Take me home…Moral roads…

All humans have a moral compass, but when guided away from it, moral hazards occur, which can wrongly affect other people. For example, the moral hazards among the biggest Wall Street firms like Merrill Lynch, Citigroup, Deutsche Bank, Lehman Brothers, etc., assisted in expelling Americans from their homes during the 2008 housing crisis. While not the only force that led to Americans losing their homes in 2008, the moral misgivings of Wall Street firms perpetuated the process. The definition of moral hazards is important to understand before delving deeper into how it pertains to Wall Street firms during the house market crash. Investopedia defines moral hazard as “the risk that a party has not entered into a contract in good faith or has provided misleading information about its assets, liabilities, or credit capacity”. Investopedia also addresses the fact that moral hazards could lead a party to take unusual risks in a desperate attempt to earn a profit. In an unusual move, several Wall Street firms took the risk of buying mortgage bonds in an attempt to earn profit, while not possessing the tools to fully understand the validity of the loans. In fact, the bankers, analysts, investors, etc. weren’t 100% sure how to interpret these bonds, contributing to the cloud of confusion surrounding the 2008 housing crisis and making it a generally difficult affair to understand. This expulsion as a result of moral hazard is also seen in Toni Morrison’s historical fiction novel A Mercy, the parallels of which will be discussed further in this essay. 

Michael Lewis’ The Big Short focuses on the events leading up to the 2008 financial crisis. Lewis also focuses on the conflicted morality of several men who foresaw the crisis well in advance, such as Steve Eisman, an American investor who profited from the collapse of the U.S. housing market. Eisman took the time to investigate the nuances of the aforementioned mortgage bonds and why Wall Street firms invested in these bonds. Eisman uncovered Wall Street’s business operations, which essentially focused on running working-class Americans out of their homes and savings. In Lewis’ book, Eisman discovers that, “with the extension of the mortgage bond market into the affairs of less creditworthy Americans, [Wall Street] found its fuel in the debts of the less solvent half [of Americans].” Discovering Wall Street’s true intentions in regard to working-class citizens led Eisman to further question the morals of the businesses, along with his own moral compass. Wherever moral hazard occurs, fraudulent activity tends to follow closely behind. The historical-fiction novel A Mercy, written by Toni Morrison, perpetuated my thoughts on moral hazards working to expel people from the places they call home, similar to how Wall Street’s poor morality created many homeless Americans in 2008. 

Morrison’s A Mercy places emphasis on noticing things, but not having the tools to interpret those things. This literary theme shares many similarities to the 2008 housing crisis, in regards to compromised morality. For example, the novel’s main character, Florens, notices her love for the blacksmith (a free black man) while living at the Vaark homestead where she is enslaved. However, Florens does not realize her love for the blacksmith is not simply due to romantic feelings. She subconsciously uses her love for the blacksmith to supplement her feelings of abandonment caused by her Minha Mãe (or “mother”). Florens tests her moral compass as she struggles to understand why her Minha Mãe gave her up as a young girl, causing Florens to chase love for the wrong reasons. 

Florens is faced with moral hazards again when she leaves her current home [Vaark homestead], to embark on a new journey. She continues her quest to find the blacksmith, hoping she will acquire the intimate connection she feels is missing within. Believing her new home is wherever the blacksmith exists is a moral hazard because Florens is searching for love for the wrong reasons. She wants to fulfill a loss of love from a mother, with love from a romantic partner. However, Florens does not consider that the blacksmith may respond negatively to her actions. Instead, Florens continues to do what she thinks is best – finding the love and acceptance from the blacksmith that she never received from her Minha Mãe. 

Florens’ desire for acceptance, inflicted by her Minha Mãe giving her away as a child, led to Florens’ expulsion from her home with the blacksmith. Up to a point, Florens associates the blacksmith as ‘home’. In A Mercy, the blacksmith’s rejection of Florens incites a flashback to her mother’s rejection. Morrison writes from Florens’ perspective, “The second time is pointing little girl hiding behind her mother and clinging to her skirts. Both times are full of danger and I am expel.” Florens refers to herself as ‘expel’, demonstrating her belief that she is not capable of being loved. However, if Florens avoided moral hazard while searching for love, she might have noticed the motherly love that Lina, an older enslaved woman at the Vaark homestead, had for Florens. Instead, Florens chases her love for the blacksmith, which leads to him rejecting her from the place she called home. 

Florens’ moral hazard of searching for love to fulfill a loss, ended with her being expelled. Florens’ situation helped me analyze why moral hazards among Wall Street firms led to Americans being expelled from their houses in 2008. Essentially, Florens and Wall Street firms both entered into contracts not in good faith, hoping that they would benefit. Both parties in these separate narratives took a risk. What is different is that Florens took a risk that caused herself to be expelled from the place she called home, whereas Wall Street Firms took a risk in making lower/middle-class Americans lose their homes, knowing that they would be protected from the consequences. Overall, Florens’ risk only affected herself, whereas Wall Street firms were taking risks against others. Both did what they wanted to do in order to benefit themselves. Toni Morrison’s A Mercy helped me analyze the different reasons people partake in moral hazards. Wall Street firms might not have been aware of the intensity that their moral hazard would cause to the American people until the housing market crashed in 2008. 

Thinking about society’s current situation dealing with a world-wide pandemic, made me realize the moral hazards among Americans as so many of us try to stop the spread of COVID-19. In order to stop the spread, we need to practice social distancing and self-quarantining. However, moral hazards exist among individuals who fail to abide by these guidelines set in place by the federal and state governments. A number of Americans might be carrying the disease, but never show signs. By failing to isolate, these citizens might continue the spread of COVID-19 to other people without being infected themselves. Therefore, there are still people guilty of moral hazards. Members of our society are potentially intensifying a world-wide pandemic by putting others at risk, due to their individual moral hazards. This contemporary example mirrors the Wall Street firms being guilty of moral hazards by putting others at risk causing the 2008 housing market crash.

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