In America’s unenlightened past, men who couldn’t pay their debts were imprisoned. Languishing behind bars deprived them of any chance to repay their creditors, so the practice was stupid as well as cruel. During college, I came upon a trove of heartrending petitions to the Connecticut General Assembly from women seeking to have their debtor husbands released from jail. The petitions were, by and large, rejected.
Society has come a long way since, but not far enough. There is still a presumption that blood can be squeezed from a stone. That’s true in the U.S. housing market, where banks continue to insist that they will be able to collect full repayment of wacky mortgage loans that they never should have made in the first place. And it’s true in Europe, where creditor nations and banks are dragging their heels on writing down the sovereign debt of Greece, Ireland, and Portugal.