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.