Monday, October 6, 2008

$700 billion

     Sometimes, I have to wonder at God’s timing and His sense of humor. While we are in the midst of what could become perhaps the greatest financial crisis since the Great Depression, our Wednesday evening Bible study, which has been on the book of Deuteronomy for nearly the past two years, was forced to confront God’s teaching on interest in chapter 23. Keep in mind, the group selected this study nearly two years ago, and we progressed at a speed which made this teaching and discussion come up right in the midst of when our government is considering a $700 billion bailout of the financial industry. Coincidence? Godincidence? “What is going on” “Does God have anything to say about the crisis?” “What should I be doing, selling or buying” And “How can we speak into this mess when talking to our neighbors ad co-workers?” are just a few of the questions being asked. Add to that my background in the markets, and a number of parishioners simply want to know whether they should panic or not.

     Without getting into the specifics of parishioner’s finances, most should be discussing their current holdings with a trusted financial planner or investment representative. A trusted representative or planner knows your goals, your situation, your risk tolerance, and other such information that you have provided over the years. He or she should be able to help guide you through this turbulence.

     So, in a nutshell, what is going on? Basically, many of the big banks and money houses bought the mortgages that were written during the recent housing boom. As foreclosures have increased, more houses have come on the market. More selling than buying drives prices down. A house that may have been worth $700,000 a couple years ago may now only be worth $550,000. Little money down was required to purchase the homes, so homeowners find themselves upside down on their homes. In other words, people may owe more on the houses than they are currently worth. Some are simply choosing to walk away from the homes leaving the banks holding a mortgage with no hope of it being paid off in full.

     Complicating the problem is the fact that many houses were bought with adjustable mortgages which were initially low, with the idea that once the house appreciated enough it would either be refinanced under a traditional fixed mortgage or simply sold with the seller pocketing the profits before the adjustable rate ever reset. As a result, many banks and other money houses find themselves owning the mortgages on properties that are no longer worth the note, with mortgage holders who cannot meet the rising mortgage payment. What to do?

     Finally, derivatives are once again contributing to some of our economic problems. And just what, exactly are derivatives? Although this is admittedly a bit of an oversimplification, companies have placed bets. Companies have bet whether interest rates will go up or down, whether other companies will go out of business, and even on the risk exposure that companies may have in the event of natural disasters. Other companies have placed bets that companies would survive, that interest rates would do the opposite, or that the other companies have no risk. It would be akin to the betting that goes on around the Super Bowl when people bet on everything from the winner to the points scored to the coin flip. Unlike with Super Bowl bets, however, nobody has checked to see whether the companies placing the bets have the assets necessary to cover the bet if they are wrong. Some companies allegedly have bought and sold derivatives worth hundreds of billions, if not trillions, of dollars, with little more than $100 or $200 million in net assets. That means that if they bet wrong, they cannot pay their debts. Meanwhile, the companies who bet against them and ending up winning are discovering that the debtor companies cannot “pay off the bets” and that the won assets are worthless.

     The problems being discussed on the nightly news and in Congress might seem a bit remote to us. Here in Iowa, the falloff has not been nearly dramatic as it has been in other parts of the country, but that primarily is because we did not experience the recent runup in housing prices that was common in California, Las Vegas, Phoenix, Miami, Charlotte, and other boom markets around the country. In many of those markets, the housing market appreciation far exceeded historic norms. Entire economies and industries came to depend upon the housing boom, and its collapse has affected everything from municipal funding to job employment. This buying and selling of houses became so ubiquitous that television shows such as “Flip that House” have garnered wide audiences, and new businesses such as “house stagers” have been developed to meet the needs of the housing boom. On paper, trillions of dollars in wealth were created, and a lot of it was spent rather than saved. The wealth generated during this recent boom kept the consumer spending high which, in turn, kept the economy chugging along. Now, as the housing bubble has burst, billions in losses may be created, and the economy may be grinding to a halt.

     I say these losses may be created as no one knows how far prices will fall. The $700 billion plan recently put forth by the government assumed that the foreclosure rate would be double that of the Great Depression and that the mortgages would be worth approximately 65 cents on the dollar (in other words, a house worth $1 million a couple years ago will bottom out around $650,000). If those two assumptions were to prove correct, taxpayers would actually make 10-12% on the $700 billion outlay, nearly paying for the recent AIG bailout.

