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Unintended Consequences

LJ at Agonist notes the confusion of bankers: BofA chief: Credit-worthy customers default

“There’s been a change in social attitudes toward default,” [Bank of America chief executive Ken] Lewis told the Wall Street Journal. “We’re seeing people who are current on their credit cards but are defaulting on their mortgages. I’m astonished that people would walk away from their homes.”

There hasn’t been a change in social attitudes, the bankers organized a change in the bankruptcy law. You can’t protect your home and you can’t avoid the credit card debt, so the financially prudent thing to do is stop paying for the house and keep paying down those credit cards. You are going to lose the house anyway, so why throw good money after bad?

The financial institutions are reaping what they sowed, and don’t want to admit they did it to themselves. At some point the bankers will realize that the first step to recovery is admitting you have a problem. Unfortunately things will get a whole lot worse before they turn around.

2 comments

1 Cookie Jill { 12.25.07 at 1:07 pm }

I don’t think they will ever admit to having a “problem”…with these folks…it’s always “someone else’s” problem.

2 Bryan { 12.25.07 at 8:57 pm }

The BofA is actually in pretty good shape as they dumped the subprime loans a while back, but they are one of the few exceptions. They may, indeed, become the Bank of America, as one of the few solvent banks left.

It’s amazing how many “conservative” financial institution bought into the ponzi scheme of subprime mortgages.