A Stitch in Haste

I have no doubt that Ms. Diane McLeod — the subject of this voluminous piece by perpetual anti-Wall-Street malcontent Gretchen Morgenson on the supposed “debt crisis” in America — is a sweet, charming, peaceful woman who would pose no threat to anyone, especially intentionally. And we may, at least to an extent, sympathize with her current financial plight:

Nevertheless, may we please simultaneously acknowledge that Ms. McLeod is, quite frankly, a moron:

–”For a little quiet, Diane McLeod stashes her phone in the dishwasher.”

–”Ms. McLeod, who is 47, readily admits her money problems are largely of her own making.”

–”Ms. McLeod … was fired from her job in March for writing inappropriate e-mail messages.”

–”When the marriage began to founder, she said, she shopped to make herself feel better.”

–”There was an $8,000 penalty to pay off the previous mortgage early as well as roughly $1,500 in closing costs on the new loan. To cover these fees, Ms. McLeod dipped into her retirement account. Only later did she realize that she had to pay an early-withdrawal penalty of $3,000 to the Internal Revenue Service. Short on cash, she put it on a credit card.”

–”Although she was making $50,000 a year working two jobs, her income was not enough to support the new $165,000 loan. She asked her son to join her on the loan application; with his income, the numbers worked. … The decision would drive a wedge between mother and son and damage his credit profile as well.”

–”She does not want another credit card, she said. But even though her credit profile is ruined, she still receives come-ons. Recently an envelope arrived offering a ‘pre-qualified’ Salute Visa Gold card issued by Urban Bank Trust. ‘We think you deserve more credit!’ it said in bold type.” (Note: I will unhesitatingly concede that Salute Visa is a predatory business that charges obscene fees for credit cards with puny limits. It is a vile enterprise and an embarrassment to every defender of capitalism. Of course, I know this because I spent five seconds on a two-word Google search that provided me with all the information I needed to discern Salute Visa’s true nature. So what’s Ms. McLeod’s excuse?)

–Finally:

Can still afford cigarettes…

Ms. McLeod also was subject to some major exogenous setbacks (e.g., medical emergencies and a death in the family) that were certainly not her fault. But everyone suffers such unexpected circumstances at one point or another. That’s why we save (and have insurance).

My point is not to mock Ms. McLeod. My point is only to remind malcontents such as Ms. Morgenson and her target audience that, just as we do not dumb down television, movies and the Internet simply because children might be exposed to it (no matter how much some theocrats and other radical conservatives would like us to), neither is it appropriate to “dumb down” the economy for fear that a Diane McLeod might overextend herself on too expensive a house and too many handbags.

I was recently describing to a friend a classic old case from law school: Vaughan v. Menlove. The facts are not as important as the holding: Stupidity, even innocent stupidity, does not excuse one from personal responsibility. If you’re stupid and you know it, then you have the duty, if not to be smart, then at least acknowledge that your stupidity is your problem and not your neighbors’.

We must not be tempted, or allow activist legislators to be tempted, to re-engineer the entire financial sector, thereby constraining the competent, in order to protect the incompetent. Prosecuting outright fraud by banks and mortgage lenders is one thing. Disclosure laws are one thing. But forbidding transactions altogether (or, worse, “punishing” innocent firms for innocent conduct) crosses a line.

Just something to keep in mind as more “exposés” are published denouncing “capitalism run amok” or “big bad bankers” or whatever.