive member of the society, you must be ashamed of yourself. No one talks about the systemic oppression anymore, about the inequalities and injustices that are the very foundation of any capitalist arrangement, it’s depressing, it’s against the American spirit of industriousness and self-starting enthusiasm: stop blaming others (the banks, the politicians, the corporations, your parents etc) and start doing something about it. Unless, of course, it involves walking away from your financial obligations to the system. Pay off your mortgages, descend to the lowest level of financial ruin and then do that self-starting thing we told you about.
Disclaimer: I do not have a mortgage. The question here is not whether people should pay their debts, clearly they should by the general consensus on how our society is organized and must function. However, there is a sense in which White is not talking about the practice of simply walking away from your obligations whenever you feel like it, he is talking about a kind of social revolution where people walk from abusive financial relationships all together thus creating a kind of civil disobedience movement – is such a movement still possible in this country? Maybe, but I’m not very enthusiastic. Look at the so-called “tea party movement” – clearly most of those people are just upset losers of the election, but some are probably generally upset about government spending or any of the other issues that they are concerned with. The problem, of course, is that it is not a real movement of the people, it is an orchestrated spectacle that serves the interests of those in powerful institutions that are ironically screwing up those very people who march on DC. As Thomas Frank’s image would have it, it is the sans-cullotte marching for the rights of the aristocracy and this is why it is generally not a very influential political event and wouldn’t be even if they gathered millions and marched them to DC every week – it is not the numbers that make a movement, it is the message which they do not have.
Enter Sarah Palin. I’ll confess I still remember the moment I learned that name: it was the morning of a non-teaching day. My wife was leaving for work and she told me: “Hey, John McCain announced his running mate.” To which I responded, being half-asleep still, “Who?” – “Sarah Palin” – “WHO?” – “I think she’s the governor of Alaska or something” – [general puzzlement]. As we learned later, she was quite a lady and all. But the latest accusation against her is that she is a quitter – she quits everything she starts and it’s not very American. But what exactly is the shame of quitting? Of course, in Sarah Palin’s case it’s just a kind of meta-accusatory strategy: she is horrible and she is also a quitter. It’s seems to me that the ideological weaponry of capitalist psychology is here at works as well: nobody likes a quitter, you must work hard no matter how oppressive and abusive the situation is, you must keep your promises, you must be consistent and honest, otherwise we cannot buy your labor power and have any guarantees that we are in fact buying anything. Morality as such is in the service of capitalism? What a novel idea! [Sound of a head exploding] I must go and think about it really really hard…