Will Washington Do Away with the Notion of "Too Big To Fail"?

In August, during an extraordinary appearance at the regional Federal Reserve Bank in Kansas City, Fed Chair spoke of the need to get past the time when any corporation is "too big to fail."

A few months ago, with memories of last year's financial meltdown fresh, that sentiment might have been as popular and unquestioned as love for sunshine and motherhood. But, having dodged a depression and with signs of improvement in the economy, support for new regulations that would allow large corporations to fail, Washington seems to be intent on doing nothing, meaning that corporate America, particularly investment firms and lenders, think that they can resume the same reckless practices that led to the September 2008 meltdown.

Former Fed Chairman Paul Volcker has made comments indicating that if Americans are concerned about this, the concern is warranted.

Calculated Risk quotes Volcker's cautionary note. Read the whole thing.

Here is the Bernanke interview. It was extremely impressive.

"A history of American [economic] growth"

From The Economist. A fun, painless graphic presentation that puts things in perspective. Thanks, Phil.

Also, see here.

'Restoring Hope in a Crashing Economy'

That's the title of the first installment of Ben Witherington's new blogging series. Good stuff, as usual.

Our Great Philadelphia Adventure (Part 3)

Funny moments and other stuff...

During the tour of Independence Hall, our guide, an informative and enthusiastic National Park Service ranger, pointed out that in that place in 1776, with the Declaration of Independence, and in 1787, with the Constitution, men from different backgrounds who had little previous experience with one another, found ways to compromise and iron things out to form and perfect a nation. A man called out from the crowd, "Do you think that we could get those guys back here today?"

During a bus tour of the city, we passed an anti-war demonstration. One protester, hat firmly pushed down overhead, bandanna tied to conceal face, held a sign that asked, "I want Congress to bail me out of my student loans."

There was a mix-up on the charge for our room at the hotel where we stayed. The clerk on duty took care of things. I noticed that he had a Phillies shirt, reflecting the excitement we saw in everyone there about the National League playoff series beginning the night of our arrival. I told him that, as a fan of the Cincinnati Reds, which hasn't won a World Series since 1990 and has pretty much lived in the cellar for the past two decades, I envied his excitement. It was pointed out to me that though the guy had worked miracles with our bill, he could do nothing about the Reds!

Philadelphia has one of the most vibrant central cities I've ever seen. On Friday, we were baffled to see so many cars leaving downtown as we breezed along on the Interstate to Independence Park at the center of town. We later found out that more people commute from the central city to the 'burbs in Philly than in any other town in the country. As we walked around the central city exploring, we saw tons of downtown area housing, something that's virtually non-existent in other big US cities. We also met people who live downtown and work downtown, enabling them to walk and bike to work each day.

Of course, it isn't all nirvana, either. We decided to take a surface road, Ridge Avenue, from downtown to our hotel in Plymouth Meeting, a suburb. Poverty is much in evidence. Jesus did say that the poor would always be with us. But He didn't say that to excuse inaction or indifference in the face of poverty. Widespread poverty in places like Philadelphia, the birthplace of the American experiment, should always be unacceptable to us, whatever our party. We can do better!

One bright spot of this part of our tour: There was a gas war happening in Roxbourough, initiated by the owner of a newly-reopened filling station. We found gas for $3.05 a gallon! (Today somewhere in Pennsylvania, we found it for $2.99 a gallon, all of which is reflective of the recent decrease in gas prices generally.)

A bright spot of the entire trip: In spite of the recent financial crisis, all the restaurants we visited were packed and travel on the Interstate and state routes was brisk. A major freight carrier had a huge banner in front of its corporate offices so that travelers on the Interstate could see. The banner announced that the company's employees had just received the largest pay increase in company history.

The Financial Crisis from One Christian's Perspective (Part 2)

The first installment in this series appeared in a shorter form yesterday over at The Moderate Voice, a site to which I've been contributing posts since last November. One of the commenters there said this:

You seem to be blaming all borrowers as if they all knew they would be in trouble with those mortgages. Some of them were not too bright (surprised?) and others too ambitious, hoping they could make it. Some lost their jobs through no fault of their own.

