In Which Ms. McArdle Continues To Stick Up For Banks

And I continue to mock her, merely by copying selected parts of her items. Not taken out of context at all. (It's the Interthing, you may click directly for full context.) No, selecting just a paragraph or three isolates the more offending parts from the general noise & froth & allows focus on the inanities that glazed eyes may miss.

Banks need to be taught a lesson for their stupid lending It all sounds very emergent and spontaneous and Hayekian: a nation of freelance bank regulators. Every man his own bankruptcy judge!

All well and good, except that if you are walking away from a mortgage simply because the house is underwater, you have no authority to punish them. After all, the reason it was stupid to lend money to you is not that they were lending money to someone who probably couldn't pay it back; you can. The reason that it was stupid to lend money to you is that you're a deadbeat--a foolish deadbeat, who thought that house prices are a magic route to free money. That's not something they could reasonably have been expected to know. Also, "banks need to be punished for being almost as stupid and greedy as I am" doesn't have much of a ring to it.

No, the bank would have had no reason to know that "you're a deadbeat--a foolish deadbeat," because all that the banks had to say on the subject was to be sober, save & not take out any second mortgages because the bubble was about to burst. Remember?

Suggestions on reconciling the bold title part w/ the rest of the typing here are solicited:

Companies act like faceless automatons, so we should too.  This is not actually true.  Imagine a bank that actually did only what is specified in their contract with you, and not an inch more.  That would be a bank you'd like a lot less than any existing bank, and with good reason.  They are restrained by various norms, and competitive pressure.  This is not to say that they always behave well.  But they do not, in fact, simply live by the letter of the contract, and if you think they do, I invite you to read me the part in your contract where they have to provide a customer service person who speaks adequate English and doesn't burst into violent profanity when you ask for a mortgage modification.

Moreover, the way to punish them for behaving badly is either to regulate the bad behavior, or refuse to patronize banks that behave badly, not to simply walk away from your house loan.

You just sit there & hold this bag until we get those regulations passed & enforced, or until a too-big-to-fail institution goes under because it behaved so badly there was a run on it. We'll be right back.