Anyone who has been following financial news, or even mainstream media news for that matter, is aware of the degree to which the housing slump has affected the overall economy. The prevailing viewpoint seems to be that we are on the verge of a recession, and various public agencies, NGO’s, and politicians are calling for the federal government to intervene in an effort to rescue our economy and save those who exceeded their means from financial ruin. But before we take such action, we would be wise to consider what ethical issues are at play and determine what morality dictates we ought to do.
Two issues at hand are significant to ethics and the mortgage crisis. First, we must consider if unethical behavior caused or enhanced this situation. This is a tough one, because it is difficult to know what individual agents might have told borrowers about the terms of their loans. From the outside, it appears that many individuals were swept up in the hype of the housing market and wanted to get in on the action. In the highly borrower friendly climate of the past several, pre-bust years, many individuals took out loans under less than ideal conditions, accepting variable rates that had the potential to exceed their ability to pay, as well as borrowing the full cost of their home. Sound financial planners normally discourage both of these things.
However, mortgage brokers are not typically sound financial planners - they are salespersons. They want you, the customer, to sign on the dotted line, and many of them could likely care less whether you ought to be doing what you are doing. Further, all they know about you is what your credit report tells them. Not every aspect of your financial status is revealed to them, and they cannot be responsible for what you fail to share or improperly account for.
More importantly, the people who voluntarily accepted loan terms that they could not afford were all adults. The reason I focus on this point is that I have heard many individuals argue for government bailouts and special loan renegotiations for people who are in danger of foreclosure. The fact that these people made bad choices and either didn’t read or didn’t understand their loan terms is not the fault of the US government, and taxpayers who didn’t lose their heads in a de facto get-rich-quick scheme should not bear the burden of other peoples’ bad choices. To say that mortgage companies are to blame when the economy takes a turn and your loan payment goes up is not supported by facts or reason.
Mortgage companies are not interested in helping you out, they want to make money, and if you don’t know that, you have been living somewhere near Mars for quite some time. Second, nobody, including economists, is terribly good at predicting economic shifts. Mortgage brokers are not Alan Greenspan clones, and we shouldn’t treat them as such.
The point I am trying to make, clearly, is that blaming mortgage companies for the housing slump is a case of misplaced responsibility. Individuals made bad choices, regardless of what they may have been told or led to believe. Loans cannot legally be deceptive, even if brokers can be. Adults who do not read legal documents should not be given a free pass. They should be made to endure the consequences of their actions. Unfortunately, this seems to be the only way that some people learn.
Assuming you buy into the above position, the second ethical concern with regard to the housing crisis is whether the US government ought to get involved to any extent. This is a question of motive. If the motive for government intervention is to rescue the dopes who bought a huge castle that they had no chance to afford, there is little justification for such action, ethically or otherwise.
However, if the motive is to prevent a broader economic collapse and shield those who did not cause this problem from the consequences of actions that they had no part in, this seems appropriate. There is not much support, ethically speaking, for protecting individuals who caused their own demise. Protecting the innocent, however, is an ethical principle that many can support, and that is consistent with our ideas of justice.
To those readers who actually are among the “dummies” who have gotten themselves into trouble, I offer my apologies. I do not intend to judge you unfairly, but I do hope to offer some perspective that others may not. Choices have consequences, plain and simple. Failure to take responsibility for our actions is one of the greatest barriers to personal growth. Even though it may be difficult at times, the best place to begin when trying to assess a negative situation is to ask yourself what you could have done differently. This is difficult, but also empowering. It makes you the center of your moral universe. Better to be in control and do the wrong thing sometimes than to feel as though you are a victim of circumstances beyond your control.
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