Secretary Paulson played the morality card two days ago when speaking about home owners that were in over their heads:
Homeowners who can afford their payments and don’t have to move, can choose to stay in their house. And let me emphasize, any homeowner who can afford his mortgage payment but chooses to walk away from an underwater property is simply a speculator – and one who is not honoring his obligations.
You have a situation where:
1) People lied on applications, or looked the other way
2) Banks and agencies made loans they knew people couldn’t pay, or lied about terms
3) Appraisers inflated values to match loan documents
4) Banks and others bought loans they knew were high risk and repackaged them as AAA rated debt
5) Rating companies rubber stamped and looked the other way
6) The Fed encouraged the unsustainable growth (bubble)
It seems to me there is plenty of blame to go around. A mortgage is a business transaction. If it is in someone’s best interest to take the hit and walk away from it all, they are within their rights to do it. Companies (including banks) do this all the time – close an office here, layoff some people there. No hard feelings, it’s business.