The Cause of the Crisis People Won’t Face
If not for speedy and sweeping government intervention, America’s economy would have tanked in September.
The trouble is, their solutions—the most radical federal intercession in the economy since the New Deal—in the long run will not prevent systemic meltdown.
Why? The reason is simple.
These remedies are failing to address what caused the problems to begin with.
Why is the U.S. financial system so diseased? It seems no one is willing to admit the real reason—even though it has been painfully evident for years.
The housing crisis involved a whole web of related problems with essentially a single cause. You had thousands of buyers lying on their mortgage applications; appraisers inflating valuations; lenders knowingly overlooking suspect documentation because they were just going to sell the mortgage to someone else anyway; credit-ratings agencies providing triple-A ratings to risky subprime mortgages even though they knew many were up to 10 times riskier than similarly rated investments; and the National Association of Realtors telling people it is always a good time to buy and vigorously denying the existence of a housing bubble—even as the bubble was clearly popping.
Pretty repulsive stuff—up and down the chain.
What was the cause of this catastrophe? Any direct mention of it tends to raise people’s hackles. People fault the lack of regulation. Okay—but why do we need regulation?
Because of greed and its associated sins. Lying. Stealing. Coveting.
The love of money, Scripture tells us, is the root of terrible, terrible evil. And as Proverbs 28:20 says, “He that maketh haste to be rich shall not be innocent.”
Across the board people have been working the system to get all they can—regardless of right and wrong, regardless of the non-monetary cost, regardless of who gets hurt.
It has all been caused by the way of get. This breaks God’s moral, spiritual law, which establishes the way of give.
The Shocking Reason Behind Foreclosures
Today, banks are foreclosing on houses in record numbers. Do you know why? It isn’t because the homeowner got sick, or lost a job, or couldn’t afford the payments.
In Stockton, California, 60 percent of delinquent borrowers do not even bother to contact their banks to attempt renegotiating their loan. “They stop paying and they stop talking,” says Kevin Morgan, an estate agent who sells repossessed houses for banks. “They just plain walk away.”
Prof. Nouriel Roubini of New York University says the industry is experiencing “a tsunami of voluntary defaults.” If trends continue, the financial losses could be more than a trillion, wiping out “most of the U.S. banking system” (emphasis mine throughout).
In past real-estate busts, homeowners did everything they could to make good on their word and their mortgages. This time, that is not happening in many cases. Homeowners are looking at their homes that are now only worth a fraction of what they paid just a couple of years ago, and deciding to mail in the keys and let the bank take the loss. It is a completely cool, well-thought-out business decision, not based on what is right and wrong but on the fact that under current bankruptcy law, there is little that banks can do about it. In five years the home owners’ credit will be repaired and they can return to the market to purchase a similarly sized home at half the cost. And in the meantime, because the banking sector is so swamped with home foreclosures, the delinquent homeowners might even be able to live rent-free for up to a year before the bank gets around to taking possession of the property.
Michael Pfeifer, a mortgage fraud lawyer in Orange County, California, says it has become one big game. “Lying is the reason we have the economic crisis to begin with. People thought it must be okay because they could get away with it.”
People don’t seem to care about things like their reputation, honesty and character. The pursuit of money reigns supreme.
A School for Unhappiness
Harvard Business School (hbs) provides another example of how widespread the moral breakdown has become. This is one of the most influential educators in global industry. One fifth of the ceos in Fortune 500 companies have been groomed and shaped by this revered institution. The biggest banking conglomerates and oldest families routinely send their best and brightest young up-and-comers to hbs to learn to manipulate the reins of power.
But consider the following event that took place at the 100-year-old hbs, and ask yourself: Can any society that values money and power over honesty and morals continue to prosper?
In 2005, over 100 applicants were caught hacking into a website that stored Harvard’s admissions information. When the breach was revealed, the school administration retracted acceptance offers made to students involved in what Harvard labeled a “serious breach of trust.”
Seems like a reasonable and just course of action. But an astounding 75 percent of Harvard’s “corporate accountability” class sided with the hackers. These were students in a class on corporate ethics! They saw nothing wrong with breaking into the school’s website, says Harvard graduate and former Daily Telegraph Paris bureau chief Philip Broughton.
In his book Ahead of the Curve—Two Years at Harvard Business School, Broughton describes hbs as basically an institution that transforms students into individuals capable of running businesses but fails them in almost every other way. In the words of BusinessWeek, Broughton describes a group of amoral strivers who are willing “to sacrifice family and friends for the success they felt they so richly deserved” (August 7). In his stinging account, Broughton says that as a result, hbs has turned into a “factory for unhappy people.” hbs has also churned out some of America’s most reviled corporate felons.
