Apparently the answer, for many people, is "Yes".
Jacob Sullum over at Reason's Hit & Run blog discussing a NY Times article on the proposed mortgage bailout programs:
The New York Times discovers the moral hazard lurking in the various plans to save homeowners from their bad investments. "Experts say it is difficult to devise programs to aid distressed homeowners without giving everyone else a reason to mail the keys back to their lenders," it reports. You think?
The story opens with Todd Lawrence, an airline pilot in Norwich, Connecticut, who "has a traditional 30-year mortgage that he has no trouble paying every month" but who "owes more on his house than it is worth, like millions of other people." Lawrence feels like a chump, continuing to pay his mortgage while his taxes go to more reckless people who overborrowed and have begun to miss their payments. Such homeowners can take advantage of government programs that reduce their interest rates and principal. "Why am I being punished for having bought a house I could afford?" Lawrence asks. "I am beginning to think I would have rocks in my head if I keep paying my mortgage."
Financial experts agree that there is some sort of hard, naturally formed mineral or petrified matter where Lawrence's brain should be. "From a purely economic standpoint, there's not a whole lot to be gained from staying," says one. Another "says he thinks just about everyone who is underwater and has few other assets should stop paying." The Times does note in passing that "many people...consider paying their debts a moral obligation."
The story closes with an unnamed homeowner who owes $350,000 on a house in a Los Angeles suburb "that is worth only $150,000." As a former Los Angeles resident who looked into the housing market there a few years ago, I find it hard to believe you can buy a house anywhere near L.A. for $150,000 even today, but never mind. The point is that the homeowner who owes more on the house than it's worth realizes he is more likely to get government help if he stops regarding paying his debts as a moral obligation. "I guess they are forcing me to deliberately stop paying to look worse than I am," he says. "Crazy, don't you think?"
The whole thing, including the Comments, is worth reading.
