Friday, March 07, 2008

Behavior Change 

This is a disturbing behavior change that requires urgent communication. The expectation has always been that homeowners would fight to the last inch to save their residences, including foregoing some necessities. That is why mortgages were considered a relatively safe investment. Since it is not so, at least in this meltdown, what can the financial industry say to remind homeowners of their responsibility? Education is beyond PR alone. There needs to be structural change. Banks have to bend, as well as homeowners, to find an accomodation that keeps people in homes but generates some repayment of outstanding balances. Failing that, the meltdown will continue for months more, and credit markets will remain under stress.

It is hard to feel too sorry for bankers. They were the first ones at fault for giving unsustainable mortgages to homeowners. They deserve the losses they are getting. Unfortunately, their losses are the economy's pain.


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