patrick.net

Consider also the case where a customer buys a box of chicken nuggets, and finds a battered and fried chicken head amongst the product. Will the average fellow just be repulsed for a moment, then have a laugh with his friends about it, then turn the box back in for a replacement? Or will he whip out his mobile phone camera to document the atrocity, then decide what lawyer to call so he can file for his lawsuit lottery?

I would be more disturbed by the former scenario, actually - in which a bizarrely detached customer has a quick chuckle before exchanging the offending deep-fried chicken head for some proper pigeon Mcnuggets.

You really made me laugh with that!

How about the folks that take out every last bit of equity that the bank allows and then stop making payments? I don't know how many times I see homes that were purchased 15-20 years ago for 35-50K but then get listed as a short sale at over 350K and it's obvious the money was NOT put back into the house as updates/remodels. Or homes that were purchased in the past 5-7 years, no permits pulled=no major remodel, yet a short sale listed at 200-300K over purchase price 5-7 years ago. Where did all the money go...vacations? new cars? Sometimes I see that the equity was pulled to buy a second home, then the first gets foreclosed on? WTF? I think the bank should take the second home, the new cars and all their dang vacation pictures.

But from what I understand, the banks are soooo overwhelmed with foreclosures that it's taking 12 months or more to even begin the foreclosure process. People are living in these homes rent free.

Everyone sitting around waiting for their taxpayer funded bailout?!?! We whine about taxpayer funded health care but cheer on taxpayer funded cash for clunkers and increasing and extending the home buyer's credit in a weak attempt to sustain this false economy...what the heck.

Don't worry, it's all going to blow up in our faces really soon. Those of us who didn't participate will pay. That's what bailouts are all about: Rewarding the greedy and the stupid at the expense of the smart. Love those rules.

BTW, I believe we need real punishment for EVERYONE involved in this Ponzi scheme, from bankers to greed "conned"-sumers. But I don't look for that, as long as the powers that be will try to continue the illusion of the debt-based economy at any cost. Oh, and don't mean to put a damper on your debt party, but how are you going to pay for the forced health care that's coming? What? You actually believe it will be affordable? They aren't even telling you what it will cost, but rather cramming it down your throat. Your overpriced house won't save you. You lose! We all lose! Change is coming, and you won't like it.

chrisborden says

BTW, I believe we need real punishment for EVERYONE involved in this Ponzi scheme, from bankers to greed “conned”-sumers. But I don’t look for that, as long as the powers that be will try to continue the illusion of the debt-based economy at any cost. Oh, and don’t mean to put a damper on your debt party, but how are you going to pay for the forced health care that’s coming? What? You actually believe it will be affordable? They aren’t even telling you what it will cost, but rather cramming it down your throat. Your overpriced house won’t save you. You lose! We all lose! Change is coming, and you won’t like it.

I'm an RN on the front lines of this. Don't get me started. I could save us billions in the current system if they'd just listen to me;O) Let me give you an example: insurance reimburses 4X the amount for a spinal fusion vs a discectomy. Yet, the fusion rarely relieves chronic pain. Then add to it all the tools and hardware needed for these fusions that must be purchased. You figure it out.

chrisborden says

BTW, I believe we need real punishment for EVERYONE involved in this Ponzi scheme, from bankers to greed “conned”-sumers. But I don’t look for that, as long as the powers that be will try to continue the illusion of the debt-based economy at any cost. Oh, and don’t mean to put a damper on your debt party, but how are you going to pay for the forced health care that’s coming? What? You actually believe it will be affordable? They aren’t even telling you what it will cost, but rather cramming it down your throat. Your overpriced house won’t save you. You lose! We all lose! Change is coming, and you won’t like it.

Oh, and two examples from this week. Two pt's will be needing either chronic dialysis the rest of their lives or kidney transplants thanks to untreated hypertension. You can chalk that up to being uninsured due to working crappy jobs that offer no bennies. It would be great if our health care system had a massive paradigm shift and focused more on preventative medicine but then it's dang hard to make money on illness and disease all the while trying to prevent it.

Leigh - I've said it many times: THEY need to talk to us, the people on the front lines. We're the ones who see the asinine decisions that cost the rest of us millions in grants & tax incentives to providers & insurance companies.

