New York Times Features BCC’s SUN Initiative in “Moral Hazard: A Tempest-Tossed Idea”

Thursday, January 26, 2012

Boston Community Capital’s SUN Initiative was featured in The New York Times article, “Moral Hazard: A Tempest-Tossed Idea.”  The article, written by reporter Shaila Dewan, argues that the risks of moral hazard are overstated.  Dewan writes:

"The cherished American ideal of self-reliance has a flip side: discomfort with the idea of bailouts and safety nets. The notion that even a small portion of such aid might find its way to the undeserving can be enough to scuttle support, or restrict help so drastically that few can use it. The specter of moral hazard haunts a basic tension in American life: to what extent are people responsible for their own problems? The more trouble you’re in, moral hazard suggests, the less we should help."

Dewan notes that banks have used the moral hazard argument to avoid providing further debt relief to homeowners facing foreclosure.  As a result, "many economists and housing experts agree that the debt that now looms over homeowners is holding back a broad recovery."

Dewan quotes Boston Community Capital CEO Elyse Cherry saying that moral hazard "has been used to fend off solutions long enough."

“Let’s assume that the guy who says, ‘I paid my mortgage; why shouldn’t she pay hers?’ wins, right?” Ms. Cherry said. “Now what do we do? How is that a strategy for getting out of the problem that we’re in?”

Read more here