Everyone’s Defaulting, Aren’t You?

Here’s a link to an interesting article on one of my favorite sites, Slate.com, on the subject of strategic defaults. Apparently, there are people that are worried about the future of capitalism if too many people walk away from their mortgages. (The people making these comments usually work for the mortgage industry!)

As the writer of this article, Daniel Gross, points out, there are gigantic companies who strategically default on their obligations all the time, including Morgan Stanley, Six Flags and others.

Interestingly, the article also mentions the paper published by University of Arizona Professor Brent White’s (see my post on this topic here) that discussed the issue of walking away from homes that are upside down.

Gross says that strategic defaults are “the American Way” and concludes the article with:

“Rather than worry about whether Americans will take cues from modest homeowners who make a tough decision not to stay current on debt, perhaps we should worry about middle-class Americans taking cues from billionaires and Fortune 500 companies who make the rational decision not to stay current on debt.”

If billionaires don’t feel guilty for walking away from their debts, why should homeowners?

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