But people's hatred of socialized medicine (aka healthcare for all) and lack of understanding of the current system has once again highjacked a thread. The question here was whether or not it's ethical to gut a house because the bank is foreclosing.

Nope. It's stealing. And my mommy told me that stealing was bad.

Nope. It’s stealing.

From whom? The bank?

Unless it's stuff that came out of your pocket, in which case, you'd be a fool to leave it behind -- then perhaps, but I still can't muster much sympathy for any bank, let alone any moral arguments on their behalf.

...granted, I am not defending the type of nitwits as seen in in that video that Patrick posted, which I only just watched. But I think they and the banks deserve one another.

Let's see now. I go to the casino, bet every dime I own and lose. But because I believe I should be guaranteed a winning hand on my "investment," (and I'm still trying to figure out just where it says one should NEVER LOSE on a house) I feel it is my right to burn down the house because they won't refund my money. OK, then, by that "logic," because I hate the new car I just bought, I feel it is my duty to make a statement about Suzukis by going down to the dealership and vandalizing every car in sight to "get back" at the salesman for duping me into buying an inferior car. What is the difference between my fantasy and someone trashing a house because it "didn't work out" for him? I'd like to get back at the dealer, but I made a choice, and I choose to live with it and learn to do better research next time. At least I learned a lesson, unlike people who buy houses they can't afford then blame banks (who are also entirely culpable) for their mistakes.

How can these people say they own the house when they still owe X amount of dollars. Take my neighbor for example. Bought 4 years ago for $415K using an 80-20. Re-did some floors, re-tiled the kitchen and bath, new sinks and went stainless steel with kitchen appliances nothing extensive. Due to the crazy market his house appreciated to $550K in a short time. He pulled out the equity and bought a small business/cafe. Well, the economy showed signs of slowing. Last year about this time he pulled out the remaining equity (now owes the bank $660K) and stopped making payments and has been living free ever since. SO he made three years of mortgage payments, mostly interest of course, yet pulls out $200K and has been living for free for about a year?!!?

How can that NOT be stealing?

Austinhousingbubble says

…granted, I am not defending the type of nitwits as seen in in that video that Patrick posted, which I only just watched. But I think they and the banks deserve one another.

But no one held a gun to their heads and told them to buy. They spent money, usually the bank's, to rehab the house into a granite countertopped, stainless applianced McMansion. They spend months not paying the payment and enjoying homes that would made HGTV so proud... They drank the koolaid and now they want thier money back 'cause it tasted like colored sugar water after all. The banks were riding the wave too - but if the tables were turned and the homeowners made a shitload of money (and the bust never happened), the banks wouldn't be asking for part of the profits earned.

Stealing like the example above, destroying the property because they "put money into it" (that also was their choice), and trashing the home are wrong. It's not okay just because the banks aren't bending over backward to change the terms of the loans. We gave billions of bailout monies to banks and now we want them to make loans to the same people who can't pay them anyway?

>> There is nothing right or wrong in this country…there is only legal and illegal.

Many people seem to be acting according to this principle, except they have taken it one step further:

There is nothing right or wrong in this country…there is only "got caught" or "got away with it".

To me this is a fascinating 'moral story'
It is like watching two bullies fighting out... I am enjoying it from the sidelines :-)

A society based on moral relativism cannot stand.

Bap33 says

not to move the arguement from housing, but the truth is there is a sect of America that even feels illegal, immoral, and indecent behavior should be accepted. They feel so strogly that they spend millions getting politicos and media to adjust the laws and/or to change the social views of these behaviors. Bringing things back to a very basic and absolute view of right and wrong would be great.

figured I'd save myself some time and just hit repeat. lol

Bringing things back to a very basic and absolute view of right and wrong would be great.

Outside of absolutes, I'd like to see some enforcement of current laws--equally to business leaders and consumers. I'm not too surprised how some people hyperleveraged and gutted their homes/equity--seeing how many corporations essentially did the same with their assets.

When you give idiots money (especially FAKE money) they will gamble.

This is not hard. The house is collateral for the loan. If you don't pay the loan the collateral reverts to the lender. Trashing it is stealing. No hard moral issues to figure out. If you feel the bank in some way defrauded you then you have a right to file for legal recourse, not take vigilante justice.