It was never my intention to paint with too broad a brush. My intent, simply, was to say that the greedy lending houses would not have gotten themselves--and the US economy--where they are right now were it not for the success they enjoyed in selling their ephemera to greedy consumers. Not all consumers who are apt to be hurt by this crisis by the time it runs its course were greedy. Not everybody who took out a loan was greedy. But some were. As I said yesterday, "Only those willing to be seduced are seduced."

The question before us is, from a Christian perspective, how do we avoid making bad financial decisions? How do we keep from being willingly seduced by those trying to palm off financial sugar water?

First: Recognize that money is neutral. It's neither bad or good. It's a tool, a means to ends. One of the most misquoted passages of the Bible says:

For the love of money is a root of all kinds of evil...(1 Timothy 6:10)

Notice that Paul, the writer of this passage doesn't say that money in itself is evil. He says that the love of it is the problem.

The love Paul describes here is what we might refer to as an addiction, a force at the bottom of a person's every motive and decision. For people like this, money is everything: the scorecard by which they measure their worth, the toy factory, their pleasure-maker.

People who love money make it the central force in their lives. It then supplants all of their relationships, whether with God or with others. It's no wonder then that Jesus says that it's easier for a camel to pass through the eye of a needle than it is for a rich person, who is likelier to have succumbed to the addictive power of money, supplanting God in the person's allegiance, to get into God's kingdom.

Second: Recognize then, that money is a power. This insight was first brought to my attention by Richard Foster in his incredible book, Money, Sex, and Power. As Foster explains there, either we will get control of our money or our money will control us. Often, those with a lot of money think that they are in control. And it is true that in many ways, the wealthy can do more than those with less. No one could deny that.

But I have also seen how wealth allows the wealthy to indulge fantasies of invincibility that come to grief when the normal downs in life that can rock all of us hit them harder than those more attuned to reality through their more modest finances.

I've also seen the wealthy become understandably distrustful of others. The wealthy are often assailed by people who "want a piece of the action." This, in turn, can lead to deep cynicism, which is unhinged from reality, too.

Whether it results of delusions of invincibility or the acid of cynicism, money is a power, an addictive power. When we see it as a tool, a means rather than an end, we are on the road to controlling our finances and the impulse to greed.

Third: Recognize that some people are more adept at making money than others. I have several long-term friendships with people who simply have a facility for generating income and making the right choices on what to do with their money to make it grow. They're shrewd about making money. Shrewdness is not a bad thing.

I'm not financially shrewd. I've never been a money-making machine. Now, I could resent that and I won't say that there haven't been times in my life when I haven't been resentful. But the Bible teaches that each of us has gifts, talents, both natural and supernatural, from God. In his book, The Purpose Driven Life, Pastor Rick Warren, who gives something like 90% of the royalties from his writing to the church, says that the thing for the Church to do with members who have the facility for making money is to encourage them to make more. Christians who make a lot of money, aware that this ability, along with every other good gift, comes from God, will be will be able to use money to support a broad array of church, charitable, and community projects. I agree with him.

Those of us who aren't financially shrewd should, instead of being resentful, use our gifts and abilities to their maximum positive effect.

Fourth: Avoid what the Bible calls covetousness. I hope to say more on what that means, why it's counterproductive, and most importantly, what can be done about it, tomorrow.

The Financial Crisis from One Christian's Perspective (Part 1)

Only those willing to be seduced are seduced.

Nobody persuaded into doing the wrong thing can credibly argue, "He tricked me," or, "She jumbled my thinking," or "The devil made me do it." The evil all around may pull at us, but we are the ones who cave into our inborn tendency to do the wrong thing, no matter what the wrong.

Believe me, I know. I do things that are wrong and, in the end, I realize I only have myself to blame.

Only those willing to be seduced are successfully seduced. I've been thinking about that a lot lately as the nation grapples with the financial crisis. It was caused, it's said, by the reckless policies of major lending institutions. Obscene compensation and benefits packages given to corporate CEOs and other company hot shots made things worse.

