In a piece in the New York Times Magazine, Roger Lowenstein, author of several books on financial issues, argues underwater homeowners should walk away from their mortgages, and not feel guilty about it. After all the wealthy and their financial institutions make similar strategic, self-interested decisions all the time. "Morgan Stanley recently decided to stop making payments on five San Francisco office buildings. A Morgan Stanley fund purchased the buildings at the height of the boom, and their value has plunged. Nobody has said Morgan Stanley is immoral — perhaps because no one assumed it was moral to begin with." In some cases homeowners are trapped because they also purchased at inflated prices at the height of the boom. In other cases they had previously purchased at fair prices, but borrowed against their home equity to live large, spending the proceeds of loans they now can't pay back.
Lowenstein is also the author of While America Aged, about the coming public employee pension disaster, a good read. The question I have for him is this. Why should younger generations sacrifice (higher taxes, diminished public services, lower pay and benefits as future public employees) to pay the unfunded portions of those pensions, and other public debts, to ensure older generations get benefits they promised themselves but didn't pay for, and that younger generations will never see, based on decisions younger generations never made?