The example of bailing out the banks is very bad for national morals.

Once people see so clearly that the banks don't "get foreclosed on" no matter how bad they are, then people feel justified in cheating the banks.

We need moral leadership willing to let the banks fail.

Maybe I'm being too hasty though. The FDIC has shut down quite a lot of banks lately, though I'd bet you the bankers come out of it just fine.

Bob2356,

Here's a harder moral issue for you:
Is it morally ok for you (personally) to forcibly throw a family out on the street because you can?

Here's what banks are starting to do, so be careful if you choose to be a home gutter...

Suppose you walk away from the house and stop paying. The house sits and you expect the bank to take it over and deal with it. But they DON'T. The house stays in your name. All fines and levies for abandonment and blight go on YOU. The bank will levy a lien against the property for far more than the house is worth, meaning you can't sell it and take anything. So while you're off trying to rebuild your life living somewhere else, the house and all its problems remain yours.

I see alot of this sort of proprty damage in friends' rentals and it's a testament to the character of the person who commits the act. They do it because they can get away with it and they have no investment, emotional or financial, in the property. You can't squeeze blood from a turnip so they have nothing to lose. You can sue them, but they'll just tell you to go @#$% yourself and are never forced to pay up. It's the same mentality, they were just allowed to get a mortgage. It'll be a few years, but it will work itself out. And yeah, it's stealing. Plain old theft. Interestingly though, friends who do credit and background checks on prospective tennants do not have this problem. Gee, I wonder why?

But no one held a gun to their heads and told them to buy.

Something much more powerful: a blank check!

They spent money, usually the bank’s, to rehab the house into a granite countertopped, stainless applianced McMansion. They spend months not paying the payment and enjoying homes that would made HGTV so proud… They drank the koolaid and now they want thier money back ’cause it tasted like colored sugar water after all.

I'm not trying to vindicate either side, but I think you'd have to concede that the banks and these losers are birds of a feather. Their behavior is a nice match to the profligate lending practices and subsequent massive socialized losses of the banks. I reserve little energy for splitting hairs so fine, distinguishing between slime and scum.

The banks were riding the wave too - but if the tables were turned and the homeowners made a shitload of money (and the bust never happened), the banks wouldn’t be asking for part of the profits earned.

Banks have vastly more elegant means for extracting their pound of flesh.

Austin,

You said it all with "a blank check' and "usually the bank's." It was all too easy. Think about it. In another time, so much responsibility was required to put yourself in the position of being able to buy a house, such behavior would have long been outgrown and never even contemplated. Hence, these purchases probably never would have ocurred in the first place. How many kids can be trusted with a pillow case full of Halloween candy? Dicipline (on either side) was, unfortunately, never part of the equation.

Is it stealing when you take something that belongs to another person? I think everyone can agree that it is.

Is it stealing when you take something that belongs to a dog? If you attribute human characteristics to a dog, then I suppose. But, if you believe that animals should not have human type rights, then you cannot steal from a dog.

Can you steal from the sky? Giving human characteristics to an inanimate object is more of a metaphysical stretch, but possible in the realm of human imagination. But, if you believe inanimate objects should not have human type rights, then it is not possible to steal from the sky.

Can you steal from a corporation? Obviously, a corporation is not a person, but rather a piece of paper with writing on it. Human imagination can attribute human characteristics on a piece of paper as easily as attributing human characteristics on a dog or the sky, so it can be possible to steal from it. But, if you do not believe a corporation should have human type rights, then you cannot steal from it.

If a corporation hires someone to kill a human, can you send the corporation to the electric chair as you could a human? If a corporation's existence is ended, does it have a soul to go to heaven or hell? What is the natural life span of a corporation? If a corporation has an indefinite life span and people give it the rights of humans, does it not have more rights than a human? Example, Prop 13 revalues real property in CA to market conditions after a transfer. A corporation and a human buy adjacent properties. The human can live 80 years and only his/her children will see the revaluation of the property after the human dies. The corporation can exist for centuries without a revaluation of the property.

