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February 04, 2012 10:14 AM “Responsible” homeowners and the problem and promise of American Moralism

By Rich Yeselson

President Obama spoke today about his latest plan to help underwater homeowners. As many critics have already noted, this is an ok idea, but it’s not as large a program as it could be.

And without knowing any of the details of the plan, you could already be certain of that because the president inserted the qualifier, “responsible.” It sounds harmless—who among us is opposed to responsibility? But the biggest problem the economy still has (despite something of an improved recovery) is a lack of aggregate demand. That problem started when the housing market collapsed and eight or nine trillion dollars in home values vaporized. Both the responsible and the irresponsible need more money in their pockets that they can use to save their homes, buy new consumer products, and invest in new businesses. But it’s very hard for any American politicians to say, “Look, the reasons don’t matter anymore. This is a technical problem—a very large technical problem, to be sure, but still a technical problem. Trying to evaluate who truly deserves to benefit from this program and who doesn’t won’t help the country.”

American politics since the founding of the Republic has been couched in the language of moral certainty and individual accountability. Unlike European countries, we had no founding national religion. Instead, churches sprang up all over the country, often sustained by the charismatic persona of their founding preachers. They competed with each other to make the most comprehensive and unsubtle analysis of the damned standing before them. Goodness would be rewarded. Sinners would be punished. And this Manichean temperament was bequeathed to our secular political culture, too.

Sometimes the war against sin merged with great issues of public wrong—such was the case with the Abolitionist and the Civil Rights movements. Then the argument goes beyond the plight of the individual, and becomes advocacy for a kind of collective self-improvement mediated by both government and private institutions. Sometimes sin is reduced to the failures of the individual sinner and we get Prohibition or the “war” on drugs, or various moral panics about perceived sexual deviancy of various sorts. In either case, the individual has a chance to step forward as redeemed or fallen. On this very day, Newt Gingrich is asking for forgiveness from the latest state contingent of the Republican electorate. We care very much about whether Gingrich or Obama or Romney or whomever is a good person.

So I guess we’re kind of stuck with the moralization of issues of public policy. Americans have been doing this for a long time.

But we’ve had trillions of dollars in lost economic output over the past several years, and, to paraphrase Adlai Stevenson, helping merely the responsible, whoever they are, isn’t enough. We need to put money in as many people’s pockets as possible.

Comments

  • bdop4 on February 04, 2012 11:50 AM:

    I know what you're saying, but it's not just putting money in people's pockets. It's direct investment in Americans through a revitalized public education, overhauled infrastructure and healthcare system.

    The 99% have been putting in their "sweat equity" for some time now (and will continue to do so). It's time for the 1% to live up to their end of the bargain (whether they like it or not).

  • DAY on February 04, 2012 11:54 AM:

    In the early days of this nation thrift was both a virtue and a necessity. Buildings were burned down to salvage the (imported from Britain) nails, and window panes went along when you moved.
    Post WWII changed all that, with Levittown and the FHA mortgage, followed swiftly by the Credit Card.
    Suddenly, thrift was for suckers! The TeeVee told us our house was a piggy bank and we deserve a vacation/boat/automobile- with nothing down.
    Eventually, chickens come home to roost.

  • theAmericanist on February 04, 2012 11:55 AM:

    Ah, Rich: we salute you. In just one post, you managed to show how the labor movement has all but vanished from the private sector, why the electorate doesn't trust Democrats with the economy (despite a far better record than Republicans), and even the reason for the alienation of values voters from progressives. Impressive. Consider the craft:

    First, the properly mocking tone about the very meaning of American : "American politics since the founding of the Republic has been couched in the language of moral certainty and individual accountability..." Yeah, what kind of fool believes THAT shit?

    Second, the profound puzzlement that, somehow, religion actually thrives in a free country: "no founding national religion...churches sprang up all over the country.." How "unsubtle."

    Third, the helpful echo of Adlai Stevenson's definitive contempt for most Americans -- a singularly odd thing in a candidate to lead the country -- when he responded to the shout: 'Every thinking American is with you!' with "Yeah, but we need a majority!'

    Finally, the brilliant Ah-Qism of the proposal: "We need to put money in as many people's pockets as possible." Who could be against THAT?

