What is really behind foreclosures?

Casey Mulligan diagnosis the situation, taking off from this discussion by Stan Liebowitz.

What do you think?  Does this evidence lend more support to the thesis that what the financial situation represents is a credit crunch or a insolvency crisis?

Comments

[e weick]

Pete,

Is the moral dimension not even a consideration? Have Ends come to rule our behavior?

Are economic man and moral man no longer compatible? ed

[John David Galt]

The problem, of course, is that mortgage lenders no longer require 20% down payments. I suspect that all or most banks were bullied into making this change by threat of prosecution for racism under the "Community Redevelopment Act" (and similar laws in the UK and Europe).

The argument that people are morally obligated to keep paying their mortgages if they possibly can is beside the point. It is simply unrealistic to expect someone who is "underwater" to keep paying if bankruptcy (or better yet, simply walking away from a nonrecourse mortgage) is a legal option.

(To those who do so expect, I must ask, would you abolish bankruptcy and go back to selling debtors into slavery? Because that's the only way I can see that your moral view can possibly be enforced.)