Claim Ignorance

Yesterday, a 47-year old Wisconsin man decided to clean up his apartment with gasoline. Apparently, he did not know what he was thinking when he tossed a lit cigarette into a pile of gas-soaked cushions and clothes. Later, in telling his case to the Police, he added that he knew gasoline is flammable but did not expect the dramatic results. He continued that it was a mistake to throw the cigarette and he was sorry for what had happened. Eleven other apartments were also damaged.

When you think people cannot be stupid, they always find ways to surprise you. That is what happened during the latest housing bubble. Granted that some homeowners were taken for a ride, but I bet most of them knew and understood the gamble they were undertaking. Put aside the fast-and-smooth talking mortgage brokers, most homeowners had basic understanding of the fact that they are signing up for mortgages that they could refinance later because house prices never fall down. But what if they did? And they did. So now it is easy to claim ignorance and ask for forgiveness, especially after ruining other people’s lives along the way (including their own families and neighborhood).

Back to our story about the apartment in flames, imagine if tenants of the eleven other apartments decided to fix the arsonist’s apartment because he could not do it himself and because they could not have a charred apartment in their building. That’s exactly what is happening in the market: Somebody acted stupid, claimed ignorance, said they were sorry and we got to pick up the tab.