Times Square Terror Suspect: Foreclosure the Easy Way

When you gamble at a craps table, there's something called "the hard way."

It's an outcome that comes through a statistically tricky way to do something. When you roll two dice, for example, the first die is going to come up 1 through 6, and the second die is going to come up 1 through 6.

There is a 5 in 36 chance, for example, that you're going to roll an eight. You might get a 2 and a 6, or you might get a 6 and a 2 -- a 2 in 36 chance. You might get a 3 and a 5, or your might get a 5 and a 3 -- also a 2 in 36 chance.

Or you might roll a double and get a 4 and a 4, which has only a 1 in 36 chance -- also known as "eight the hard way."

Well, now news has surfaced that Times Square bombing suspect Faisal Shahzad allowed the bank to foreclose on his house in Shelton, Connecticut, a small town in Fairfield County.

Which is leading to a little cause-and-effect problem: did Shahzad load up a Nissan Pathfinder with explosives because he was losing his house?

Or as a Washington Post headline from today put it, "Faisal Shahzad: violent fanatic, or unhappy homeowner?"

But that overlooks the fact that Shahzad didn't go into foreclosure the way so many Americans do, after suffering from a medical catastrophe or being fired.

Instead, he voluntarily quit his job -- a white-collar job as a financial analyst with a firm with the we-paid-a-fancy-branding-firm-to-name-it moniker of Affinion -- and simply stopped paying his mortgage.

Result: the first mortage holder, Chase, got screwed. (The mortgage was 80% on the $273,000 house, according to Josh Barbanel, Andrew Grossman, and Sumathi Reddy of The Wall Street Journal).

The home equity holder -- who according to Charles Lane of the Washington Post was Wachovia to the tune of $65,000 -- got screwed worse.

Because if that house sells for, let's say, 25 percent less than its 2004 purchase price (I am not a Connecticut agent so I am guesstimating this) then Wachovia gets nothing and Chase gets back less than it lent.

The difference will be made up one of two ways: by stockholders, or by taxpayers.

There are a few academics, such as Brent White of the University of Arizona, who even advocate this mailing the keys back to the bank -- but in this context we see that "foreclosure the easy way" is a kind of bomb of its own.