Thursday, September 18, 2008

To protect its citizens, government should limit greed. Yes, I'm angry.

I was just about to write something on what's happening on Wall Street, but checked my email first and found this excellent article from Sojourners. It is an excellent read---I've copied it below.

I don't know about you, but I'd hear a story about all these financial failures, and I'd think, either: Oh, this is too complex to understand or Oh, everything will be alright. But then I listened to Terry Gross interview Michael Greenberger on Fresh Air yesterday, and the way he explained what was happening was so helpful.

And terrifying.

When I began to really understand what was happening, I thought: Oh, we need to take out all our money--take the tax hit--and hide what's left under the mattress! But then Greenberger ended the interview by saying that would be exactly the wrong thing to do. He said Congress will not let the FDIC fail. And he said there are people in government who understand all this and will do the right thing. Robert Rubin, for example, who is Obama's advisor on the economy, "gets it." Even though Reuben made some mistakes about all this in the Clinton administration in the 90's, he has seen the error of his ways, said Greenberger, and he'll do the right thing.

McCain, on the other hand, has always promoted deregulation. In fact, it was McCain's good buddy Phil Gramm who was the force behind the legislation to let all these complicated financial instruments (like the "credit-default swaps" in which AIG is awash) run amok with no regulation whatsoever. So now the government can't even really know the extent of this "shadow financial system" that is now wreaking havoc, although estimates are that it totals $62 trillion, more than the stock and bond markets combined.

Greenberger also explained clearly what "credit default swaps" are. They are underhanded legalese for "insurance." The legislation couldn't say "insurance," though, because insurance is regulated. So they called it "credit-default swaps" which allow all these financial institutions to provide "insurance" WITHOUT ANY CAPITALIZATION whatsoever! No funds to cover what they have promised they will insure! It boggles the mind. So, of course, when people who couldn't afford homes in the first place began to default on their loans, the house of cards begins to crumble, and eventually all these huge institutions are in danger of defaulting as well.

The Sojourners article calls on pastors everywhere to call people to account for the greed and hubris and sinful sense of entitlement and privilege at the root of this behavior.

It's part of the paradox at the heart of what it means to be human. We are generous and humble AND we are greedy and full of hubris. And we are amazingly susceptible to self-deception, somehow justifying in our minds that it's okay for us to make $12 million dollars on a single deal while most working-stiffs struggle to make ends meet. We need the governement to LIMIT HUMAN GREED. Sojourners makes that point, and it is a good one.

Oh, and that's another thing. David was saying how we "working stiffs" are on both ends and in the middle of this whole thing. It was our mortgages and our bank accounts that these Wall Street whiz-idiots wanted to get their hands on. And when the wall separating banks and investment banks was taken down (thank you, Congress -- and whichever President signed that piece of glorious legislation), we had no protection. And now that the government is bailing out these huge firms---which it must do now in order to protect my bank account, my brother's AIG annuity, my house---it is doing it on the backs of working stiffs like me and David who'll pay for it through increased taxes, and who wonder every now and then whether we'll have enough for retirement.

Yes, I'm angry.

In my deepest heart I know that no matter what happens, things will be okay. That knowledge comes from my profound trust in God and God's goodness. At the cellular level I believe that goodness prevails, and indeed outweighs that which is evil. The threat I feel, and therefore the anger, comes from the flagrant disregard for ordinary Americans--ordinary people the world over, actually---who could easily be very hurt by this evil behavior. I value treating people with respect. I value the idea that we are all in this together, a community. I'm angry because I CARE that these values have been trampled.

Wouldn't surprise me if God were angry, and shedding a tear or two, as well.

Here's the Sojourners article:

Everyone has heard the famous phrase, attributed to James Carville, which supposedly won the 1992 presidential election for Bill Clinton: "It’s the economy, stupid!" It’s still good advice, especially as the shocking collapse of the financial markets has turned the election campaign into a much more serious and somber discussion than lipstick on pigs.

