This episode of the daily show got me thinking again about the profound unfairness of our money system.
To me it is sad more than it is funny. Forget the obvious irony of their story, that the mortgage banker's association ITSELF defaulted on its own mortgage obligation while telling everyone else not to. You can choke on the irony. However, the writers at TDS don't really realize how amoral the whole money game is. I don't expect them to, they are hired for their funny bones, not their degrees in economics.
The problem is simply stated. You have taken a loan on a house. Your house has lost value. You walk away from your mortgage. It is the right financial decision to take, but is it moral.
A straightforward answer is that money is created by the banking system. If you deposit a dollar in the bank, it is really multiplied by 10 or more in loans. THIS is how money is created. Out of thin air. So when you default you are not returning money that didn't exist in the first place. And the bank ends up owning the asset.
Stop at that, reread this a couple of times. Wrap your head around that fact. Banks create money out of thin air and end up owning the asset. Banks own assets out of nothing. Brilliant. Period. Amoral.