Is Greg getting bailed out by his rich uncle?

I have an old friend, and he probably won’t mind I am telling you this, but for sake of anonymity, I will just call him Greg. He has had some economic difficulties recently, but his family has stepped in at different points. This, I thought, was great for Greg, but the whole sequence of events has led to a lot of animosity within Greg’s family. Even though I am biased, since Greg is my friend, I still can’t help thinking that he somewhat has to blame himself. But I’ll let you be the judge.

The background is that Greg and his family found their dream house some years ago, and Greg took out a mortgage. Everything went fine for a while. Greg had a well-paid job, and every quarter he could honor the agreed mortgage payments as well as providing for his family. Then bad luck struck: Greg lost his job, and his unemployment benefits could only just about cover the costs of taking care of the family. It became impossible for him to make the mortgage payments. You might say he was in a “debt crisis”.

He was obviously in distress, but Greg has an uncle who is incredible well-to-do, and he stepped in and covered the mortgage payments for the entire year Greg was unemployed. Greg got a new job, and things lightened up for a while. But the family relations had suffered. Greg’s uncle began to talk less favorable about Greg. Apparently, he was annoyed that Greg never thanked him for the economic help he received during the unemployment spell. I couldn’t believe what I heard, and thought that the uncle was probably being unfair. But one evening I was out with Greg and two of his new friends (let’s just call them Paul and Joe), and we came to talk about the recent events. Paul and Joe made it quite clear that they didn’t think Greg owed his uncle any thanks. Their argument was that the uncle hadn’t helped Greg by paying his mortgages, but merely had helped the mortgage company. And since it was a big corporation that didn’t really needed the money anyway, there was no need to thank.

I decided not to play the “I am an economist” card. Not only because it never brings me anywhere, but we were having a nice evening, so I didn’t want to ruin it. I just thought for myself that the net effect of the uncle’s action had been to essentially provide housing utility for Greg and his family in a year. Yes, the money went to the mortgage company, but in effect Greg (and his family) could stay in the house uninterrupted. I actually thought that the uncle helped Greg. But I could feel this was not considered politically correct.

The rest of Greg’s family did not get involved too heavily until last year, when Greg unfortunately lost his job again. Greg’s uncle immediately offered to step in and cover Greg’s mortgages, but this time he would only do so if Greg agreed to pay him back when he got a job again. Greg refused and got mad at him, and the whole situation has now split the family into two equally furious parts. One who thinks that Greg’s uncle is a no-good, money-loving capitalist kicking a man lying down, and one who thinks basically the same but that Greg should swallow his pride and succumb to the uncle’s threat for the sake of the well being of his family.

I am torn here. I somehow do not think the uncle is the bad guy. From an economists’ point of view, he tries to help Greg smooth consumption over time. But those arguments don’t fly with Paul and Joe, who think he should cut any connections to his uncle as they believe he has been exploiting Greg all along.

What do you think?

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