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Housing plan raises ethical questions
The New York Times Magazine's ethicist columnist Randy Cohen
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TEXT OF INTERVIEW
Tess Vigeland: So what it is about this particular issue that's got folks so mad that they just don't want to take it anymore. Or, give it I suppose, when we're talking about foreclosure rescue money. Americans, though, have a general history of propping one another up when we're down. So what's so different about this time? And what's that they say about glass houses? With us to sort things out is Randy Cohen, ethicist columnist for the New York Times Magazine. Randy, welcome to the show.
Randy Cohen: Thank you for having me on.
Vigeland: Let's start with a little definition. How do you define ethical behavior?
Cohen: Ethics concerns are the effects of our actions on other people. And so ethical behavior is that which has a benign effect on other people, or certainly doesn't do harm to other people.
Vigeland: Given that definition, you know, as we've just heard from Nancy, there's a lot of, shall we say, frustration out there from people who say, "Look. I did nothing wrong. I was responsible. My neighbor's going to get a bailout. Where's mine, even though I don't really need it?" How are we supposed to reconcile, I guess kind of the greater good, versus individual fairness, especially when it comes to the dollars in our pockets?
Cohen: It's an understandable feeling, but it's a poor guide to public policy. Once you start conjuring up this Victorian notion of the undeserving poor. Look, we help people who make mistakes all the time. When someone goes to the emergency room, the doctors don't question their moral worth, they make a medical decision. We send the fire department to someone's house without asking why did their house catch fire? What it is to live in a community is to shoulder the burden of responding to the needs of those around you, without making moral judgments.
Vigeland: But, you know, there seems to be this notion that helping people in trouble is equivalent to rewarding them for bad behavior. But, as you said, we choose as a society to help people all the time. Why is this different?
Cohen: Here's why: To make a bad financial decision, isn't a moral failing. It's a practical failing. It's a financial failing. There were people who made moral failings who should be scrutinized. A banker who has a sworn duty to issue prudent mortgages and who is negligent about how much down payment should I demand? What's a reasonable monthly payment for someone with this income? That person has morally transgressed. A person who takes a mortgage on his or her home and gets in over their head has not morally transgressed.
Vigeland: I feel like some of this is similar in many ways to the anger that you saw during the debate over the bank bailout a few months ago. Then it was, you know, corporate America versus the population. But, at a certain point, people became very resigned to the idea that, "OK, we're going to have to do this." Now, it's almost household versus household. How, if at all, does that change the ethical debate?
Cohen: Significantly. The banker we were just talking about has a genuine professional duty to issue prudent mortgages. The federal regulators who are overseeing the financial sector have a sworn duty to make sure prudent practices are observed. If those people deliberately fabricate those responsibilities, they've committed moral failings, and we're rightly angry at them and should tax them for that. If an individual makes a foolish financial decision, that's ignorance. They acted unwisely, but not unethically. You know, in my view it's -- you're not going to succeed at social policy that, that takes people out and flogs them for this. We tried that. It was called debtors prison. We saw being poor as a moral failing, and responded punitively. Didn't work out so well. We've had much better luck with prudent banking law. That kind of regulation seems a much more practical response to how human beings behave.
Vigeland: So for those who are feeling more than a little angry about all this, you're suggesting maybe just chill out?
Cohen: Yeah. That's a very natural feeling, and I feel it too. If I've played by the rules, if I've led a frugal life, it's hard not to resent the people who have done so and are now people helped, at my expense, in part. We should recognize that those feelings are also not that which is best about us. We should look to the better angels of our nature.
Vigeland: And I guess who have to wonder what a world would look like where we all got what we deserved.
Cohen: A terrible thing, or a fine thing. We'd all be in Hell if we got what we deserved.
Vigeland: Randy Cohen writes the ethicist column for the New York Times. Thanks so much.
Cohen: I enjoyed talking to you.
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Never have I been so incensed by the stupidity of comments made by a person on the radio that I felt compelled to take immediate action. Don’t get me wrong, I hear inane discussions on the radio all the time. But for a NYTimes writer--posing as an “Ethicistâ€â€”to make such sweeping and inaccurate statements about intentions behind people’s financial decisions and how we should subsequently respond. . . For the first time in my life, I stopped in the middle of what I was doing, took out a pen, and wrote down the name of the person making the comments. I thought to myself, “I need to voice my opposition to this loon, Randy Cohen, and then steer clear of him for the rest of my entire life.†I will never read the NYTimes again. I feel that strongly.
The crux of Cohens argument is that people who have gotten in over their head have not morally transgressed because they were ignorant and acted unwisely, but not unethically. Are you kidding me!?! Are you trying to tell me that none of these people knew full well the virtues of frugality and the perils of improvidence.
