I just watched a John Stossel Special show on Fox Business Network (FBN). Tonight he did a sort of redemption show for a previous one on the phenomena of “walking away”. I call it a redemption show because Stossel claimed the subject of the previous show felt he did a “hatchet job” the last time. The subject, Chad Ruyle a co-founder of YouWalkAway.com, agreed to go back on Stossel’s show to set the record straight. Why, I don’t know. YouWalkAway is a website and service which helps homeowners navigate the process of walking away from an underwater mortgage. I can’t say I know the definition of a hatchet job but, I bet the following said by Stossel in the first show would qualify:
You guys are disgusting, you are helping people freeload
I am sure some of Stossel’s viewers shared his contempt because the concept of “walking away” or a “strategic default” was a foreign one until a few years ago. That was before almost eleven million homeowners found themselves underwater or owing much more than their house was worth. It was before millions of mortgage backed securities investors were made whole. It was before thousands of mortgage brokers put a closed sign on their door and walked away rich. It was before the mega banks took billions in a bailout but, gave millions in bonuses the same year. It was before all those banks, investors and brokers decided higher interest rates and obscene profits trumped the risk of making loans which really never had a chance of being paid back.
Stossel poo-pooed Ruyle’s point that homeowners were making decisions just like the banks and the investment class do every day. For the investment class, a bad investment should be jettisoned. In the case of an underwater homeowner, their biggest investment, a home, may simply never bear fruit. Cutting down the tree, in this case, suddenly worries laissez-faire capitalists like Stossel. What is good for the goose is apparently not good for the gander. For the banks, their sudden attack of morality probably has more to do with the profits associated with servicing troubled mortgages instead of indignation. They seem to make their money by both making impossible loans and the slow process of kicking the mortgagee to the street.
This trend of walking away will probably continue. The trend of foreclosures won’t get better in the near future either. I believe it is finally time to do the MORAL thing. It seems to me everybody involved in the mortgage mess has a little skin in the morality game when it comes to blame. So, they should all pay. All the suffering should not be the homeowner’s alone. Banks, mortgage backed securities holders, originators (mortgage brokers), the loan service industry, credit default swappers and anyone else who had to buy a dump truck over the last decade to haul all the money they made should pay. The government, yes the government, should get them all around the table and tell them all to take the necessary financial loss to stop this foreclosure mess. Many economists tell us our economy cannot recover until this happens.
As far as indignation goes, the hypocrisy of Stossel’s hyperbole is clear to all but his most rabid disciples. He says he loves the free market until the masses take advantage of it. He says he loves morality but would stand by while normal homeowners take the fall for all their sins and the sins of the whole financial industry. By the way, the title of his series is called “Freeloaders”. He apparently wanders the world in search of freeloaders who need to be exposed. By taking advantage of the hardest decision a homeowner may ever make, isn’t Stossel a sort of freeloader in a way? Maybe next time Stossel should look a little closer to home for his freeloader.