    There's a REASON "moral hazard" is an economic principle. There are also LOTS of reasons why Democrats (and progressives) have to think through not only what we're pitching, but how.

    And this post is a superb example not only of what not to do, but also of how it should not be done.

  • c u n d gulag on February 04, 2012 11:57 AM:

    And just who are/were the immoral ones?

    The poor schlubs who signed on the dotted-line, not knowing what they were signing, or the financial people who DID KNOW, and encouraged them to do it anyway?

    But there's no penalty for the rich and greedy in this country.
    NONE!!!

    They walk around, happily spending their ill-gotten gains, and smirking at the world, while families scrounge to find enough to feed, clothe, and keep a roof over the heads of themselves and their children, and hope everyone stays healthy, because they can't afford health care.

    There's not enough bad sh*t that can happen to these f*cking people.
    And not enough will...

  • vix on February 04, 2012 12:00 PM:

    Determining who benefits based on their "responsibility" for their predicaments can be taken to all kinds of levels. Home prices have, in general, been rising for at least 50 years. People shouldn't be penalized for relying on that along with bad policies at lending institutions.
    Is it right to deny insurance coverage to people with health problems due to bad lifestyle choices? Having worked in the health care profession what I've seen is that lack of exercise, poor eating habits, alcohol, and cigarettes cause a lot of health care resources. Do we say that people are responsible for their choices?

  • Greg Worley on February 04, 2012 12:03 PM:

    Riiiiight. Like all the bailout and quantitative easing was directed only at the "responsible" bankers and lenders. Moral hazard is only for those of us who haven't been able to rig the system.

  • TCinLA on February 04, 2012 12:05 PM:

    And of course those "most moral among us" are 90 percent of the time the scumballs who go around the corner and practice "do as I say, not as I do" morality.

    Not to mention most of those "charismatic preachers" were nothing but con artists who found a better way to rob the sheep. I like the way they have portrayed one of those guys in the new show "Hell On Wheels."

  • Mimikatz on February 04, 2012 12:28 PM:

    Add to the moralizing tendency the Puritan notion of the Elect, transformed in American culture into the idea that material prosperity equates with God's favor, and we get kind of prosperity gospel where everyone deserves their fate and therefore no one should be helped. And if individual wealth is the only true measure of success, then getting it by any means available must be ok.

    We have truly come to a very ugly state where selfishness is moral and helping others is communistic. Some might even say it is a perversion of Christianity. And I'd be much more worried about moral hazard if it applied to the top dogs as well as e largely bilked would-be homeowners.

  • s9 on February 04, 2012 12:31 PM:

    Have you ever noticed that when politicians use moralistic bullshit to sell their policy programs, they- even Democrats- especially Democrats- virtually never use it to demonstrate concern that government programs present wealthy and politically powerful elites with a moral hazard. Never!

    Likewise, if the general lack of concern about politicians lying through their teeth about morality were consistently applied across the board to all comers it would be possible to use moralistic bullshit about responsibility while dropping money out of helicopters. But it isn't, and they don't lie when it comes to this point.

    When they say they're concerned about the moral hazard caused by government relieving poor people from misery, it's really true. In that one very special and unique case. Isn't that something?

  • dr2chase on February 04, 2012 12:37 PM:

    Micromanaging "responsibility" is pointless. A little inflation would do the trick; that eventually gets mortgages out from underwater by raising housing values. It would also potentially drag the EU to inflate their own currency to keep their exports competitive, which in turn helps Greece, Portugal, and Spain (who are in a situation not unlike underwater homeowners).

    And to get a little inflation, if necessary, print money, and give it to people. Fling it from helicopters. Do not give it to the banks. Yes, it punishes some people, but the people it most punishes are those are timidly ("prudently", is the positive word for this) sitting on their cash, keeping money out of circulation and prolonging the pain of this recession.

  • Robert on February 04, 2012 12:42 PM:

    The "Americanist" is dead wrong. Good essay Rich on the "hazard" of allowing phony (and all too often self serving 'thee not me') morals to confuse and undermine social and economic policy. "Americanist" meant to say is:"There's a REASON "moral hazard" is an economic principle for all those but the rich who have special privileges."