You can see the signs of such criminal thinking all over these latest Wall Street failures—and all Americans will pay the price. Take Fannie Mae and Freddie Mac, for example. The government nationalized these two giant mortgage lenders after it determined they had drastically overstated (lied about) their reserves and had blatantly manipulated recent losses. Now, U.S. taxpayers are on the hook for trillions of dollars’ worth of fraud-ridden “liars” (no documentation loans) and “ninja” (no income, no job or assets) loans. And you can bank on the fact that as other lenders’ profits get crushed, they will do whatever it takes to try and stay solvent. That means more fees, less taxes paid, more layoffs, reduced services, and higher lending costs for the rest of us.
What Happens When You Break the Law
Many people believe that biblical laws no longer apply. They are dead wrong. Our broken economy proves it.
No one doubts the existence of physical law. The skyscrapers on Wall Street couldn’t have been erected without a respect for it. Some even believe in a Creator who designed physical law. Why should we believe, then, that the moral law that He authored and codified to govern human relations is any less binding on us—even when we see mountains of evidence that it breaks those who break it?
God’s Ten Commandments prohibit lying and deceit. That would include fraudulent accounting practices, falsifying loan applications, misrepresentations of the health of mortgages to potential buyers, and so on. Man-made regulations and laws forbid most of these practices, but still, countless individuals and businesses obviously felt that, if they could get away with it, they’d come out ahead by engaging in them anyway. They overlooked the fact that they were also breaking a God-given moral law—something that always exacts a penalty.
The commandments forbid stealing. A particularly egregious violation of the spirit of this law is the kind of severance packages we are seeing among the ceos of these failed Wall Street firms: $22 million for Lehman Brothers chief Richard Fuld; $60 million for Bear Stearns chairman Jimmy Cayne; $68 million for Citigroup’s Chuck Prince; $161 million for Merrill Lynch’s E. Stanley O’Neal. The recklessness of these men cost hundreds of thousands of people untold wealth. The fact that they are enriching themselves on the backs of the people they broke gives insight into how they conducted their business. No wonder their companies crashed. Though they are apparently violating no man-made laws, they are absolutely trampling on God’s spiritual law.
The commandments forbid coveting and greed. These sins have been at the very heart of this financial crisis. At every level.
Legions of lawyers and armies of analysts are crunching numbers and trying to answer this question: Can the economy survive the looming financial collapse? But the real question is, can the economy survive the widespread moral collapse?
No financial system can stand for long when its foundations are compromised by such corruption!
Though the market is hopeful that the government’s intervention will stave off disaster, in reality the government itself is compromised with the same fundamental problems that the private sector is. Though it pretends to have the resources to fix these problems, the truth is that it too is a hair’s breadth away from requiring outside intervention itself.
People do not want to hear about sin. But whether or not they admit it, that is exactly what has caused their economic suffering. All those who are losing jobs and wealth are suffering the results of broken spiritual laws. Not necessarily their own sin, but sin just the same.
The Clearest Way to Wealth and Happiness
Many people believe God’s law is a curse. Actually, it is an incalculable blessing, because it reveals exactly which behaviors will inexorably lead to curses such as those we see today, and which will lead to blessings.
Think what America’s economy would become if Americans followed those laws and never stole and never lied. Think of the cost savings that would result from obedience to just those two of the Ten Commandments. Think of how much money would be saved if businesses were never robbed, websites were never hacked, billion-dollar lawsuits were extinct, police did not have to track down criminals, and courts and prisons did not have to process convicts.
As Bruce Walker, writing for American Thinker, said, “The cool, practical, financial argument against sin is so overwhelming, the number crunching of any serious cost-benefit analysis of the trillions lost through our acceptance of sin is so convincing, that hopeful people can dream that a wise leader will champion the fight against sin as the clearest way to make us wealthier and happier people” (September 7).
Yes—hopeful people can dream about this, particularly because that wise leader is coming! After the coming financial days of reckoning, Jesus Christ will return and champion the fight against the sins that are killing us today. You can read about the resulting wealth and happiness in the booklet The Wonderful World Tomorrow—What It Will Be Like, free upon request. Once all the fraud and deceit is removed, a healthy, solid, prosperous economy will be established and will spread across the globe. Financial markets will thrive, businesses will succeed, families will enjoy wealth and fairness. Why? Because a world economy based on law and honesty—God’s principles for prosperity—cannot fail to succeed!