October 14, 2010
The well known story of Shakespeare's The Merchant of Venice has title character Antonio borrowing money from Shylock. When Antonio cannot pay, Shylock is entitled to the terms of the loan: a pound of Antonio's flesh. Thus ensues a great drama.
Today we are still living with the effects of our own great mortgage drama. It spawned the financial crisis and tipped our economy into recession. Meanwhile Washington is busy creating new bureaucracies and financial markets struggle back. But at ground level, we have some of Shakespeare's story: homeowners who have borrowed and cannot pay, and bankers who want their pound of flesh.
Back in Shakespeare's original, Shylock has been careless with his terms. He is indeed entitled to a pound of Antonio's flesh in satisfaction of the debt. But in the court of the Duke of Venice, it is pointed out that while he may indeed carve a pound of flesh from Antonio, he may not take so much as a drop of blood in the process. Shylock is defeated and Antonio goes free.
Today's bankers seek to foreclose on homeowners who cannot pay their mortgage. Defaulted borrowers must be foreclosed. After all, in the words of Calvin Coolidge, "They hired the money." But if the bankers are to insist on payment, they must prove that they are entitled. And now it appears that, like Shylock, they too have been careless with their terms.
Banks made billions making mortgage loans, lost billions when markets went south, received billions in taxpayer-financed bailouts, and now seek billions in foreclosure proceeds. Let the bankers have their day in court. They may take their due, but if they were sloppy or heedless with their terms, let them suffer Shylock's fate.
(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp. The author's opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).