  • Danny on February 04, 2012 12:43 PM:

    True enough, but the President has more important stuff to do than moving the Overton window on the American peoples obsession with personal responsibility. It's mostly a scam anyway: at least half the people that spout off about personal responsibility is anything but. But hey! Good news: that mean's that pretty much anyone can claim the mantle of responsibility for themselves and their allies - all it takes is a little audacity.

  • jjm on February 04, 2012 12:43 PM:

    Come on, you guys.

    Land fraud is THE way to make big money! Repossess properties and sell them over and over again to those who cannot afford them.

    Or do things like the big money family did in the Imperial Valley of California: first buy the water rights and the canals that irrigate the land, then sell the land to farmers, then cut off their water so they can't pay their mortgages, then repossess the land, and sell it again to farmers, then cut off their water, et cetera et cetera et cetera.

    Even Thomas Jefferson thought land fraud was a good way to deal with the Indians.

    How can anyone dare to question this???

    And I have to say that when GW Bush announced 'the ownership society' I began telling everyone: "He's going to Argentina us." Was I far from wrong?

  • theAmericanist on February 04, 2012 12:47 PM:

    LOL -- Robert, if I'm dead wrong, how come the private sector has all but abandoned organized labor?

  • Trollop on February 04, 2012 12:47 PM:

    If you don't feel equated with irresponsible are you not then responsible? That seems like the real technicality. The ones who are irresponsible are the wealthy whom are their brother's keepers but chose and underwrote greed instead of humanity; there is no question as to who is irresponsible here. That is the core of the class war and it's been going on as long as I've been alive.

  • Rick Taylor on February 04, 2012 12:51 PM:

    When it's banks, we don't worry about responsible vs irresponsible, we need to pony up trillions to save the economy. When it's individuals though,k well we don't give money to anyone irresponsible. . .

  • Arlington BigFish on February 04, 2012 12:53 PM:

    Whenever folks start talking about who "deserves" our help & who's a "responsible" person, I'm reminded of the parable of the Prodigal Son -- the moral of which most people don't understand. The father welcomed back his wandering, "irresponsible" son by laying out a feast, which the "deserving" son, who had stayed at home & helped his father, could NOT understand. The point of the parable is that we help people even though they might not "deserve" it -- because we're not the ones who can make that determination. That decision is made by a higher authority.

  • Robert on February 04, 2012 12:56 PM:

    Americanist do I really have to point out the 'race to the bottom'. The answer to your question is: THEY DID IT with the help of the Republican right wing and some "blue dog democrats" FOR THE MONEY!Welcome to the real world and the real economy which ain't free except for those on top. The rest of us are paying for it big time.

  • Rick B on February 04, 2012 1:02 PM:

    The assumption most of us were taught was that we went to the bank and asked for a loan. Since the bank was lending their own money the rules of the game were that the bank set the amount they would lend. The borrower had an upper limit based on the bank's estimate of their ability to repay.

    Then the banks changed the rules so that they made money on any loan they made. Only they never told the borrowers about the changed rules. When the mortgage ponzi scheme inevitably collapsed, it was without any doubt at all entirely the fault of Wall Street and the banks!

    But that's not the way the blame game works. Nothing the wealthy elites do is ever the source of the bad results. The victims are always blamed and the propaganda machine is cranked up to identify and punish the victims rather than the criminal perpetrators. Why? Because the wealthy own the propaganda machine and buy the politicians.

    If the banks had taught the public the new rules, then and only then would the borrowers possibly be to blame. But the banks weren't going to do that because every incentive was to maximize the number of loans feeding the ponzi scheme. So Angelo R. Mozilo (CEO of Countrywide) and others like him walked away with $millions when the ponzi scheme collapsed and the politicians and are working to blame the victims.

    Nothing is ever the fault of the wealthy financial predators unless they are out of favor with the other elites.

  • Rick B on February 04, 2012 1:05 PM:

    Oh yeah. And the conservative politicians get to demonize the victims after blaming them so that they can get more power and be allowed by their peers to continue their normal corruption. The politically powerful are inherently corrupt and are rarely if ever exposed.

