Why is it that the various tentacles of the mortgage industry have not tried to be more helpful to homeowners struggling to maintain the roof over their heads? Elyse Cherry offers one explanation in an article posted on Alternet.
Interestingly enough, it comes from the financial industry itself!! This is the way they operate and so they assume everyone else operates this way too.
Lately, almost anytime bad investments blow up in their faces, the federal government comes a'riding to their rescue. The fed throws them oodles of money with little, if any, strings attached. This strategy creates a "moral hazard" in that the financiers don't have to pay for their sins; so they rush right back out to engage in even more bad investment deals.
When these blow up in their faces, they hold out their hands and the federal government saves their asses. This "moral hazard" engenders no incentive to change their business model because they know that, when things go south, good old Uncle Sam will be there to bail them out over and over again!
One reason the mortgage industry hasn't done more, its leaders say, is that it fears creating a "moral hazard" -- the concept being that if homeowners in default are given too much help, other homeowners might be tempted to deliberately default in order get the same help.Cherry, who works for "a 27-year-old nonprofit, community development finance institution," will tell you this happenstance has not occurred in her experience. So, where is this rationale coming from?
Interestingly enough, it comes from the financial industry itself!! This is the way they operate and so they assume everyone else operates this way too.
Lately, almost anytime bad investments blow up in their faces, the federal government comes a'riding to their rescue. The fed throws them oodles of money with little, if any, strings attached. This strategy creates a "moral hazard" in that the financiers don't have to pay for their sins; so they rush right back out to engage in even more bad investment deals.
When these blow up in their faces, they hold out their hands and the federal government saves their asses. This "moral hazard" engenders no incentive to change their business model because they know that, when things go south, good old Uncle Sam will be there to bail them out over and over again!
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