I live in a nice apartment building in an upscale area of Seattle. This week I noticed fliers posted around the building announcing a contest. They are having a $100 drawing each month for residents that pay their rent on time. I had to inquire.
Me: I don’t understand the contest. Didn’t the residents sign an agreement stating they would pay their rent by the first of each month?
Her: Yes, but a lot of residents aren’t. So we are offering this contest as incentive.
Me: How many occupied units are in this building?
Me: Don’t most people pay on time?
Her: It’s becoming a huge problem. A HUGE problem!
I really shouldn’t be surprised. In the age of the bailouts and foreclosures, the societal pressure to pay your own way is fading fast. Take on a mortgage that is too much? Stop paying it. Loan billions out to bad credit risks? Get a bailout and let the taxpayers eat the loss.
Every day we are hearing stories of people and corporations walking away from their obligations. Not only are they not being punished or shunned, they are being rewarded. We are waking up to a world where the people paying their bills are the suckers. My building feels they need to reward renters for doing what they already contractually agreed to do.
Everything the Treasury and Federal Reserve has done to increase lending has backfired. They have created a situation where nobody trusts each other. No economy can grow when banks don’t trust companies, investors don’t trust balance sheets, companies don’t trust their customers and the citizens don’t trust their government.