But back to my top story for today. Headline reads:
"Fannie Mae forgives loan for woman who shot herself"
Yes. That's right. This 90 year old lady decided that she would rather die than lose her house. In fact, if you read the details, she had already owned the house but 4 years ago, she took out a 30-year mortagage on her equity stake for $45,620. "The same day, she also took out an $11,380 line of credit."
I really hope that she wasn't using that cash for something frivolous - like buying a pony for the granddaughter because that would've been a really costly pony.
But the bigger story is.. Now that it's been made public that Fannie Mae has forgiven this suicidal lady's debt, Mr Moral Hazard creeps into the picture.
Tim Harford has a pretty good explanation of Moral Hazard and he also references a time in the late 50's and early 60s when, in a small town of Vernon, Florida:
"almost 10 per cent of the adult population had lost a limb. One man was said to be insured by dozens of companies when he lost his foot; fortunately he had been carrying a tourniquet at the time of the accident. He pocketed a million dollars. Another man shot his foot off – “while aiming at a squirrel” – just 12 hours after buying insurance."
I'm not making a judgement call here, but I would have suggested that they not publicize having forgiven this woman's debt. I'm expecting to hear more of these stories in the near future.
And in contrast, and what I believe is a good metaphor for what needs to happen to the American financial system, is this guy who chopped off a finger so he could continue playing football.
Wikre told the doctor, “ ‘This is my senior year. If I want to go on, I’ve got to play great the rest of the way. These are my last few games, we’ve got to make this work.’
“He’s like, ‘We can’t.’ I said, ‘We can. Cut it off.’ I love football. When you face the fact you’ve played your last game, it hurts. If you love the game and you’re told that, you do whatever you have to do to play again.
For a moment, I was reading in awe. This guy has such a strong conviction that one appendage wasn't going to stand in the way of his love for football.
Then I read this bit:
Wikre was more upset because his evening plans with his fiance were ruined.
I was pissed,” Wikre said. “Trace was going to make chicken and potato salad and we were going to watch Iron Man. I missed out on all of that.”
Awe no more.
