Very Few Innocents in Housing Market Collapse

No doubt such responsible homeowners as he described could be found if looked for hard enough, but not in such numbers that their bad luck could have precipitated a financial crisis measurable on the Richter scale. Such a crisis could have developed only if there were millions of homeowners, or should I say people who took out loans to buy homes, who behaved not responsibly, but irresponsibly.

This does not in any way exonerate crooked mortgage brokers, careless or dishonest bankers, or a government that failed to notice that anything was wrong; nor does it mean that the millions of irresponsible "homeowners" were the worst villains of the piece. But the man who drives the getaway car from an armed robbery is not innocent because he did not instigate or plan the crime, nor would we think much of a criminal justice system that exonerated him completely on those grounds.

If you really believed that there were millions of people who ended up with negative equity "through no fault of their own," you would believe that there were millions of people who, morally speaking, were minors, that is to say had no capacity to judge, control over, or responsibility for the conduct of their own affairs. Whether such moral and intellectual incompetents (if they really existed) should be allowed the vote is a question I leave to political philosophers.

We see in this characterization of loan defaulters as helpless victims a version of the noble savage. Ordinary people, predominantly at the lower end of the social scale, are not on this view capable of being imprudent, feckless, improvident, greedy, and dishonest; they cannot be expected know that it is dishonest to claim an income five times larger than the one they have for the purposes of obtaining a loan.

Let us at least be clear, and have no humbug, about the reasons for measures to assist the "distressed" homeowner who has a large mortgage that he cannot service. It is not because he has negative equity "through no fault of his own," or to render him victim compensation. It is to avoid a further collapse in the property and financial markets. Whether this is the right, that is to say the economically prudent policy, is a matter of debate; but it should not be undertaken under the banner of preventing a massacre of the innocents. In this story, there are very, very few innocents.