  • theAmericanist on February 04, 2012 1:17 PM:

    Robert (and Rich): you're like a guy at a swap sale who wants to sell a box of drill bits to somebody who asks -- are those metric?

    And your answer is: Chocolate pudding!

    So you don't get to sell the drill bits.

    As a rule, the Right is better at the politics of moral hazard. You can bitch about it -- or you can get better at it.

    I merely noted that Rich's post is an excellent example of what NOT to do -- dissing the Founding, for example, mocking religion in general, throwing in most Americans, the distant echo of Adlai Stevenson-ism and finally! coming up with perhaps the least popular (and most stereotypical) Leftie solution -- let's just stuff lots of money in everybody's pockets as quickly as possible, because, after all: who believes that morality and responsiblity shit, anyway?

    A smarter lad than you, Robert, might have noticed that every single frigging comment that bitches about how the rich are the REALLY immoral ones both contradicts Rich's point -- AND proves why it's such a model of what to avoid, even if you agreed with its premise.

    LOL -- I mean, to kvetch about how Americans are too moralistic in their politics and then insist that the rich are evil is a parody worthy of Colbert.

  • JEA on February 04, 2012 3:57 PM:

    I've been RESPONSIBLE for 16 years in the same house - including 4 years total of disability when I was in serious danger of losing my home. No govt agency ever offered me help.

    But I'M supposed to pay for people who bought more than they could afford, who traded up houses every 2-3 years "KNOWING" the market was never going to go down, and who made irresponsible decisions?

    I struggle with medical costs - despite having insurance - and to keep my family intact - despite being told we'd qualify for more help for my autistic son if we separated.

    Where the hell is MY bailout???

  • golack on February 04, 2012 4:11 PM:

    Unfortunately the "moralism" is effectively being used to kill gov't. You can't have anyone abusing any benefit program, so insist on tons of paperwork, with associated bureaucracies--then claim gov't is out of hand, which it is. But only cut the regulations on businesses.

    Block tax increases, but tolerate, if not encourage, fee increases, which are very regressive. Then claim gov't takes too much money and demand tax (not fee) cuts!!! And cut them--for the very rich. Some token relief for the middle class--that will be more than sucked up by fee increases, higher property taxes, etc. Don't worry, big business won't be stuck with higher property taxes--they're usually exempt. The morality? I'm paying more than my fair share since I pay more (not percent, dollars) in federal income taxes than most people. Those who don't make as much money as I do must be immoral since God has clearly rewarded me and not them. (That's the true moral relativism and feel good Christianity that the church(es) needs to be concerned about--but it's wedded to the money of the rich, so can only attack those without)

    Very inefficient way to run a country.

  • Green Eagle on February 04, 2012 5:18 PM:

    Whatever your position on this issue, I would like to suggest that there is one class that does lie outside the realm of "responsible" homeowners: speculators who purchased these homes not as their own dwellings but in order to attempt to profit from an already grossly expanded bubble, and in the process contributed in a major way to the market's instability.

    I fully agree that the average homeowner was not capable of arriving at a meaningful understanding of the appropriate value of a house for himself, and deserves special treatment to ameliorate the results of the lenders' criminal behavior. This should not extend to ownership for profit. There, market forces should be allowed to take their toll.

  • Doug on February 04, 2012 5:42 PM:

    "Responsible" homeowners are those who either are or are trying to pay off their mortgages. True, that may exclude some who were TRYING to be responsible but were defeated by the economic condidtions. Even limiting the "assistance" to those who meet the qualifications above would, in my opinion, greatly ameliorate the overall situation; ie, reduce paper home values to something closer to their actual market value.
    I also see theAmericanist is continuing with his non-sequitur-laced examples of "reasoning" to show how everything Democrats attempt is doomed to failure.
    Amusing.

  • Danny on February 04, 2012 6:07 PM:

    So here's what you do: In the short term you hijack the narrative and make sure that our idea of a "responsible American" is out there, one that hasnt got anything to do with skin color. Then there will be a long game about putting other narratives out there. In any case, nitpicking the Presidents messaging is probably not the most productive exercise. In the macro perspective the man's out there fighting for you and me against the forces of "corporations are people" and laissez faire: the housing market.

