Thursday, September 18, 2008

Den of Thieves


Susan Brooks Thistlewaite writes in Newsweek on the current economic crisis in the US and explores the moral failure of leadership:
"Then Jesus entered the Temple and drove out all who were selling and buying in the Temple, and he overturned the tables of the money changers..." (Matthew 21:12) When Jesus drove the money changers out of the Temple in Jerusalem, he took on the brokers who were ripping off the pilgrims who came during Passover. These brokers (bankers) were in cahoots with the priestly class who ran the Temple and together they would cheat pilgrims out of the just price of their offerings. The bankers would sell their own Temple coinage in exchange for foreign money at a very high rate of exchange.

The Temple in Jerusalem was in a sense the national bank of Israel in Jesus' time; it was a powerful national treasury that did not let its great wealth sit idle. The bank lent the money it collected at very high interest rates. These unjust lending practices drove many residents into extreme poverty and created the vast slum dwellers of Jerusalem. The Jewish historian Josephus wrote an account of the huge debts owed by the poor to the rich in the Jerusalem around the same period.

Yes, credit and debt are religious issues! Jesus plainly thought so, to the point where he physically disrupted the largest national bank in Israel during the height of its Passover practices of ripping off poor and even more affluent pilgrims. Temple practices that hooked the poor on high interest credit and drove them into debt were the target of Jesus' anger.

The practice of exploiting the poor and the middle class is not new; what is new today, however, is that we have abandoned everything we learned in this country about how to control the worst of these banking abuses. In the mid-twentieth century in this country we had figured out that the markets needed to be regulated and had introduced practices to oversee lending practices and reign in at least the worst of the sinful human impulse to greed and exploitation. The Great Depression of the 1930's was in part a result of Herbert Hoover's over-confidence that business would regulate itself. After the Depression, regulations were put in place to restrain the most extreme and risky practices of financial markets.

That is, these regulations were in place until the "Reagan Revolution" and the tide of free market economics that is now drowning the American economy. James K. Galbraith, the Lloyd M. Bentsen, Jr. Professor of Government/Business Relations at the University of Texas in Austin, places the blame for today's market meltdown squarely on deregulation. "Revolutions devour their children. Deregulation has been the public faith of the financial sector since Reagan. Under Bush II, waves of predatory finance in housing were aggressively promoted by Alan Greenspan, by McCain's closest economic adviser Phil Gramm, and by so-called regulators who systematically subvert the public interest." Paul Krugman of Princeton University today said that, as chairman of the Banking Committee, Phil Gramm bears responsibility for the current credit crisis. "We could have another Great Depression if we really work at it and Phil Gramm is the guy to do it."

But this current multi-sector meltdown is not merely the result of deregulation, but a failure to create new regulation for new financial instruments that, for example, allowed lenders to transfer their credit risks, i.e. mortgage defaults, to third parties and passing the losses on, creating what has been called "a massive global gamble." Add this chain reaction risk to the fact that high-risk loans, even "piggyback" loans where a loan for the down payment is "piggybacked" on the regular mortgage, and the risk becomes even greater. The gamble was that the credit house of cards built on greed would not fall. It has fallen.

Markets are not ethical instruments; they are not "self-regulating." Markets are driven by the drive for acquisition. Regulations are designed to limit destruction wrought by greed, while not stifling the productivity of markets.

The moral failure here is that those who were charged with protecting the public interest from runaway greed and unfair lending practices instead have shown that they are the ringleaders of the Den of Thieves.


Read it here.

7 comments:

dr.primrose said...

OT. Episcopal Cafe has posted a link to Field Poll finds gay marriage ban trails by 17 points. The story begins:

"A constitutional amendment that would ban same-sex marriage in California has lost support during the past two months and now trails by a 17-point margin.

"Just 38 percent of likely voters back Proposition 8 while 55 percent say they will vote against the Nov. 4 ballot measure, according to a new Field Poll. In July, the measure trailed by nine points."

Марко said...

Does anyone have any insight or ideas about when we will finally hit bottom economically? This is a nightmare and it seems to be causing worldwide anxiety. The sense of dread I am picking up from people is like we are on a downward slope, sliding inexorably into the ditch of some awful war. The people who had the least to do with the creation of this disaster are the ones who will be hurt the most.

Cany said...

Ann, this was such a great post.

I had this discussion with my 94yo mom yesterday that used to double date with Reagan and has always liked him. I think she was paying particular attention given we spent 5 hours on Tuesday INSIDE banks, moving things from WaMu to Wells Fargo. This is half her life's savings that she worked very hard for, three separate (and separately protected) accounts. She has two others at Banco Popular NA which I am watching closely.

The big Republican shark of deregulation and its egregious companion, privatization, ruined in one year what Clinton saved in 8 years (after UNDOING daddy Bush's mess of four years). If Obama wins, he is stuck with one helluva mess to fix and getting out of the middleeast ASAP will HAVE to be part of that solution. We simple cannot spend $500million/day occupying a foreign country we had no business invading.

I am not sure the American public gets all this yet as the news doesn't lay out the history very well. I will never understand the complex strands of the current crisis, even groups of experts don't understand it. But we do know the philosophy that drove us to where we are.

Clinton's biggest mistake, IMHO, was NAFTA. That is part of this. He wasn't alone by any means. Few pubs voted against it and few dems, likewise. I will give Nader credit: he warned and warned and warned until he was blue in the face, and so did the unions. They were right.

We Americans have lost our sense of "us".(little u). I am going to be writing on that soon.

It is a religious and cultural adaptation to politics which is extremely sad.

The only possible good thing that may well come out of this is that it may have changed the dynamics of the election.

FINALLY people are talking about issues and not some second-place beauty queen who has no deference to the natural world which, BTW, includes we humans. We all know why it is so wrong that this is happening--and hopefully everyone understands why--and perhaps this singular event may keep her from being president in the next four years.

If we are going to get ANYTHING done to fix this, we need a dem presidency AND a dem congress. That is the fastest and best way to make changes we so obviously and desperately need.

Sorry, end of lecture.

I can only hope that people wise up and I think that is starting.

JCF said...

Off-topic:

xDUNCAN DEPOSED!

Lord have mercy. Christ have mercy. Lord have mercy.

God, continue to bless and protect the Episcopal Church. Strengthen your faithful Episcopalian servants in Pittsburgh, for the HARD WORK of rebuilding their diocese; may they be granted a new shepherd who is faithful and merciful. Bring a spirit of reconcilation---to your child Robert, and to us all---in your time.

David |Dah • veed| said...

Duncan was received into the HoB of the So. Cone by declaration of the PB of the So. Cone this morning, before deposition by the TEC HoB.

JCF said...

On-topic: has anyone else this week sorta wanted to hear that hoity-toity Knickerbocker accent intone

The only thing we have to fear . . . is FEAR itself!

[FDR was an Episcopalian, wasn't he? He shoulda been! ;-)]

Grandmère Mimi said...

Ann, that's an excellent commentary on the present situation of borrowing and lending in the US today. The deregulators enabled the rapacious, greedy lenders, along with those who were trading "who knows what it is and what it's worth" back and forth, with little or no transparency.