     Why the need for the outlay? Quite simply, no bank really knows how bad the mortgages held by other banks really are. As a result, banks are refusing to lend to other banks. Complicating that problem, no one is willing to provide capital to banks and other lenders because they cannot assess the value of many of these distressed mortgages. Banks are hoarding cash. Investors are hoarding cash. Liquidity has dried up. Mortgages cannot be closed; student loans are unavailable; big ticket items such as cars are harder to purchase.
Regulators, the Presidential Administration, and the Congress have all come to realize that cash must be put back into the system. If the government buys $700 billion in questionable assets, that frees the banks and financial institutions of the uncertainty currently hindering their business and allows banks and other financial institution to get back to loaning, investing, and making money. What does this have to do with Deuteronomy and how can Christians speak into such an environment?

     I will not presume to catch everyone up on nearly two years worth of study, but Deuteronomy provides us with a second instruction, torah, from God (Israel decided it did not want to follow the Lord into the Promised Land the first time it stood on the banks of the Jordan). Deuteronomy both reminds us of God’s ideal and attempts to mitigate the consequences of sin in the world. God’s offer to Israel was sincere. If Israel kept His instructions, He would have blessed them; Israel chose to ignore His instructions and received, instead, His curse: expulsion from the Land. Among the instructions given to Israel was that there would be no charging of any interest on loans. To make sure Israel understood what God was saying, interest was prohibited in Exodus 22:25; Leviticus 25:35-37, and Deuteronomy 23:19-20. Some modern translations may say excessive or exoribitant or greedy interest. The Hebrew simply says any. God’s people were not to charge God’s people any interest. Indeed, not charging interest is declared a sign of rightousness in the Psalms, in Proverbs, and in Ezekiel. The principle behind this instruction is that humanity will often embrace any opportunity for exploitation. In other words, when we have an opportunity to take advantage of another human being, we will. In these passages, God is saying that the hard-hearted are not allowed to profit during hard times on the backs of the less fortunate. Hard times will occur; God’s people will react to those times in a way befitting a people who call Him Lord and Abba. The poor in the midst of His people will be protected from exploitation.

     You and I, sitting in Davenport, may well wonder, given the importance of interest-credit relationships in the “free market economy” in which we live, how we can speak into this credit crisis. Indeed, you and I may well feel powerless and exploited as this situation and proposed solution seem to be focused on other parts of our country. $700 bilion is so much money that all of us here combined will not earn that much money in our lifetimes combined. How can Church change the culture?

     First, we would do well to remember our roots. It is only recently that the Church has embraced the idea that interest was morally acceptable. Clearly, God had other ideas. God’s people were not allowed to charge God’s people any interest. This idea of dining out, buying bigscreen televisions, beer -- if one is a college student, and other amenities on credit cards goes against the way He taught His people to live. Paying off those $26,000 credit card bills through refinances of houses (increasing ones debt) is against His instruction. How might the credit-interest relationship of our church members be changed if we committed to living within our means and paying cash for all our purchases?