People who commit such morally reprehensible acts will get their comeuppance one way or another, sooner or later. It is the law of life (for every action there is an equal and opposite reaction). No one can escape that. You want to see how it works? Next time you express anger toward someone, guess what you're going to get in return? Then try being nice; it comes right back. Evildoers eventually get caught, even big ones. It is only a matter of time.

chrisborden says

People who commit such morally reprehensible acts will get their comeuppance one way or another, sooner or later. It is the law of life (for every action there is an equal and opposite reaction). No one can escape that. You want to see how it works? Next time you express anger toward someone, guess what you’re going to get in return? Then try being nice; it comes right back. Evildoers eventually get caught, even big ones. It is only a matter of time.

This is called karma in hindu philosophy and its applicable beyond this life ...now i am getting too philosophical

The example of bailing out the banks is very bad for national morals.
Once people see so clearly that the banks don’t “get foreclosed on” no matter how bad they are, then people feel justified in cheating the banks.
We need moral leadership willing to let the banks fail.
Maybe I’m being too hasty though. The FDIC has shut down quite a lot of banks lately, though I’d bet you the bankers come out of it just fine.

my understanding of this situation is the banks were forced (or allowed) to lend money to people that were not properly (traditional) qualified buyers. Would you agree that this lending standard change was the begining of such problems?

Can you steal from the sky? Can you steal from a dog (I just did). Can you steal from a corporation - we've already established that they can steal from us, but since we can't "see" a corporation did we really just get ripped off? If a tree falls on a teevee program but I muted it, was there any sound? Can flowers talk? How much wood would a wood chuck chuck if a wood chuck could chuck wood? Why is there air? If you break a cookie, doesn't that cause calorie leakage thereby reducing the caloric content of the remaining pieces? And how in the blazes did that pig get his wooden leg?*

Sure the banks offered blank checks, but the sheeple signed papers that said they'd pay it back. They surely have some responsibility.

Is it morally okay to throw a family out on the street? I would want to ask what the family's responsibilty would be - If they don't pay their rent, they are morally responsible for their own eviction.

Like Bap, I'm just regurgitating at this point. To answer the original question, it's wrong.
------------------------------------------------------

*Yes, yes, yes-yes, not for me, I don't know but this one keeps me up at night, A woodchuck would chuck as much wood as a woodchuck could chuck if a woodchuck could chuck wood, to blow up basketballs, sure (if it makes you feel better), and because a good pig like that - you can't eat him all at once.

Bap33 says

my understanding of this situation is the banks were forced (or allowed) to lend money to people that were not properly (traditional) qualified buyers. Would you agree that this lending standard change was the begining of such problems?

Lending to people who can't really afford a house is a bad idea, but I think that wasn't the begining of the problems.

Letting banks push the risk for bad lending onto bond investors and onto the government is what really made bad lending take off. The banks thought they couldn't lose, so they were willing to lend to anyone.

The repeal of the Glass-Steagall Act of 1933 was the biggest single problem, IMHO. That meant that mortgage could be turned into bonds and sold on Wall Street. Wall Street loved it, because they in turn thought they could just push all the risk onto bond buyers or the gov't.

"The repeal enabled commercial lenders such as Citigroup, which was in 1999 the largest U.S. bank by assets, to underwrite and trade instruments such as mortgage-backed securities..." from http://en.wikipedia.org/wiki/Glass_steagall

So utlimately, the problem is Wall Street being involved in government. Or in more general terms corporate involvement in government.

in my opinion that is focusing on effects as oposed to the cause that was used to build this problem. The easy lending was, in my most humble opinion, the very first change that had to take place to allow any of the other very valid points to take place.

What I mean is this, the human nature factors are a constant .. greed, desire, fear, are all nothing new, and as Ellie points out, sheeple see - sheeple do. So those factors are not unique to the bubble, just a constant factor in the human experience. In the chronicalogical(sp) order of things the very valid points that Patrick makes follow the step that I believe was the first step ... loose lending forced on the banks. That step alone drove prices up by increasing the buyer pool beyond those with the means to repay the loans. And then all of the other poop started hitting the rotating cooling device.

@Patrick,
That is a very good point about how the banksters were able to play on wall-street. I would almost bet that they knew they would be saved (unless, ofcourse, the mighty Gov felt you should fall on the sword) (and if you work for $1 a year plus bonuses it sure sucks to have your bonuses attacked by folks that demanded the system you work under be put into place.) I see your point as having a large roll in the bubble going as big as it did and global also. Maybe that was the banksters way to get back at (or planned pay-off) gov (B.Frank and Co) for getting involved in banking?

