CNBC.com

I read a fascinating article in the Financial Times this morning that I want to bring to your attention.

The short version is that all those mathematical models used to predict future home loan default rates, i.e. the ones that should have prevented the mortgage crisis, failed because they left out one key variable: human behavior.

The models were based on consumers’ actions in the past. Historically, when money gets tight, households tend to slow down on their credit card or car payments, not on their house payments. In the past, an economic downturn, or hard times, resulted in defaults on unsecured loans, not mortgages. Today, not so much.

It seems that while many borrowers today are delinquent in their home loans, they are keeping current with their car and credit card loans. Why the change? Simple: a mortgage today is not what it used to be. In the new mortgage landscape, many borrowers put no money down, and therefore they have no real financial investment in the homes.

With falling prices, their homes may have negative equity, so there’s really no reason to keep paying for it. Also, it is now culturally more acceptable to default on a loan because there are now so many government and industry programs begging to pull you out of your particular pickle. Also, bankruptcy law changes now make it less heinous to throw it all in.

The Financial Times article lays it all out quite eloquently, but I prefer to be more crass: There is a fundamental and deplorable breakdown in financial responsibility in America today. I’ve been saying it for a long time now; I’m sick and tired of everyone running to bail out borrowers who simply made irresponsible financial decisions.

Yes, there was predatory lending, and yes, there was some fraud (and I don’t mean those cases). But the fundamental reason for today’s credit and housing crisis is greed, plain and simple, and a reprehensible lack of financial responsibility. People saw free and easy money, and they took it. They took it along with the promise of continued economic expansion, and anyone who’s lived for more than a few decades knows that nobody can promise that.

In today’s uncertain world, we should be more prudent than ever in betting on the economic future of our country, and if we do choose to bet, and we lose, then we need to take responsibility for ourselves.

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