It is Not a Moral Decision it is a Financial Decision.

I was reading in the recent issue of Business Week about how lenders have started to negotiate on principal in some of the mortgages that are under water. It spoke of their fear of the precedent this would set, apparently with good reason.

There was a short story about a salesman who was able to make his payments. However, because his neighbor’s house has declined in value he wanted to renegotiate his loan or he would walk away. His comment; “it’s not a moral decision it’s a financial decision.” Did you catch that?!

When did financial considerations take precedent over moral ones? Have we forgotten the pursuit of virtue and morality in life that was considered the high life in ancient Greece? I hear my friends and colleagues decry bailouts etc. saying that we are fostering a culture that does not take responsibility. I tend to lean to the side that says help those that are sincere and that need help. Yet it is people like this guy that make me want to take a hard line.

What do you think? Can you separate moral from financial decisions? What takes precedent?

4 Comments:

  1. John,

    What an interesting post. When you have this type of discussion there are always some semantics involved. The person who said “it’s not a moral decision, it’s a financial decision” is really making a moral decision. But the issue is that the standards for his morals are low enough that he let’s dollars control them.

    Said another way, we are guided through our life by our values. It guides everything from the way we talk to the breakfast we eat, who we choose to marry, and what job we accept. For some people their value systems have a highly moral or religious bent, where they measure their thoughts and actions based on how “right” things are. Others might have a value system where their personal pleasure drives their thoughts and actions. They don’t care about how their decisions affect others, they only care about what THEY get.

    Our friend here has a value system that is based on his personal well being and not his role in the bigger picture. So he has indeed made a moral choice. But his morals place himself at the top and everyone else well below him.

    Great article. Thanks for writing this…..

    Dave

  2. The word integrity comes to mind here. I believe that’s the only thing that we really have is integrity. Integrity means that you keep your word and do what you say that you are going to do. Without it, we have nothing. So, when you sign a mortgage and commit to paying your loan back, then you need to keep your word and do that. There is no “grey” area with integrity. You either keep your word, or you don’t.

    Our entire capitalistic system is based on winners and losers. You take risks in exchange for the opportunity to be a winner. Part of that risk is losing. Without losing, you no longer have capitalism.

    Our country as we know it is erroding because people never want to lose, and never want to feel any pain. When things don’t go their way, they want someone else to be responsible. At the end of the day though, when you have no integrity, your the one that suffers the most.

  3. John,
    I remember early on in the financial crisis seeing a CBS interview with a couple in San Francisco. They were both employed, had two new Subarus, and had just gone below water on a condo they had bought largely for investment purposes. They had decided to walk away from the loan.

    I remember feeling shocked at exactly what you are talking about–they said, “Well, you can’t expect us to lose money on it, of course.” Hello?

    What really cinched it for me was her follow-up comment: “What I really feel is unfair about this is how it’s going to hurt our credit-rating. Excuse me?!

    At the same time, I know several people who were simply financially unsophisticated, and got sold second mortgages (in one case) and absurdly over-leveraged mortgages on another (a million dollar loan for a 1.2 million New York condo on an income of $60,000. That is not just a stupid buyer, that is also a scum rapacious mortgage broker at work.

    In at least some of those cases, I think you have to have some sympathy for the borrower. Which is to say, I think that the “ethical” behavior is not obviously, solely and simply to be aimed at the buyer; it is, as is often the case in ethics, a little complicated.

    But the main point is the one you have stated: if it’s purely financial, it ain’t ethical, and we have strayed way too far down the path of eliminating the “ethical” component of business.

    Thanks for a fine post.

  4. Charlie,

    Your point is well taken ethical is not obvious. When I was in college, I took extra courses in Logic, as I knew that with the perfect syllogism I could rule the world. Ask me how that approach worked.

    Thank you for the comment

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