So utlimately, the problem is Wall Street being involved in government. Or in more general terms corporate involvement in government
Its like trying to keep a prostitute (govt) and john (wallstreet) apart by making prostitution illegal.....never worked and never will....but we can always try.

wallstreet has money and govt has power. I don't know how you can keep money and power apart. money and power survive on each other. Ofcourse USA has been the most successful coutry where money and power are most separated due to our contitutions focus on freedoms.

"The example of bailing out the banks is very bad for national morals."

It may seem like that on the surface, but what exactly happened.

The banks, which hold the funds of depositors*,

lent the money to end user (home buyers) in return for a promissory note. Now that the homebuyer were unable to pay back the promissory note, the depositors* funds have disappeared. The bailout (funding) was the last resort for the depositors to be whole again.

The US Government/Fed walked in and provided liquidity until the banks can convert the housing inventory they seized into cash back to the depositors accounts.

* and who are the depositors?, personal savings and checking accounts, corporate accounts(investments, checking for fund operations/payroll), non-profits like (churches, universities, and the like), government (local, state, federal entities), international account holders doing business in the US, and other entity funds.

The alternative would be finding that you, me, everyone else who is a depositor would find a huge drop in their bank balances, if any balance. How are you going to divide whats left to each account class and account holder as depositor?

Things would be far worst had that happened. Depression indeed. The alternative what 'could have happened' is far worst than you or I can imagine.

"wish i was lucky" - clearly you sound like an accountant. Only an accountant / auditor would ask such questions. Kudos to my Bro!

"What I mean is this, the human nature factors are a constant .. greed, desire, fear, are all nothing new,"

Agreed Babs, that is why we need more internal controls... it is a 'mechanism' to stop conflicts of interest which harm the consumer/public at large.

Lending to people who can’t really afford a house is a bad idea, but I think that wasn’t the begining of the problems.

Agreed!
The laundry list regarding Banks, Lenders, Realtors is very long !
We can start not so much at the top but at 'first contact' on main street where the transactions start.. local buyer, sellers, realtors, and lenders.
We still have people and the NAR running around talking about how RE is the best investment. Yet we haven't even touched the NAR.

Why in the world would you put an accountant in charge of a program that involves money? They'd ask too many questions and streamline the system, thereby causing countless useless bureocrats to lose their jobs. Nah, they'd just get transferred to another useless program...

Ryan says

Bob2356,
Here’s a harder moral issue for you:

Is it morally ok for you (personally) to forcibly throw a family out on the street because you can?

In a heartbeat if they trashed my house. I'd file charges too. We are talking adults here not 15 year olds.

What ever happened to personal responsibility? I'm sick of hearing about the poor people who were taken advantage of by the greedy banks. No one held a gun to anyone's head and forced them to take a no money down 105% mortgage for 500,000 with a 50,000 income. A large percentage were gambling and lost. Now want someone else to bail them out. Didn't anyone ever learn not to gamble with money you can't afford to lose?

The banks are just as bad. Oh my God the world will end if we didn't bail out the banks. BS. What makes banks so special that they couldn't have gone into bankruptcy like anyone else. Business continues, just under protection of the court. The good parts of the business are sold off. The bad parts are dissolved. The stockholders and bondholders eat the loss.There my friends is the rub. Follow the money. Who are the bondholders? Mostly foreign governments and sovereign wealth funds. The same people who are financing the operations of the US government by buying insane amounts of Tbills that are eventually going to be worthless anyway. Oops, can't let them eat it or they won't buy any more tbills. That would be end of the world for the US government. The bailouts are the greatest fraud ever perpetuated on the American public in the history of the republic.

bob2356 says

What makes banks so special that they couldn’t have gone into bankruptcy like anyone else. Business continues, just under protection of the court.

Read my statement above! Bankruptcy for a bank wouldn't work... so what happens to the funds on deposit by the public and other entities, like your employer who pays his payroll and vendors from the funds in the same bank. Ho hum! banks go under and ho hum everything goes like any other day... Jez! get real!