     Second, the society into which this instruction was placed was forbidden to charge interest and commanded to help a neighbor in need. A community could keep such an ethic only if it was confident that the Lord was the Lord of everything. So often, you and I may act as if God is only God on Sunday mornings. So often, you and I buy into the idea that the “market” is in control. A trillion dollars was wiped out last Monday because the “market” went down, as if that explains the fear that was at play when the House voted down the proposed bailout bill. But we, as sons and daughters of our Father in heaven, are called to remember that He is in charge of every inch of the universe and every second of time. There is no time, there is no place when we are beyond His reach. What if we, as He has called us to do, responded to the needs of our fellow brothers and sisters in the way that He has called us? We might be tempted to think that we could not accomplish much, but here at St. Alban’s we have made a difference in the lives of parishioners affected by the summer floods, have made a difference in the lives of our brothers and sisters in Swaziland by providing them with clean drinking water, have made a difference in the lives of those around us hungering for food, have made a difference in providing for the needs of abused ladies and their children, have made a difference giving our change to vaccinate the youth in Tanzania, and have made a difference in the lives of young girls trying to find a safe place in which to give birth. We are by no means rich; and we have not loaned them this help “with interest!” We have responded to need in our midst by loving our neighbors as ourselves. Are we in any way impoverished for our actions? Has God not blessed us for our actions? Or are we, as so many of us note, living in the midst of the “loaves and fishes.” And see how our community notices. Like the Romans who noticed the Christians (“see how they love one another”), people notice what we do, ask us why we do it, and often go away muttering that they wish they shared our faith! Finally, since the people of God were not allowed to charge interest and since they were commanded to render aid, there existed a legal and moral imperative to help another in need when the instructions of Deuteronomy were followed. It was a much different economy; quite unlike the economy we have experienced the past few days. The papers and press have reported that banks and other money institutions have refused to loan money to one another and that LIBOR rates (rates charged between banks) have surged as a result. If God’s instructions were followed, what would life look like? Would we be hoarding cash as many banks are now? Or would we instead be encouraged to loan to another brother or sister in need. If one lived with the understanding that he or she was commanded to help and one could not charge interest, there is simply no reason to hoard. The whole community living under God's instruction has an moral imperative to help those in their midst in need. And such an understanding was commanded throughout the entirety of the torah. Slaves had to be freed every seventh year and “garlanded” with flocks and crops; the hungry were allowed to feed in the fields, the crops lay fallow every seventh year and for two years every 49th and 50th year, and the widows and orphans were cared for in accordance with the Lord’s heart. Because they were commanded to be aided, God’s people in need had no reason to look outside God’s people for help; and, because they could not make more money loaning their money anywhere else, God’s people with money had no reason to hoard their cash.

     What does such a life look like, lived in modern times? What if we as landlords cared for properties as if our beloved family members were going to live in our houses or apartments? What if, when one among us was stricken with a disaster such as a tornado or serious medical need, we stepped in and helped as much as we were able? What are some other ways in which those with resources might care for His chosen people in our midst?

     And what of the needy? We need to discern whether we really need what we think we need. Perhaps, if we are always in financial difficulties, we are not being good stewards. Perhaps, our perceived needs are really wants. Sure, the newest, hottest truck is awesome to drive and show to our buddies, but does it get us to work any better than a 2004 compact? Yes, a 55-inch high def plasma screen is great for watching games or soaps, but do we really need the television dominating our conversations even more? Eating out is sure convenient, but do we get our bang for the buck? We need to learn to live within our means, trusting that our Lord will provide for our needs and our emergencies as He has for His people all throughout history.

     Reading this and considering the dollars and forces arrayed against us, one might be tempted to consider that I have lost my senses. The money is too much; the need is so great. We cannot change the way the world works. I am reminded, however, of a discussion with the roses a few Thursdays back. We were considering how we should respond when we are ill-treated and trust that vengeance will be the Lord's, just as He has promised. A couple of ladies, at nearly the same time, reminded all of us present of the Amish response to the schoolhouse massacre from a year ago. Rather than seeking the death of the sick man who killed their children, the Amish set out to pray for and to forgive him for the evil he had brought into their peaceful lives. For a couple news cycles, the world remarked at that “turn the other cheek” mentality. Pundits and talking heads asked, “How can they forgive him?” And the spokespeople for the Amish responded that their Lord had first forgiven them. The world was stunned. Christ was again a stumbling block to the world!

     Similarly, the past few weeks have seen us reading part of the Exodus story in which the people of Israel complain about the provision of the Lord. They hunger, and against all likelihood, the Lord provides manna and quail. Imagine, former slaves get to eat meat every day! Then, filled in their bellies, they thirst. And God brings forth a spring of water from the flint stone in the desert to provide drink for His people. God always provides for His people abundantly. Why should we think that He cannot provide for us today?

     Would it be easy to live as He has instructed us? No. Certainly people would think that Christians have lost there minds and seek to take advantage of us. The world would smile at us and nod its head accordingly as it tried to reach around us and fleece our pockets. Yet, if it is God’s plan, can the world really prevail? The same Lord who created all that is, the same Lord who sent His Son to redeem us, the same Lord who raised that Son on the third day is the same Lord who commands a different economy? If He thinks it would work, who are we to argue? If our lives and our times are truly in His hands, why not our wallets, or checkbooks, our 401k’s and our trust as well?


1 comment:

Rev. Bryan Bywater said...

Amen, Amen....spoken from a man who walks in the shoes of the people of the Exile, whose sandels, though used, have not worn out. Thank you Brian.