Years ago (geez, at this point it's almost two decades ago) I was in the night club business, and I got way over my head in debt. It was out of control (as was I), and eventually I ended up filing for bankruptcy. A disgraceful and shameful situation to be in, and of course I had no one to blame but myself, as I took the risks and had to face the consequences. Now, you might argue that filing for bankruptcy in itself constitutes a refusal to face the consequences, and you would be right. So I compounded my badness with further badness, and I admit it. I like to think I learned from my mistakes, but this post is not about that. Rather, it is about following the rules, and the rule of law. Rules and laws are there, and even when they are wrong (or inherently unfair or dishonest), in theory they are supposed to apply to everyone.

The stuff I have been reading (and I refer to a plethora of posts and articles about the "foreclosuregate" scandal) reminds me of one annoyingly unforgettable aspect of my financial ruin.

I was fraudulently sued. More properly, I was sued on the basis of a forged promissory note. My business partner (fellow shareholder -- whose credit was not as good as mine) signed my name to a personal guarantee so that the business (a corporation) could obtain credit with a distributor. Naturally, when the business went belly up, that creditor sued me personally. I was so damned depressed that I never contested it (and they obtained a default judgment), but there was just something about seeing a note that I never signed being the basis for a lawsuit and a judgment against me that always stuck in my craw. Had I been so inclined, I might have been able to beat the lawsuit by avoiding personal liability on the note. Yet still... they did extend credit based on "my" signature, and the corporation did use it, so I suppose that it could be argued that by relying on the credit I ratified my partner's conduct, so I was morally obligated if not legally obligated.

The reason I remember my own experience is that I think it highlights the distinction between a moral obligation and a legal obligation. What we call legal "technicalities" may not square with morality, but like it or not, rule of law is built upon technicalities. Like, it does not matter how egregious your conduct was in a given situation, if you are sued you have to be served properly. Likewise, if you are wholly innocent of wrongdoing, that does not allow you to ignore service of process.

In terms of the banking scandal, whether a borrower was in over his head and ought to be held accountable is a moral argument. It has nothing to do with the legal obligations of the lender or its successor in interest (or successors to a fraudulent 1000% interest in his mortgage). If they want to foreclose, they have to do it correctly. If they have obtained the mortgage fraudulently (or find themselves without the necessary documentation to proceed), they might just be SOL. That does not make the borrower a "victim" nor does it make him morally innocent, but it might just provide precisely the technicality that the borrower can use to avoid foreclosure.

We can argue over who is more morally "right" (as if one wrong is to be weighed against another wrong), but where it comes to rule of law, that's about as relevant as whether a criminal actually did what no one can prove he did in a court of law.

Is that justice?

Depends on your definition. The law does not guarantee "justice" in the moral sense.

But isn't the fact that these legal "technicalities" apply to everyone equally is a form of justice? If you irresponsibly signed a piece of paper and the people who want to sue you on it irresponsibly can't find it, then justice requires that you escape being "held accountable for your actions." If the owner(s) of the paper can't find it and thus can't put you out of your house, then in the legal sense they're being held accountable, and you aren't.

We can trash-talk "technicalities" all we want, but at least there's a chance that somewhere, someone will be held accountable. Maybe even the Wall Street securitizers, who seem awfully quick to engage in trash-talking:

Wall Street does not sympathize. "You had people putting zero down to get massive houses they couldn't afford to be in," he said Monday morning, "but now they want to stay. And the government wants to let them stay, because they're voters." A few hours later, the Goldman Sachs arm Litton Loan Servicing said it had suspended certain foreclosure proceedings, too. "Talk about a financial scandal," a Wall Street Journal editorial this weekend joked. "A consumer borrows money to buy a house, doesn't make the mortgage payments and then loses the house in foreclosure--only to learn that the wrong guy at the bank signed the foreclosure paperwork. Can you imagine?"

Sometimes the wrong guy signs, and when that happens, it can often mean that another wrong guy walks.

Life can be tough, especially for the wrong.

Who is deserving of the most sympathy has little to do with it.

MORE: To put this more simply, if borrowers can be foreclosed against because of their shoddy financial planning, I don't have much sympathy for them. But if they can't be foreclosed against because of the bank's shoddy paperwork, I don't have much sympathy for the bank either. And if it's because of fraud, I have even less.