David Brooks is Always Wrong Too: Why Does Brooks (And The Republicans) Hate Contracts So Much?
Financiers send the world into recession and don’t seem to suffer. Neighbors take on huge mortgages and then just walk away when they go underwater.
Now, I’ll have more to say about this column, as it is yet one more textbook case of bad faith, ignorance and, I’d wager, deliberate, useful error. (There’s a nastier term for that, but people of Mr. Brooks delicate constitution tend to faint when Anglo-Saxonisms slip into the discussion, so I’ll let y’all fill in the gaps.)
But here I just want to say something that seems to me so obvious that I hadn’t bothered to point it out yet. That is, the difference between the two poles of this false dichotomy lies not just in the kinds of disparities Doug points out: financiers who get rich by destroying the fabric of civilization are not quite the same as individual home-owners.*
Rather, or additionally the nature of the act committed by a financier betting the firm (but not his compensation — see Michael Lewis’s The Big Short for blood-pressure raising details if you are interested) is fundamentally unlike that performed by a mortgage borrower dropping her or his keys.
The financier has obligations — fiduciary ones to investors, and social ones that derive from the claim that finance plays an essential role in building a prosperous society — the argument used to justify outsize compensation and the rest. There are legal ones too: no fraud, no insider dealing and the rest. This raft of requirements add up to a duty of care that our robber barons clearly failed to meet over the last few years. They broke the social compact, and they continue to do so, IMHO.
Home owners, mortgage holders, by contrast, have a very specific set of obligations, defined in a contract. Failure to perform their commitments under that contract carry specified, limited consequences, known and agreed to by both sides.
Anyone whose bought a house knows this very well; dealing with all this is why a closing takes a couple of hours, 975 signatures (I made that number up) and so on. You learn that you are bound to pay the mortgage as scheduled, pay your taxes (when not escrowed), keep insurance on the property and so on. If you choose or are compelled to cease to do so, the lender has certain rights, of which the chief is to seize the property on which it holds the mortgage.
That is: you don’t pay, they get your house. That’s not a moral failing (unless the lender defrauded you, of course — or you lied to your bank); that’s a contract. You can pay or not, and different outcomes, spelled out, result from either of those actions.
It’s a contract! We love contracts, property rights, the rule of law — don’t we?
No we don’t.
Not if “we” happen to be conservative, especially if we slip into the skin of a faux “values” arbiter, or a glibertarian. Contracts have two sides — but Brooks, and folks like Megan McCardle, who predictably wrote similarly breathlessly about the bad behavior of folks exercising their rights under perfectly clear (standard!) contracts a while back, only recognize that part of the contract that benefits the approved parties, the rich, the powerful, the institutional.
Surrendering a house that you cannot pay for may reflect all kinds of things about you personally: everything from your status as one of millions of collaterally damaged folks undone by global financial disaster and global economic shifts to your actions as a lying scumsucker of a social climber taking advantage of easy money to live high for a few years. (In which case more than ever, caveat lender.)
No where along that spectrum though, is that behavior anything but perfectly acceptable under the long-held practices of a contract-ruled social and economic system. That’s a little different from what the banksters did: stack up a huge pile of dry wood (the financial system, overleveraged through derivatives created for no economic purpose), add gasoline (an insurance scheme that had no actual solvent counterparties guaranteeing loss payouts) and then stand around flipping glowing butts at the pile just to see what would happen.
That Brooks refuses to see the difference between individuals acting as their legal constraints permit them, and those who thus played chicken with the entire global banking system is a measure of his mind. To me, it says that he is a shill, a hack, a dishonest broker. YMMV.
*Demonized here as deluded climbers — the “huge mortgage” trope. If you actually start digging into the numbers that’s bullshit, as one might guess considering (a) the source and (b) the fatuous blanket quality of the statement. This is a Brooks tell, how you know that he is a propagandist, and not an original thinker. I’m still tracking down precise data, but a place to start to get a handle on mortgage size and delinquency would be this HUD report to Congress on the root causes of the foreclosure crisis. A key point there: it was house price appreciation, not the magnitude of the price of a given home, that seems to have driven the bus when it comes to the collapse of the bubble and the foreclosure crisis. Brooks is doing a shifty bit here, that is, blaming individual moral failings instead of the much more complex and society-wide issue of why prices rose so unsustainably. That has obvious policy implications, which is the point: Brooks plays a clever game, and it takes some digging to get past the easy and plausible generalizations with which he masks his real aim.