It is the subject of some of the oldest tales of morality. Who hasn’t heard some variation of The Ant and the Grasshopper fable?
From Wikipedia:
The fable concerns a grasshopper who has spent the warm months singing away while the ant (or ants in some editions) worked to store up food for winter. When winter arrives, the grasshopper finds itself dying of hunger, and upon asking the ant for food is only rebuked for its idleness.
No one is saying that some of the mortgagers were not thieves. But by implying that customers had nothing to do with this, Cohen has shown how completely out of touch with reality he is. The major financial decisions of one household DOES have a direct impact on other households. This has always been true. The current financial crisis is only one giant example of this. And by Cohens own definition, if you know you are acting in a manner you know may eventually impact your neighbor, you are morally transgressing.
Granted, turning the grasshopper away in his time of need is also morally questionable. So in variations of the fable where the “grasshopper†is not turned away, some payment arrangement is made in return for the ant granting room and board. But Cohen tries to make the case that we should not get what we deserve and not be punitive. “We’d all be in Hell,†he said.
Right. Let’s not hold people accountable for their financial decisions. Let’s see how long the ants will continue to feed the grasshoppers for free. Let’s see if we can create and enforce enough laws to keep the grasshoppers in check. That will be Heaven! NOT!
If I didn’t know better, I would say Randy Cohen is a grasshopper. Ignore this grasshopper!!!!
I am shocked about the hateful and judgmental nature of many of the comments left regarding this article. I thought Mr. Cohen's comments were right on - and many people completely missed the point. As someone who also saved for many years, got a house well below the amount I was approved for, and pays above the mortgage payment amount regularly, I too could also be on my "moral high horse" like some of these people think they are. I absolutely loved this story and think it was time someone got it right! Some of the comments in earlier posts to the contrary are ridiculous and beyond stupid. Bankers are "supposed to be greedy" and, therefore, aren't at fault with this mess? Are you kidding me? Talk to me when your home or car are burglarized - after all, burglars are also "supposed to be greedy"! Can't blame them! When people realize that they can't be like five year olds when it comes to public policy and that doing what is more painful can also be better, we will become a better society and world. People use money as a judgment for good character, and it's time they finally realized otherwise. Bravo for this wonderful story that tells us why we need to do what's right - Mr. Cohen makes me want to read more of his columns!
This is a great conversation. I can only hope something like it is going on all over America.
I'm impressed by Scott Mackey's opinion that there are reasonable alternatives, like supporting homeowners in peril to transition to renters, to increasing the ranks of the homeless.
Gregory Sacchetti, who claims he "signed a mortgage seven or eight years ago it was like 200 pages who could possible understand," also gets my sympathy. In my exchange with gb-gb, we seemed to disagree that home buyers should be able to understand the paperwork they have to sign. Gregory seems to underscore my point that home deals undermine consumers rather than supporting their interests.
By all means, let's be individually more responsible. But should we go along with Patrick Owens when he asserts that "I cannot blame the businesses for being greedy"?
Well, if it's OK for businesses to be greedy, then shouldn't we all ignore the commandment and rush to commit this sin? Even if we all did, the biggest, greediest businesses with the most resources would always win, and grow into institutions that are "too big to fail," and therefore merit being bailed out.
If it was greed that got us into this sorry situation, should we accept that as a given or as a good and perpetuate it? I think a new ethos is called for, and that's what the president said last night.
How do you know I'm not about to lose my home? You think money grows on trees and someone put a fence around it? The freedom to choose comes and is connected with the freedom to succeed or fail. I'm just willing to take my lumps when I fail, not push it off on my neighbor or paint anyone that objects to helping me as evil. You want your kind of society' I hear Cuba has some marvelous mansions (just a little restoration needed), all kinds of freebies and you can't fail.
#1 how could anyone afford to rent a 1.2 million dollar house if thy can't buy one?
any of you geniuses who bought your houses twenty thirty years ago realize what has happened to real income for working families in the last twenty years. what has happened to job security in the last thirty years your geezer butt may have had the same job at a living wage for a life time with a real petition I don't know anyone who dose now. and how a bout you coots who are so smart give back you S.S> financial wizards such as your self shouldn't need the handout and if your a ww2 vet why not pay the Gov. back for your free college lunch ww1 vets didn't get what you got-freeloaders. and i signed a mortgage seven or eight years ago it was like 200 pages who could possible understand that and like c.card contract your not suppose to. get off you high horse frankly you sicken me. go back to fox network where you belong
#1 how could anyone afford to rent a 1.2 million dollar house if thy can't buy one?
