Sure, people should do that if they think it is in their interest.

But note that even the banks are not squatting, they transfer ownership back with the property in it's current condition.

Truly an excellent Ticker. You could easily add in that for many folks, it is (or will become) mathematically impossible to meet their obligations. Thus it is better to take the hit now rather than continuing to pay into what is going to be a loss anyway.

Musashi: Well, that's the difference between the leverage the big businesses have to "negotiate" a strategic default, and a homeowner, with whom the lender will not negotiate at all. The lender says to the homeowner "Pay or I'll foreclose". The homeowner says "Ok, foreclose". Then the lender sits on the foreclosure proceedings and doesn't foreclose. So why leave, if they won't move forward on the foreclosure?

I agree 100%. Companies do this all the time. Layoffs, plant closings, walking away from a leased building but God forbid an individual does something to protect thier financial situation.

Georgetown tuition is one of the most expensive. I think if you had this proffessor you should walk away from paying for that part of the tuition as well.

I think euphemistically in light of the times this financial strategy should

now be coined as a Unilateral Jubilee.

........................

http://www.usdebtclock.org/

And yet there are a lot of people on here trying to catch the bottom of housing. Why I ask?

I think that there ought to be a moral responsibility to fulfill obligations when your counterparties have been upfront in their obligations to you. Hopefully, people are waking up to the fraud that has been committed by the banks. Ideally, we would hope that fraud would be addressed openly by the law making/enforcing bodies. As such has not been the case, a reasonable response may be to declare the contract null and void unilaterally.

Obviously, there will be few areas of black and white in this reasoning. Accurately recognizing the shades of gray, our society might have a chance to respond to the wrong-doing while moving toward more just arrangements. Unfortunately, I fear that few people will approach the issue from a moral perspective. Rather, they will act only in the interest of personal gain. Whether their actions could be deemed just, the calculus of some may be the same as if they were considering whether they would engage in outright theft if they could feel assured of not getting caught.

Karl, while I agree with your conclusion that strategic default is appropriate in today's environment (especially when concerning an institution whose actions have been egregious), I hope that you'll stress the moral side of it. If we are to rebuild a sound system of credit, we'll need eventually to move society back to where contracts are approached with honesty and integrity.

Anyway, thanks for tipping us off to the "strategic defaults" engaged by the banks. I'd also be interested in knowing more details from your discussion with Brenkert though his is only one guy's opinion.

Mondo,

Yes, but in strategic defaults the stockholders get wiped out.
I view the homeowner as stockholder (the only one) in himself.

Of course there are many different problem situations with being underwater. But why is RE different from automobiles? If you finance a vehicle and drive off the lot, you're instantly 30% or more underwater. This calls for a congressional investigation into a possible bailout.

morals are for ordinary people and not bankers, kind of like bailouts..

Great ticker. The thought of a wave of strategic defaults becoming a tsunami, is probably something that is keeping Ben and Timmy up nights.

It is amazing that more people haven't said F-U to the banks and their ponzi scheme and walked away already... many of them are probably making a several hundred thousand dollar mistake.

I've seen attitudes shift from moral obligation to moral indignation in less than a year in the blogosphere. A year ago, you'd have people argue against walking away from mortgages for moral reasons.

Not today.

And I hope more banks default on their loans and that news picks it up and headlines them. The more people do it, the more people will do it, and the sooner we can get on with re-balancing the system.

The extend and pretend days only postpone the pain. You can argue whether or not it helps, but personally, I'd prefer to take it all now rather than draw it out over the next decade.

If MS's lender doesn't sell the assets for what's owed,will MS have to come up with the difference,like a normal homeowner would?
An everyday homeowner would have wages garnished,tax refunds taken,etc.,,to collect the difference.

Legally individuals are treated as corporations as far as the legal code goes. However an unstated law is in effect: All animals are equal, but some animals are more equal than others. The bigger the animal the more equal they are in terms of the legal code (or interpretation of code by the legal system).

But the opposite rule must be applied to support the full faith and credit of our sovereign debt, only an individual can be taxed on their income, corporations (not individuals as corporations) are taxed on their gains. The system must rely on the individual's income to support the monetary system as constructed by the tax code and debt structure. The bigger animals are sucking the blood from the smaller animals and soon their food base will have been wiped out, what happens then?

morality is personal; ditto for freedom. you have the freedom to do whatever you want as long as you accept the consequences - be they legal or self-inflicted via your own conscience. except, of course, if you're GS or BOA or JPM; in which case you can throw out the "legal" consequences... um, guess you can toss the "conscience" end of it as well!

Deadbeat:Slang.
n.
One who does not pay one's debts.
A lazy person; a loafer.
adj.
Not fulfilling one's obligations or paying one's debts: a deadbeat <strike>dad</strike>bank.

Bentick wrote..

I've seen attitudes shift from moral obligation to moral indignation in less than a year in the blogosphere. A year ago, you'd have people argue against walking away from mortgages for moral reasons.

Great observation. I think that obligation and indignation ought to be two sides to the same coin. We support appropriate obligations and respond with indignation when those obligations are shirked.

All the talk about moral obligation now originates from people who have few morals and who have a lot to lose if indignation generates wide scale reactions.

I think more people haven't done it, because they don't know how easy it is to do - you don't need to declare bankruptcy to do it.

Maybe someone should write a How To and publish it in the WSJ. I'll start:

1. Stop paying mortgage on underwater house.
2. Enjoy!

Foreclosures on one side, capital flight to safety on the other and leverage in between...

Bentick,
leave about 300 blank pages in-between #1 and #2 and you've got a "Best Seller"

3. The End

One would think that NOTHING, NOTHING would enrage the people more than a dual set of standards/laws that apply to some citizens and not to others. This is a perfect example and there are many more prerogative treats for the elites. Everybody is driving the speed limit except for those with the financial means and connections to promulgate a speed limit that they think they will abide by, until they are sick of abiding by the self set rules and then they will arbitrarily and capriciously again change the rules. Is this not moral hazard???

This avarice is even more nauseating, when the rule breakers and changers get their money from the taxpayers to mold their social and legal structure to their benefit.

Nice Ticker Karl!!!!

GREAT Ticker. Puts the hypocrisy on the front burner, for all to see. Everyone here should post and/or link other sites to it. Maybe the Lamestream Media will even pick up on it.

Oh, and at least MS has to recognize the loss on these projects, unlike the banks that sit on foreclosed homes with worthless or nearly worthless mortgages.