Yesterday I spoke with my friend Gonzalo the banker, who lives in Hialeah and rides MetroRail. I have talked with Gonzalo about the banking side of the economic recession since it began in 2009. He continues to be appalled by the greed he sees on the micro level among bankers and borrowers, greed facilitated by government policy, and the connection of that greed to the problems we have on the macro level.
He told me yesterday of a friend of his who, during the real estate boom, moved from Hialeah to a Cocoplum mansion that the friend financed with very little down, a mansion that now is in a sort of frozen state of foreclosure. By that I mean, he pays no mortgage payments any more, because he can no longer afford it. However, because of a government program to "save" people's homes, he still is in possession of it and anticipates he will remain in possession for at least two more years before the bank can finally get it back. What is interesting about his situation is that Gonzalo's friend is not now actually living in his mansion. He has rented it and has moved back in Hialeah. Aided by the rental income, he continues his life-style as best he can. The family's educational plans include keeping their kids in private school. They are getting ready to send their oldest to NYU this fall, no doubt financed in large part by grants and loans, for which the family qualifies because of the sad balance sheet submitted by the parents.
Apparently, there is nothing illegal about Gonzalo's friend gaming the system this way. (Or would you say that these are reasonable survival tactics, under the circumstances?)
No amount of government regulation will make up for the lack of character among its citizens. When I was in law school, the sort of legal philosophy known as "positivism" reigned. That is the idea that one could change behaviors with a statute, that law was a sort of teaching tool and could civilize the heart. We see now that more laws only make the game more complicated - and that clever minds can rise to the challenge of any regulation. The problem is character, not economics.
I've read somewhere that law does not so much build character as expose it. Now where was that?