any of you geniuses who bought your houses twenty thirty years ago realize what has happened to real income for working families in the last twenty years. what has happened to job security in the last thirty years your geezer butt may have had the same job at a living wage for a life time with a real petition I don't know anyone who dose now. and how a bout you coots who are so smart give back you S.S> financial wizards such as your self shouldn't need the handout and if your a ww2 vet why not pay the Gov. back for your free college lunch ww1 vets didn't get what you got-freeloaders. and i signed a mortgage seven or eight years ago it was like 200 pages who could possible understand that and like c.card contract your not suppose to. get off you high horse frankly you sicken me. go back to fox network where you belong
I too have to add my voice to the chorus of those who find Cohen's analysis of the situation overly simplisitc and just plain wrong. It seems, however, that I don't agree with either side of the discussion going on here. The discussion is simply the wrong one. The question of blame is completely irrelevant. The only ethical question here is do we, as a society, help the stupid and/or ignorant. I think the obvious answer is, Of course we do. That only leaves the question of how. The seemingly ethical problem arises because the choices that have been put forth are incomplete. The choices are not simply do we help them stay in a home that they cannot afford or do we throw them in the street. There are other options, such as providing assistance with getting these families into rental housing, i.e. first and last month's rent and security deposit, not something ridiculous like a year's worth a rent. They are thus not "on the street", and for most of them they will actually be paying much less for rent than they are paying for their mortgage. At, say, $3000 per forclosure, that would only cost us $3B for 1M forclosures. It would really be tough for anybody to complain too much about that. We then get all these houses back on the market at a price that is reasonable for people who can actually afford them. Seems to me like everybody wins--except for the banks which will need to be nationalized and sold off, but that is another dicsussion altogether.
I am pleased to see in this society which has very recently turned hard-left in its politics that there are still some who believe in personal responsibility. There are a few who put the lion’s share of the blame on the mortgage companies and banks.
I wanted to share a personal story about our neighborhood. We live in a in an average subdivision in a growing community. The home prices range from $220K to $300K. I spoke to our new neighbor as they were moving in two years ago. The man drove a soft drink truck and stocked the shelves at convenience stores. His girlfriend was a secretary. After chatting with them for a while, I discovered that they purchased the $239K home with an interest-only loan. I used an online calculator which said they were paying about $600 per month. Their plan was to use the loan until the payment went up to its full value, then refinance with another interest-only and do it all over (“its cheaper than renting†he told me). The problem came when they could not refinance and the house was worth less than they paid for it. They walked away from it.
About 50% of our subdivision has “For Sale†signs in the lawn. It was the same story over and over.
I cannot blame the businesses for being greedy. They are in business to make money any way they can that is within the law. It would be like blaming McDonalds/Rally’s/Burger King for giving people heart failure. Everyone knows its bad for you, but people gamble with their health. Should we nationalize health care for the irresponsible ones? Ummm wait, I guess that’s next on the agenda.
The question is, consumers should know “Buyer Beware!†Businesses are expected to maximize profits- and consumers are to pay attention to what they are signing.
It is amazing, I'm unethical because I don't want some smooth talking pol to confiscate my money, for a neighbor that made some very stupid decisions? But it is perfectly ethical for the same pol to take my money to buy my neighbors vote? It is not the governments job to maintain my or my neighbors house value, or to see how some pol can use the system to buy votes. It is their job to provide a clear, simple, framework that leaves us free to pursue our individual pursuit of happiness. Government "charity" is not charity at all, it is enslavement. Charity (very ethical)is a private decision that when rendered has its own built in controls and accountability. We're not upset because of some "give me mine" mentality or can't see the argument for the "protect my home value" crowd. It is immoral (unethical) for the neighborhood goon (smooth talking pol) to come to your home and take money for his buddies in the neighborhood. And to claim we're immoral(unethical) for saying no!!!! The height of orwellian speak.
Well, When you brought Mr. Cohen in for a discussion about ethical behavior that raised my blood pressure. For Mr. Cohen to compare examples of emergency room visits and fire department responses to the irresponsible behavior of both the buyer and the lending institutions is beyond my comprehension. My wife and I have have bought homes ourselves with the understanding that we knew what we were getting into. We are like most home owners in that purchasing a home is going to be one of the biggest investment we'll ever make. We read the contracts, figured out what payment we could handle and that is if only ONE of us is working. And if we didn't understand portions of the contract we sought advise. What I am saying is that we knew we had to live within our means "Not Keep Up With The Jones". What happened to those 8 percent of the buyers who can't ADD or SUBTRACT let alone do MULTIPLECATION to figure out interest rates? The rest of the 92 percent figured it out! So why is it that we 92 percent have to bailout the 8 perecent(along with the lending institutions) that were irresponsible. This is a deliberate and premeditated act; not an emergency room visit as Cohen thinks. Now if that person(s) looses his or her job NOW that's an emergency situation. Signed: Sleeping well in Ohio!
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