Thursday, March 25, 2010

Irresponsiblity Pays

In the age of bailouts and "spreading the wealth", irresponsibility pays more than ever. Those who work, save, and live within their means subsidize those who have no such constraints. The sense of entitlement is palpable. Anyone who has the "audacity" to cry foul is greedy and heartless.

The slow death of responsibility is evident in the mortgage forgiveness plan of Bank of America (BAC). Everyone who pays their mortgage payment in full and on time should be outraged.

This post from speaks volumes. The open letter to B of A from a reader is worth reprinting here.

To: Bryan Moynihan, CEO, Bank of America

Dear Mr. Moynihan,

I awoke this morning to read that Bank of America intends to begin forgiving mortgage principal for delinquent borrowers. I am writing to inform you that I will never bank with your firm ever again.

Principal forgiveness is an affront to every responsible, non-delinquent borrower in your book of assets. Not only is the federal reserve subsidizing the replenishment of your bank's capital by confiscating yield from savers/depositors so you can earn monstrous spreads on your loan book, but now you are rewarding those who bit off more than they could chew, while those who did not take on excess leverage, or who kept their income-to-debt ratios manageable, see no benefit, even as their home equity values have declined. Even worse, you are denying savers who sit in the cash market the opportunity to purchase inventory from the delinquent.

Capitalism should migrate assets from the weak to the strong, not the contrary. If you want to mitigate your loan losses, I suggest you advance an organized short-selling process to mitigate the expense of foreclosure, and to discover the fair market value of your delinquent assets. But for me, allowing those who are delinquent to now benefit from their financial excesses is a despicable solution that ignores the integrity and responsibility of those who actually finance the lion's share of your earnings: those who don't default.

Moral hazard be damned. Count me as one future cash flow stream you will never see again!


Actually, capitalism does "migrate assets" from those who respect capital and treat it well (the strong) to those who don't. It's socialist leaning politicians and the "useful idiots" in the banking industry who do the exact opposite, watering the weeds under the guise of compassion. The free market is no match for such genius.

The free market may not be as tidy an efficient as we might like at times, but government intervention ultimately fails. When will this country ever learn?

No positions


  1. "Actually, capitalism does "migrate assets" from those who respect capital and treat it well (the strong) to those who don't."

    I think you meant to say the following:

    "Actually, capitalism does "migrate assets" to those who respect capital and treat it well (the strong) from those who don't."

    I agree completely with your comments and the gentleman's statement. Where is the outrage? When hardworking, responsible citizens are sacrificed for the benefit of those who live irresponsibly, I feel as though I'm living in the fictional/frightening world of "Atlas Shrugged". As Yogi Berra said, "the future ain't what it used to be" and unfortunately, neither is the present.

  2. We are socialistic sheep cloaked as capitalism at best. Maybe it is time to re-evaluate Keynes and consider Hayek.
    I second the notion to audit the government, big fat white elephant. Let's start with state employee's pension and retirement plan. I would love to see how they balance their books there.