Reuters news agency today reported that San Diego City Attorney Michael Aguirre had filed suit against Bank of America and it’s Countrywide subsidiary to prevent the mortgage lenders from foreclosing on homes in his city. He also plans to file similar suits against Washington Mutual, Wachovia and Wells Fargo in the near future. The state goal is to make San Diego a “foreclosure sanctuary.”
More aptly, Mr. Aguirre should have said that he wants to make San Diego the first “Stupidty and Greed” sanctuary.
For those that aren’t aware San Diego was one of the first markets to experience the run-up in real estate prices and also had some of the highest appreciation rates in the country. San Diego was also known for the zeal with which it’s residents speculated on the real estate market. With the credit crisis, San Diego has now lead the market with some of the steepest losses in the country.
As with any speculative bubble, this one was characterized by people taking out aggressive loans, that they probably couldn’t afford, believing that the market would continue to climb at its torrid pace, ultimately allowing them to refinance, take out cash and generally live the good life. In other words, stupidity and greed took over until the market corrected and those same people were stuck with potentially huge losses.
By suing lenders to prevent them from foreclosing, San Diego has essentially condoned this stupid and greedy behavior and given it its stamp of approval. While undoubtedly well-intentioned, these lawsuits are encouraging the wrong behavior. Instead of encouraging people to be accountable for their actions and live within their means, the city of San Diego has essentially told its citizens “It’s OK to take unnecessary financial gambles. If it doesn’t work out, we’ll bail you out.”
So, if you’re planning on doing something greedy and stupid, move to San Diego so you can find “sanctuary” from your actions.