I’ve been meaning to write something about this New York Times article that suggests that affluent homeowners are strategically defaulting more than middle class and poor ones, but Mike the Mad Biologist said it better.
While I realize regulation has become a four-letter word, regulation does force the regulated to act in certain ways that they would otherwise not. To the extent we want an ethical economic system, it needs to be structured and enforced in order to remove incentives and advantages for unethical (or ‘athetical’) behavior.
But I realize that would be like totally Hitler
What I think is interesting about the Times article is that it actually includes the sentence – that’s quite a radical quote to appear in the New York Times
The rich are different: they are more ruthless,” said Sam Khater, CoreLogic’s senior economist.
I’m not sure the Times’ conclusion that the middle class and working class are more ethical is actually correct. More likely, I think that most of the middle and working class have fewer options and are more intimidated about exercising them. You often aren’t going to be able to buy anything else after you default (or even before) and moving into rental housing requires dealing with the realities that most landlords don’t really like children or pets. The costs to your credit rating are a much bigger deal for most people with out huge wads of cash. And you don’t have that second home to sell to raise first month, last month and security.
Still, I think this is important, particularly if housing prices have further to drop, which some commenters suggest they do. I thought Stuart Staniford’s latest review of possible measures by which to calculate expected deleveraging was interesting.