It's all true, of course. And these realities are among the reasons that both Democratic and Republican members of the House of Representatives offer for not passing the $700-billion bailout or rescue package forged by the White House and congressional leaders over. "Why should we give $700-billion to these greedy corporate honchos?" It's a fair question.*

I hate it when legitimacy, such as that enjoyed by the captains of the lending industry in recent years, is given by the government. For several decades now, Democratic and Republican Presidents and Congresses have endorsed and allowed the practices of the big investment bankers and mortgage lenders. Presidents lauded the ever-increasing homeownership rates, ignoring the fact that this "progress" was a house of cards erected on financial quicksand, bricks and mortar stacked on onion skin paper. It's high time that the illegitimate practices of the big mortgage houses were changed.

But others' practices need to be changed as well: Those of the borrowing public.

Nobody forced people to get sub-prime loans. Nobody forced consumers to buy houses with no money down, with insufficient income to make loan payments, all on the less-than-shrewd bet that property values would inevitably increase and, borrowing from projected future value, they could refinance their way out of debt. And nobody forces consumers to use their charge cards as revolving loans.

The greed of the now-pilloried corporations was rewarded for the past twenty years by equally greedy consumers who were working the angles to get into houses, to own other things, to effectively steal their ways to more comfortable lifestyles.

Greedy lenders seduced people. But they couldn't have been successful without greedy borrowers who were willing to be seduced.

The Biblical bases for today's Our Daily Bread devotion is Proverbs 1:8-19. For those not familiar with the passage or with the Old Testament book of Proverbs generally, a little background is in order. The book is a collection of wisdom sayings given by God to King Solomon.** These specific verses underscore how important it is for young people to listen to the wisdom given to them by their parents. "Pay close attention, friend, to what your father tells you; never forget what you learned at your mother's knee..." It goes on to say:

Dear friend, if bad companions tempt you, don't go along with them...[when they say]...We'll load up on top-quality loot. We'll haul it home by the truckload."...Don't give [the enticers] a second look; don't listen to them for a minute.***

Then it concludes by saying that the greedy who want to haul in truckloads come to bad ends:

...they lie in wait--to kill themselves! And set an ambush--for their own lives! Such is the end of all who are greedy for gain; it takes away the life of its possessors."****

Here in Ohio yesterday, voters began deciding the fate of two state issues. One will reduce the interest that payday lenders can charge. The other will allow casino gambling in the middle of the state. Payday lenders are predatory, charging as much as 392% in interest rates and casino gambling rarely brings the economic benefits proponents trumpet, resulting instead, in low-wage jobs and in preying most on those who can ill-afford to part with their money. So, I intend to vote yes on limiting the payday lenders and no on casino gambling.

But, don't be mistaken, greed merchants can't make a sale if people aren't buying.

Tomorrow, a few thoughts on how we avoid the enticements of the greedy.

*Proponents argue equally fairly that the bailout is really for the entire economy, restoring liquidity so that deserving consumers and business owners can have the credit they need to buy homes, invest in inventory, and make payrolls.

**Solomon is an interesting case. He began his reign recognizing that to compensate for his lack of experience, he needed wisdom. God was impressed that, rather than asking for wealth or power, Solomon asked for the wisdom to do his job well. But Solomon came to a bad end. He didn't go to the poorhouse. But with his wisdom came the capacity to acquire lots of money, women, property, and power. He became so consumed by these things that he wandered far from God. He oversaw the conversion of Israel into a society of greed-merchants, everyone on the take. Shortly after Solomon's death, the nation divided and, eventually, was conquered by foreigners. When the major object of a nation is to acquire stuff that's of no use to us after we die, the nation, no matter how much it's been blessed, dies.

***This is from The Message's rendering of Proverbs 1:8-10

****This is from the translation in The New Revised Standard Version of Proverbs 1:18-19

[Go here for thoughts on the meaning of 'the American Dream.']

[A shorter version of this piece appears on The Moderate Voice.]

It's Going to Be a Bumpy Ride

My pension monies are split between five different funds, each comprising 20% of the total portfolio. On Tuesday night, I checked how the funds were going and found that I had lost a total of $19,000 since the start of the third quarter. When I logged back on today, I learned that because of the market's response to the bailout initiative announced by Henry Paulson and Ben Bernanke, my pension had gained $6000 and I'm "only" down $13,000...for the quarter. At this rate, I could be out of the hole in two more days, three tops. But I am suffering from whiplash. Anybody else?

To quote Bette Davis, "Fasten your seatbelts. It's going to be a bumpy ride."