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Beyond Spite

I hate people who ignore signs to merge on the highway until the last minute. They get miles and miles of warning that construction is approaching, and yet there they go, zipping past us in the soon-to-disappear lane, right up until they’re about to hit an orange cone or a construction vehicle, and then they expect those of us who helpfully merged earlier to kindly let them in. It’s a tiny little thing, but it makes my bile rise as fast as the sound of George Bush’s voice.

The worst part is, I’m wrong.

At least from a traffic flow standpoint. Apparently people have modeled it, and two lanes of traffic merging at the last minute keeps more traffic moving more freely for longer than everyone dutifully going into one lane when they get first warning.

I’ve read this assertion several times, and I keep, well, “forgetting” it. Because I know deep in my vengeful soul that that’s not why people are doing it. I know that each and every one of those drivers sailing past me is just thinking “Suckas!!!!!” and patting themselves on the back for taking care of number one and letting us eat each other’s stopped-in-traffic fumes. So even though I’m sure it makes me a traffic flow demon, I’m still highly tempted to refuse to let them in. If I could fashion an instant agreement of everyone who merged early not to budge, I might do it.

I’m not unusual in this. When the choice is between punishment and restitution, vengeance and a course of action that truly makes things better for everyone, including ourselves, punishment and vengeance pull a surprising number of votes. (This is only one of many reasons that traditional economists’ assumptions that people act in their own best interests are way, way off the mark.)

Take the case of mortgage lenders. They’ve got a major crisis on their hands. Let’s leave aside for the moment the (huge) fact that it is a crisis that is largely their fault. In any case, we have a tidal wave of foreclosures in many areas of the country. And what do the lenders do as soon as they complete a foreclosure? Kick the people living there out.

Which may be to their benefit in San Diego, where the house might well sell in not too long, maybe for less than it cost before, but for a decent price. But in Buffalo, Chicago, or Detroit those houses aren’t going to sell. The already weak market is flooded, many of the neighborhoods riddled with multiple foreclosures per block. Nearby foreclosures drop the value of all the remaining homes. In some areas, as soon as a house is vacant it’s vandalized and stripped for valuables like copper wire.

How does this scenario benefit the lender who owns the now-ruined house? Answer: It doesn’t. Emptying the house was a stupid move. Not only is its asset destroyed, the value of all the other assets it holds in the same neighborhood has been lowered.

There are often other options: Deferring a foreclosure until a loan modification can be agreed upon, for example, or arranging to let an owner (or at least the owner’s tenants) stay on paying rent for some period of time after a foreclosure goes through, keeping the building occupied. These strategies wouldn’t work in all cases, and they require learning new habits and developing new protocols. Nonetheless, making them more of a matter of course could save lenders and investors a ton of money in losses avoided. Not to mention that the costs these evictions and vacancies impose on individual borrowers, all of their neighbors, and their cash-strapped cities would be drastically reduced.

But of course the idea of letting people stay rankles. It doesn’t punish anyone. At least not enough. The destroyed credit rating, lost equity, and shame of failing at the American Dream are not enough. A defaulting owner must pay the largest possible price for . . . for what? For being pressured, misled, or lied to by a mortgage broker in most cases. For betting wrong on a rising housing market in others. For being fiscally irresponsible in some, sure. Or for losing a job or getting sick at the wrong time. Without a ton research into each case, we don’t know.

I’m not sure it matters that we know. With a crisis this big—millions of foreclosures predicted in the coming years, hundreds of billions of dollars in lost equity surrounding those foreclosures, entire neighborhoods lost—it seems more important to decide that judgment and vengeance are not the best things to base policy decisions on, even in cases where it might be “deserved.”

I need to remind myself of this every time I feel inwardly rebelling at a suggestion that’s going to be “win-win” for communities and lenders, servicers and investors. Because while I don’t feel a need to punish borrowers any more, I also don’t feel any great inclination to generate even a partial “win” for the predatory lenders and greedy investors who got us into this mess. I find myself needing to take a deep breath to accept that if punishing them comes at the expense of sane solutions to the problem and reduced suffering for everyone, it’s not worth it.

Giving up punishment in favor of solving problems can be tough to swallow. If we know what’s good for us, I think we’ll all start chewing.

—Miriam Axel-Lute

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