Wednesday, October 01, 2008

Let Wall Street have a nightmare and the whole country has to help them get back in bed again.

Will Rogers said that over 70 years ago. How little life has changed.

Is there a relationship between economics and morality?

Or has a sound economy become the highest good?

What has happened to our economy and how did we get here?
We have worked with people, who are in economic distress, in Christian financial counseling for 17 years, and with young, engaged and newly married couples for the last 13 years. We saw the train wreck coming for many years, as did many others. The red lights were flashing but the train wasn’t slowing down.

The lure of debt dangles before our eyes every direction we turn; the temptations are everywhere. The Bible says in Proverbs 22:7 “the borrower is servant to the lender.”

We have seen three foreboding snares in which people, especially young people, get trapped. Each snare is bound up in debt.

The bait for each trap is materialism, greed, consumerism, instant gratification …. Whatever you want to call it...

The first is school loans. We have seen people with more than $100,000 in school loans. They are easy to get, always available. We heard a story just today from a parent of a 39 year old who is having trouble paying her school loans. They go on forever.

The second trap is a new car with little or no down payment. Again, these loans are easy to get. Within a year, many people find that they can’t afford the payments on the car. They are “upside down” on the loan, they owe more than the car is worth. The chance of selling the car and getting out of the payments is nil. Car dealers make it easy though, they will let you buy another one and roll-over your debt into a new loan!

The third trap is buying a more expensive house than a person can really afford. Home buyers often gauge which house they will buy according to what the mortgage company will loan them. Mortgage companies will loan a person much more than the person can afford and often they do not require a down payment.

This third trap was the tipping point of the financial crisis we have today.

Mortgage companies often sell the mortgage to another company after the home is bought. After practicing this procedure regularly, many of them realized that they weren’t really taking a risk to be the initial financier of a home. They financed homes without being stringent on the qualifications of the buyer. The company who bought the loan had not qualified the buyer themselves. They had no idea if the person could make the payments…. and so on and so on.

The house of cards has now collapsed.

What are others saying?

By the time you read this blog, the decisions on Capitol Hill may be finalized. Right now, politicians are debating, main street Americans are angry, and Wall Street is on a wild, roller coaster ride.

Some politicians are calling the government bailout “socialism.”

Chuck Colson, on his website called Breakpoint, says that the cause of the market meltdown was moral failure. Free markets—capitalism itself—can thrive only when corporations and individuals exercise moral restraint. When those restraints fail, government regulation is sure to follow; which, in turn, makes free markets less efficient, and certainly less free.

Moral restraint, you see, requires a set of morals—beliefs that some things are right, and some things wrong. To put it more simply, moral restraint requires a biblical worldview.

Last July, in a private gathering, someone captured President Bush on a mobile phone. When asked about the cause of the global credit crisis, the president responded, “There is no question about it. Wall Street got drunk.” The president paused, and said, “That’s one reason I asked you to turn off your TV cameras.”

Michael Novak writes about the relationship between the free market system and morality: Western democratic capitalism is like a three-legged stool, resting on political freedom, economic freedom, and moral restraint. Take away moral restraint, and the stool collapses.