  • Marriea on February 04, 2012 6:51 PM:

    The problem in spite of the history lesson is this. Over a period of time someone convinced folks their property was worth a certain amount of money. Then using that sales pitch told folks that they could borrow against the equitity that this property was now worth. After the unsuspecting folks had cashed the check, these salespersons pulled the rug from under these customers and now their homes aren't worth the money they borrowed and now their homes are worth nothing, BUT since you brought into my lie and signed on the dotted line, you now have to pay me back the money you borrowed even though it was a lie in the first place.
    I have always question where these estimates originated from in the first place. I saw many houses going for more than 1/2 million dollars that now are supposively worth on a 1/4 million now. The owners of these houses/homes should now be able to renegotiate these loans based on the current value of the home. It's only fair seeing that they were mislead in the first place. That way the folks get to keep their homes and these companies get to recoop some of the monies they obviously conned the folks into believing they had through the value of their homes. There is something called scorched earth, when you enter into a contract based on false premises. In this case the homeowners were lied to mostly by the lenders. Now true their were folks who brought properies based on the thought that they could make a quick profit. Although there's nothing wrong with that, they got caught in their own 'greed'.But there are the homeowners who honestly thought they were being given honest info. They truly want their homes. Those folks should be given the chance to renegoiate those loans. And I do mean a real chance.

  • JEA on February 04, 2012 7:52 PM:

    Nobody forced anyone to "buy into the lie." I didn't buy into it. And if people bought into it for things like vacations or adding on or a wedding, then that's on THEM.

    It's not my obligation to bail them out.

    I'd happily bail out certain groups like students with loans, but not homeowners' extravagances.

  • John Dillinger on February 04, 2012 7:58 PM:

    This isn't 2009 anymore folks. Anybody who, 5 years after the mortgage bubble burst, hasn't lost their home, and is still making payments, is, by any definition, "responsible." The president's use of a term was nothing other than a sop, so why anyone would get worked up about it is a mystery.

  • Patango on February 04, 2012 11:09 PM:

    Thanx Rich Yeselson...

    Great comments here , JEA and Marriea really stand out for me , You can find states in america that are not that bad off , here in Iowa people did not borrow way to much , including myself , so apparently we had no moral hazard lol ..

    My 1st though on the piece is obama thinks very small , then you have to balance it with what JEA and Marriea are pointing out , my whole shtick is we need to have HOME OWNERSHIP , and PROPERTY INVESTMENT , in 2 different categories , tax wise and bank loans wise , My hero Barney Frank was on the other day saying how we need to fix the system as such ...He also suggested we could allow people to invest in and build affordable apartments / condos , knocking down all the property taxes and maintenance issues for those in lower income brackets, or retired folks...

    Which brings us back to obama the op and the dems, sometimes it is like watching them trying to build a erector set , while the conglomerate of international corporations builds a legends of doom sky scraper over the capital , I love the dems and obama and bless them , but as people point out on here , the scraps they come up with for the working class are just pathetic , there is nothing wrong with thinking big , even tho you might not get it , because you might actually GET IT , and change the downward crashing of the working class ..

    Obama and the dems could have the highest of moral grounds if they wanted to take it , their wall st pals will not allow it , america is hurting to bust out of the same ol same ol , we are all stuck in a wall st DC box ...

  • Dolores Mirabella on February 05, 2012 11:05 AM:

    Grammar police, sort of:
    We care very much about whether Gingrich or Obama or Romney or whomever is a good person.

    In the sentence above not whomever, but whoever is a good person.

  • v98max on February 05, 2012 10:55 PM:

    When the TARP went around, everyone was told we had to grow up about the moral hazard of bailing out banks, because if we didn't the whole economy would collapse and everyone would be worse off, deserving or not. Well it's time for some of that sage adulthood to rub off on ordinary citizens.

    I'm not real big on principal reduction because people should pay back what they borrowed. But every home owner should be eligible for interest reduction, and it should be a simple requirement of every lender engaged in interstate commerce, every FDIC-insured bank and every TARP recipient. That would put some of the moralizing to rest and get people some breathing room, and lenders would still get their money back, only with less profit that they were hoping for.