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Sorry for being late to the discussion, but I, too, am taking exception on your characterization of "breach of commitment".
I have these interesting tidbits in my bookmarks on this very subject:

First, about "norm asymmetry": I have already posted that snippet before, but it bears repeating:

Economic View - Will More Borrowers Walk Away From Their Mortgages? - NYTimes.com

Some homeowners may keep paying because they think it's immoral to default. This view has been reinforced by government officials like former Treasury Secretary Henry M. Paulson Jr., who while in office said that anyone who walked away from a mortgage would be "simply a speculator -- and one who is not honoring his obligation." (The irony of a former investment banker denouncing speculation seems to have been lost on him.)

But does this really come down to a question of morality?

A provocative paper by Brent White, a law professor at the University of Arizona, makes the case that borrowers are actually suffering from a "norm asymmetry." In other words, they think they are obligated to repay their loans even if it is not in their financial interest to do so, while their lenders are free to do whatever maximizes profits. It's as if borrowers are playing in a poker game in which they are the only ones who think bluffing is unethical.

Note the jab aimed at the "investment banker" calling strategic defaulters "speculators" (no, this was not for you Jerome :-)).

So, shocker #1: The Poor are Honest! (who would have thought?)

Then, this:

Walking Away From Million-Dollar Mortgages - NYTimes.com

More than one in seven homeowners with loans in excess of a million dollars are seriously delinquent, according to data compiled for The New York Times by the real estate analytics firm CoreLogic.

By contrast, homeowners with less lavish housing are much more likely to keep writing checks to their lender. About one in 12 mortgages below the million-dollar mark is delinquent.

Though it is hard to prove, the CoreLogic data suggest that many of the well-to-do are purposely dumping their financially draining properties, just as they would any sour investment.

"The rich are different: they are more ruthless," said Sam Khater, CoreLogic's senior economist.

Shocker #2: "The rich are different than you and me." (F. Scott Fitzgerald quoted by Yves Smith)

And what is my own opinion on this "moral issue"?

To me the one thing that is truly reprehensible, morally and practically, is that famous "norm asymmetry" described by Brent White of the the University of Arizona: the social expectation that the less well-off people keep up their commitment more often (and at greater cost and suffering) than the richer individual or corporations.

Truly, if there is one cause for outrage in my book, this is it.

And I'll note that, in your reaction to strategic defaulting, you definitely are on the same line as the less well-off. Too bad your norms are so asymmetrical...

by Bernard on Thu Aug 26th, 2010 at 11:52:56 AM EST
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