Academic journal article ABA Banking Journal

One Foot on a Slippery Slope

Academic journal article ABA Banking Journal

One Foot on a Slippery Slope

Article excerpt

There was a popular book a few years ago titled, "The Death of Common Sense," by Phillip Howard. A good sequel would be, "The Death of Integrity."

Integrity, in the sense of honoring one's obligations and responsibilities, is a quality that Americans have long admired and, to varying degrees, strived for. Unfortunately, we've been seeing an erosion of integrity for some time. In a recent conversation, a bank CEO lamented the lack of integrity on the part of some borrowers. Now we have widespread "strategic defaults," where borrowers who can afford loan payments decide it's not a "good business decision" to keep paying, because the property value is underwater. They know that by walking away they're sticking the bank with a loss, but they rationalize this in a variety of ways including, "The bank shouldn't have made me the loan."

No one is going to feel sorry for banks. But people should feel sorry for themselves and for where our country is headed if they simply walk away from legitimate obligations. Over time this behavior will undercut the foundation of not only banking, but society.

There are many cases of true hardship, where some sort of accommodation-even bankruptcy--is justified. A banker with integrity would do everything within reason to try and help a borrower in such straits, as many do. A borrower with integrity would do everything possible to meet the restructured terms--a few even going so far as to pay all creditors in full, once they've emerged from bankruptcy. That's integrity. …

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