Bear market for personal responsibility

[kg_veteran]

Bear market for personal responsibility

By Michael Graham | Tuesday, September 30, 2008

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Despite the vote by the House of Representatives yesterday, the fact remains that America desperately needs a bailout - a massive rescue plan for an institution vital to our nation and its economy.


My bailout target?


Personal responsibility.


America is experiencing a collapse of the ethics market. Belief in the notion that people should be responsible for their own actions, or pay their own bills or keep their promises has plummeted. It’s time to pump moral and ethical capital into the idea of individual responsibility.


Is it any wonder that Wall Street is waiting for a bailout? After all, we’ve become a bailout society.
Earlier this summer - before the financial meltdown - we passed Barney Frank’s $300 billion bailout of individual homeowners who had bought homes they couldn’t afford. Last week, Congress voted a $25 billion bailout of the auto industry because they’ve made cars nobody wants to drive.


And now we’re bailing out banks because they made loans to people who feel no duty to repay them. This failure of personal responsibility has led to the potential failure of our financial markets.


Yes, there is a public policy aspect to this story. The Clinton and Bush administrations were wrong to push easy lending to low-income borrowers, and the Democratic Congress’s scandalous affair with Freddie and Fannie is enough to make Barney Frank blush (almost).


Wall Street bankers who leveraged $1 trillion worth of mortgage-backed securities up to 40 times on the dollar get no sympathy from me. But it is an inescapable - if unpleasant - fact that banks would not be failing or credit markets frozen if borrowers were keeping their word.


This isn’t a failure of finances. It’s a failure of character.


Barney Frankophiles rage against this idea as “blaming the victim.” I ask “victim of what?” The economy?
I’m sorry, but folks who lost their homes during the Depression were victims of the economy. Twenty percent unemployment made it impossible for folks to pay the mortgage.


We are experiencing the opposite: Unemployment has barely hit 6 percent, and yet so many borrowers are walking away from their loans that they might take down the entire economy.


You can blame mortgage brokers willing to make loans to any warm body, but every transaction ended with that warm body - presumably a voting-age adult - signing their good name on a pledge to repay the loan.


But when was the last time you even heard the phrase “my good name?” Has a single politician in the midst of this mortgage crisis mentioned the notion of personal responsibility even once?


No. Instead, John McCain rails against “Wall Street fat cats,” Barack Obama suggests tar and feathers for a few CEOs, and then we write a $1 trillion check to subsidize the bad behavior of all involved.
And it’s not just on Wall Street. Main Street’s always up for a bailout, too.


Marriage too tough to manage? Just bail out, and don’t worry about the consequences. The kids will probably be OK.


Don’t want to pay your bills? Why not bankruptcy? Hey - everybody does it!


And what are proposals here in Massachusetts to abandon the MCAS other than a bailout of under-performing students? Why make failing kids work harder, when it’s so easy to drop the standards instead?


Yesterday, the Herald reported that the Boston City Council is considering legal action against parents who refuse to take responsibility for their truant kids.


In Salem, a woman who tripped over a firefighter’s rescue bag in a rest room is suing the city for her broken wrist. She can’t be held responsible, it seems, for even watching where she’s going.


So here’s the final question: If everyone gets a bailout, who does the bailing?

[mcsluggo]

the general point is well taken... but I think he overplays the hand a bit. no?

What I WOULD TAKE from this discussion is that we have to be careful in any of the miriad of proposals floating about not to simply reward bad behavior. If possible, allow individuals to keep their homes, but not simply through a direct improvement in their situation. Costs should be shared. Frankly, if the USG gets an equity share in AIG and fannie/freddie... why not give the USG an equity share in individual homes that are bailed out. The USG gets a 10% lein (top of the waterfall) for bailing you out and adjusting the terms of your mortgage. (with specific terms of how you can buy out the government's share when you get better footing again)

I am just thinking out loud here... and i am POSITIVE there are problems with this idea i haven't thought of (since I haven't thought it through at all) but as a basic concept... why not?

[Murphy3]

interesting thoughts sluggo..

[Mavdog]

in general, I agree with the concept michael graham is discussing.

we have swung to a nation of people who abdicate personal responsibility. at the drop of a hat people attempt to push any blame off of themselves and onto anywhere else but themselves.

is the plan for resolving the securities paralysis a failure to accept responsibility? no, i don't see that scenario because the holders of these securities have already taken a pretty big hit, and the potential selling of these securities will be done at a discount. so the bottom line is they will be resposible and will take the loss.

the mortgage morass is different. the cries for mortgage relief are bottom line a plan to shield the homebuyer from the downside of their decisions. unlike the holder of these mbs, the homeowner is looking for the government to rescue them by either rewriting the terms of the mortgage they entered into or to by forcing the lender to accept less repayment of the amount lent. either of these is bottom line a failure of the borrower to accept responsibility for their decisions.

the idea of forestalling a foreclosure is acceptable, it merely allows the borrower more time to get their finances in order to make the loan current. I have no problem with this approach.

btw, barack obama sees similar failure of accepting responsibility. from his speech to the naacp in july:

So yes, we have to demand more responsibility from Washington. And yes we have to demand more responsibility from Wall Street. But we also have to demand more from ourselves. Now, I know some say I've been too tough on folks about this responsibility stuff. But I'm not going to stop talking about it. Because I believe that in the end, it doesn't matter how much money we invest in our communities, or how many 10-point plans we propose, or how many government programs we launch - none of it will make any difference if we don't seize more responsibility in our own lives.

That's how we'll truly honor those who came before us. Because I know that Thurgood Marshall did not argue Brown versus Board of Education so that some of us could stop doing our jobs as parents. And I know that nine little children did not walk through a schoolhouse door in Little Rock so that we could stand by and let our children drop out of school and turn to gangs for the support they are not getting elsewhere. That's not the freedom they fought so hard to achieve. That's not the America they gave so much to build. That's not the dream they had for our children.

That's why if we're serious about reclaiming that dream, we have to do more in our own lives, our own families, and our own communities. That starts with providing the guidance our children need, turning off the TV, and putting away the video games; attending those parent-teacher conferences, helping our children with their homework, and setting a good example. It starts with teaching our daughters to never allow images on television to tell them what they are worth; and teaching our sons to treat women with respect, and to realize that responsibility does not end at conception; that what makes them men is not the ability to have a child but the courage to raise one. It starts by being good neighbors and good citizens who are willing to volunteer in our communities - and to help our synagogues and churches and community centers feed the hungry and care for the elderly. We all have to do our part to lift up this country.