The thing is that banks have not acted "ethically" toward the consumer. Now that the coin is flipping, they are getting back what they have dished out. It's a consequence.
*Someone* lends you money. Doesn't matter who. It could be a bookie, could be your neighbor, could be a friend, could be a big, bad guy whose henchman is named Bubba.
That *Someone* has a signed contract with *YOUR* signature stating that you will pay a certain percentage of interest for a certain number of months for the privledge of being lent that money. That contract is a legal, binding document that you are obligated to pay; unless you file bankruptcy (get a lawyer for that).
Because *You* don't have thousands of dollars saved up to purchase that item out of hand yourself. You've been purchasing big screen TVs, going on vacations you can't afford, paying for cable with HBO, buying your kid the latest greatest blue jeans and other gadgets your kid doesn't need. Now, as a result, you have to borrow money from whoever will lend it to you. Oh, and you purchased the item without doing your due diligence and paid top price for it. I mean, everyone was buying and you just had to have it, right? It seemed like a bargain. And it was sure to go up in value. Those things ALWAYS do. Right? Right.
If you don't pay that interest, plus a part of the principal you borrowed every month, that Someone has a right to seize the asset you signed on the contract for. Could be an auto, could be a diamond, could be a house. Works pretty much the same way for all of the above.
You decide you don't like politics or policies of that Someone and decide to Teach Them a Lesson.
So, you decide to default on the loan. The loan they own. The loan they have your signature on. The loan which feeds directly into the credit bureau's and will destroy your future chances to get credit from anyone else. At least for 5-7 years.
Oh, and they will seize the asset from you. Whether it be your car, your diamond or your home.
But, being the Brainiac you seem to be, you decide to roll the dice and say "F-them, I don't agree with the President of the US and his policy of bailing them out. I'm angry at the bank for accepting money they didn't ask for (and paid back with interest; all except Citibank--look it up), however, since I am so smart, I'm going to lose my asset over my anger at the System."
Yeah, real smart move.
BTW, banks aren't getting back anything. Except assets--and lots of income apparently. They are getting assets back that you paid for. You already paid for it, partly. Someone else will get it at a reduced rate. The bank only stands to win. Try to figure that one out. The bank only wins. Banks made record profits last year. Why do you think Goldman is paying it's CEO $100 million dollars this year as a bonus? Because they made bad decisions?
Banks are borrowing money at zero percent from the federal government and lending it to us (those of us whose credit isn't destroyed because we didn't walk away from our assets) at 5-8% depending on the asset. They are making lots of cash.
Do some research.
What they really ought to "ethically" do is take part of the loss on the homes that are under water. Then people would be less inclined to walk away
.
B anks are a business. There is no business reason to take any loss for a bad decision a homeowner made. Who forced the homeowner to pick that home in that area at that price?
Did the realtor force you to purchase that home? Did the loan officer force you to take out that loan? Did someone hold a gun to your head and make you buy a house you couldn't afford and shouldn't have bought in the first place.
A resounding NO.
The bank has absolutely no reason to bailout the stupid decision a homeowner made on running up the purchase price of the home. If a home is underwater, that is terribly unfortunate. There are so many reasons for it. I just don't believe walking away from it is the answer. A car is underwater the moment you drive it off the lot. Do you walk away from it? Why not?
