No, of course it does not absolve someone of debt. But we have long lived in a world where people pursue the American dream of home ownership by taking out reasonable mortgages and expecting to be able to pay for them with their incomes (and not with their retirement savings). Banks making loans are almost never interested in your assets, retirement or otherwise. They want to know your income. And AAA-rated loans are made on that basis. Thus, there are plenty of people who were not wildly speculative when they purchased their homes who are nevertheless finding themselves in trouble not only because of losing their job, but of losing it in a recession which is never-ending (because of Obama) and gives them little hope of finding another. I expect unemployment to dip a little in the next 6 months and then to rise dramatically in 2011. Those are widely held forecasts. Those people have two choices: (1) sell their home, at a time when no one is buying houses or (2) use their retirement savings to pay their mortgages and hope that they can plant a good potato crop in the backyard.
“But we have long lived in a world where people pursue the American dream of home ownership by taking out reasonable mortgages and expecting to be able to pay for them with their incomes”
I don’t know about the “reasonable” part. Americans have been drowning in debt recently for a reason, and it’s not because they’ve been circumspect. Which is not to say that none of the people facing foreclosure have been reasonable. I’m sure they were. Also not to say bad things don’t happen to good people. They do.
However, if we are ever to disabuse ourselves of the demon of credit, people’ve gotta be afraid of defaulting. When people talk of troubled borrowers as “hard working people,” who were “reasonable,” and were more or less struck by lightning, perhaps unintentionally, the implication is that they must be saved. The exact same sort of “through no fault of their own” language was used to push through healthcare reform. Specifically, people whose coverage was dropped due to preexisting conditions. Which of course is the fault of the government’s tying insurance to employment, but which politically reads as “it could happen to you!”
Well, yes, it could happen to you. It is part of your repsonsibility to plan with that knowledge. And, if misfortune strikes despite your plans, it’s your responsibility to take the hit. We ought to be shouting that, rather than playing into the mindset that “through no fault of your own” is somehow unfair.
“Thus, there are plenty of people who were not wildly speculative when they purchased their homes who are nevertheless finding themselves in trouble not only because of losing their job, but of losing it in a recession which is never-ending (because of Obama) and gives them little hope of finding another.”
I heartedly advise people to live as if a recession is imminently possible. Among other things, it will make recessions less likely, since they are caused by overextension of credit. If nothing else, it’ll make life easier when recessions occur. Best of all, it’ll make borrowers infitely more “reasonable,” in that they won’t automatically assume the future will be exactly like the present when they take out their loans, and I won’t have to hear as many sob stories.