But the issue is deeper than just the economy. I would now rephrase Carville and say, "It’s the morality, sinner!" And I would direct it to the people who have been making the decisions about the direction of this economy from Wall Street to Washington. Here is the morality play: Aggressive lending to potential home-buyers using subprime and adjustable rate mortgages ledto "mortgage-backed securities" being sold to investors at high returns. Ashousing prices dropped and interest rates rose, homeowners got caught, fellbehind on payments, and millions of foreclosures followed. That resulted in the mortgage-backed assets losing value with banks unable to sell the securities. So the subprime lenders began to fail. Asset declines then spread to investment banks. We have now seen the sale of Bear Stearns brokered by the government, and last week the government took over Fannie Mae and Freddie Mac as mortgage defaults threatened them. Then Lehman Brothers fell into bankruptcy and Merrill Lynch was sold. Now another bailout, this time of AIG, the largest insurance company in the country --whose potential demise threatened the whole financial system even further.

During the height of the lending frenzy, many people got very rich, as they did during the previous technology bubble. Now with the collapse, experts say the most likely result will be further tightening of credit and lending standards for consumers and businesses. Home, retail, and business loans will become more expensive and harder to secure. And the consequences of that will spread to most of America.

In the accounts and interpretation of these events, a word is slowly entering the discussion and analysis — greed. It’s an old concept, and one with deep moral roots. Even venerable establishment economists such as Robert Samuelson now say, "Greed and fear, which routinely govern financial markets, have seeded this global crisis ... short-term rewards blinded them to the long-term dangers."

The people on top of the American economy get rich whether they make good or bad decisions, while workers and consumers are the ones whosuffer from all their bad ones. Prudent investment has been replaced with reckless financial gambling in what some have called a "casino economy." And the benefits accruing to top CEOs and financial managers, especially as compared to the declining wages of average workers, has become one of the greatest moral travesties of our time.

In the search for blame, some say greed and some say deregulation. Both are right. The financial collapse of Wall Street is the fiscal consequence of the economic philosophy that now governs America — that markets are always good and government is always bad.

But it is also the moral consequence of greed, where private profit prevails over the concept of the common good. The American economy is often rooted in unbridled materialism, a culture that continues to extol greed, a false standard of values that puts short-term profits over societal health, and a distorted calculus that measures human worth by personal income instead of character, integrity, and generosity.

Americans have a love-hate relationship with government and business. The climate seems to shift between an "anything goes" mentality and stricter government regulation. The excesses of the 1920s, leading to the Great Depression, were followed by the reforms of Franklin Roosevelt. The entrepreneurial spirit and socialinnovation fostered by a market economy has benefited many and should not beoverly encumbered by unnecessary or stifling regulations. But left to its own devices and human weakness (let’s call it sin), the market too often disintegrates into greed and corruption, as the Wall Street financial collapse painfully reveals. Capitalism needs rules, or it easily becomes destructive. A healthy, balanced relationship between free enterprise on the one hand, and public accountability and regulation, on the other, ismorally and practically essential. Government should encourageinnovation, but it must also limit greed.

The behavior of too many on Wall Street is a violation of biblical ethics. The teachings of Christianity, Judaism, and other faiths condemn the greed, selfishness, and cheating that have been revealed in corporate behavior over decades now, and denounce their callous mistreatment of employees. Read your Bible.

The strongest critics of the Wall Street gamblers call it putting self-interest above the public interest; the Bible would call it a sin. I don’t know about the church- or synagogue-going habits of the nation’s top financial managers, but if they do attend services, I wonder if they ever hear a religious word about the practices of arranging huge personal bonuses and escape hatches while destroying the lives of people who work for them.

We now need wisdom from the economists, prudence from the business community, and renewal courses on the common good from the nation’s religious leaders. It’s time for the pulpit to speak — for the religious community to bring the Word of God to bear on the moral issues of the American economy. The Bible speaks of such things from beginning to end, so why not our pastors and preachers?


Diane said...

thank you for posting this. I heard part of that interview too, and am glad that Robert Rubin is one of Obama's advisors.

Jiff said...

It's right to be angry, and also right to affirm that things will be okay.
They will.

mompriest said...

Wow, yes....I have thought this for so long...although not being a financial person I lack the knowledge and the language to articulate it so well....thank you!