Alliance Data Systems (NYSE: ADS) seems ready to fight its buy-out dispute with Blackstone Group (NYSE: BX) all they way to the Supreme Count. But, it gave up the ghost, perhaps thinking that, even if it won the action, it would takes years and cause management distractions.

The original buy-out deal was for $6.76 billion or $81.75 a share. The stock now trades at $52.84. According to Reuters, ADS has now sued Blackstone for a much more modest "$170 million business interruption payment." The two companies had looked at compromises to keep the deal on track, but nothing works.

The news is not only a victory for Blackstone. It shows that private equity firms can walk away from many of the deals that they made in early 2006. Weak credit markets are the cause of breaking the deals because they have driven higher interest rates and an economy that could hurt profits at the businesses they planned to buy.

None of that states the core of the new reality, which is that financial buyers can take whatever promises they made and throw them out the window. No matter what they said, they can claim no obligations. It is an ethical collapse just as much as it is a financial one.

Douglas A. McIntyre is an editor at 247wallst.com.