Sunday, January 31, 2010

SIGTARP reports (and he's not happy)

Even if TARP saved our financial system from driving off a cliff back in 2008, absent meaningful reform, we are still driving on the same winding mountain road, but this time in a faster car.

These words are from the latest quarterly report to Congress by SIGTARP Neil Barofsky, the Special Inspector General for TARP, the Troubled Asset Relief Program. TARP is the $700 billion bank bailout approved by Congress in the fall of 2008 at the height of the financial crisis. The “too big to fail” banks are now even bigger, Barofsky writes, and therefore are even more dangerous. They still have no incentive to restrain their risky behavior because they know the government still will rescue them rather than risk the collapse of the financial system.

Barofsky’s report also raises serious concerns about the federal government’s massive intervention in the home mortgage market. The government "has done more than simply support the mortgage market, in many ways it has become the mortgage market, with the taxpayer shouldering the risk that had once been borne by the private investor." Ninety percent of recent home mortgages have been backed by government controlled entities like Fannie Mae and Freddie Mac. What the government calls a stabilizing of the housing market, Barofsky says is a potential re-inflation of the housing bubble.

The Federal Reserve has spent an unprecedented $1.25 trillion dollars purchasing mortgage backed securities (MBS) to keep mortgage rates low. Those purchases are about to come to an end with an inevitable jump in interest rates. Home purchase will then almost certainly drop, as will prices—by as much as 10 percent by some estimates.

Barofsky’s report raises the same concerns as those of many economists. Are the hundreds of billions of taxpayer dollars spent since the financial crisis began actually improving things or just postponing inevitable market corrections, “kicking the can down the road”? Are we actually dealing with underlying problems or just treating symptoms?

From the start the reaction to the financial crisis has had an air of unreality and denial. The hope still seems to be to go back to the way things were before, despite universal recognition that the previous economy was unsustainable. For example, markets are looking for a rebound in new home construction as a “real” sign of economic recovery. Yet there remains a significant oversupply of new houses and the previous high rate of home construction was possible only because of the artificial demand of the housing bubble.

The SIGTARP report goes on for over 200 pages and detailed summaries are available here and here. Included in the report is the information that 77 criminal and civil investigations are underway, including cases of fraud, money laundering, insider trading, and tax evasion. It also describes numerous instances of questionable negotiations between government agencies and private firms and favorable government actions on their behalf.

Obviously SIGTARP has been very busy and he looks to continue to be so for some time to come.

Saturday, January 30, 2010

If 7 Worrisome Things Aren’t Enough . . .

From Bloomberg (via Mike Shedlock/Mish’s Global Economic Analysis) we learn:

Greece is losing the confidence of bondholders that it will reduce the largest budget deficit in the European Union amid increased speculation that the country won’t be able to meet its debt obligations.

Dan Froomkin’s “7 Worrisome Things” that I posted about earlier were all domestic economic concerns. With the increasing interconnectedness of the global economy, we need to remember that there are international financial problems just as great as our own. A financial crisis half-way around the world can ricochet with unpredictable consequences.

Greece is universally recognized as the weakest link of the European Union. In fact, many now believe it should never have been admitted into the EU in the first place as the economic numbers used to justify it were probably fudged. Too late now.

Doubts in the financial markets are causing Greece’s borrowing costs to soar. To prevent a default, other EU member countries may have to come to its rescue with a bailout (sounding familiar?) But if that happens, what is the incentive for Greece to get its economic house in order? And what message does that send to the other EU members in financial difficulty, like Portugal, Spain, Italy, Ireland . . . ? All the options are looking bad and Germany, especially, is NOT happy as it knows it will bear much of the burden for shoring up its faltering EU partners.

A financial crisis in the European Union can’t not have global consequences—it’s just too big an economic player. So everyone is working to prevent it, right? Not necessarily, because there are ways to make money no matter what happens. Financial institutions try to hedge themselves against any eventuality. Then the question becomes, “Who’s betting on Greece falling and stands to make big money if it does?” and “Do they have the financial power to bring it about?” Perhaps Captain Renault should head to Wall Street and round up the usual suspects. And if your reaction is, "Surely no one would intentionally bankrupt a foreign country," then you haven't been paying attention.

Friday, January 29, 2010

End of the McMansion?


Despite the nonsense in Washington, there are signs around the country that we are coming to our senses. Here's an encouraging report that house sizes may be coming back down. The wasted space in new, over-sized houses I see is incredible. Rationality as well as the new economic realities may lead us to build houses with ammenities that we actually use and can afford.

Seven Worrisome Things

As part of its slow death spiral, the Washington Post dumped one of its more able reporters, Dan Froomkin. Fortunately he landed at place which can use his talents even better, The Huffington Post, where he is now Washington Bureau Chief. Last week he wrote this piece which succinctly summarizes the continuing and serious economic dangers still lurking. The theme of so many economists today is that this is not an ordinary recession. Rather, it is the culmination of years of economic deterioration and denial, compounded by financial malfeasance and incompetence.

“7 Things About the Economy Everyone Should Be Worried About” is just what it says—and “everyone” should include our elected officials in Washington. Economic stagnation, or worse, is now a reality for the majority of American households. The reasons are not yet clear but globalization and our dependence on foreign oil are certainly major factors. The missed element in this, however, is that not everyone is sharing in our economic flat-lining. The rich and very rich have managed to continue to prosper and Washington policies have played a direct role in enabling them to do so.

This, for me (and for many others), has been the biggest disappointment with President Obama. He doesn’t get it and, despite his rhetoric, is enacting policies guaranteed to continue this inequality. His failure to aggressively rein in the big banks is one example. His nonsensical concern with the deficit in the midst of the country’s worst recession since the Depression is another. Surrounded as he is by advisors who are almost all products of Wall Street, this isn’t really a surprise. Perhaps the surprise is that we didn’t see it coming.

Read Froomkin’s article and learn about these “7 Things:”

No. 1: The middle class may never be the same again
No. 2: The recovery could take a really long time
No. 3: The recovery could only be temporary
No. 4: Then what? This time, we don't have the tools to get out of a recession
No. 5: The ‘very serious' people in Washington are still obsessed about the deficit
No. 6: Whatever is making the stock market go up could go away
No. 7: The hugely irresponsible financial sector remains unchastened

Thursday, January 28, 2010

God in Haiti (Sunday Reflections for January 31, 2009)

Did God cause the earthquake in Haiti? TV evangelist Pat Robertson implied as much on his 700 Club TV show. A torrent of criticism poured down on him afterwards but I’m not aware that he’s retracted or modified his remarks.

When speaking about the catastrophe and calling the country to come to Haiti’s aid, President Obama said, “we stand in solidarity with our neighbors to the south, knowing that but for the grace of God, there we go.” Yet these gracious words also hide a questionable theology, as writer James Woods observes in the New York Times.

And there was God once again. Awkwardly, the literal meaning of Mr. Obama’s phrase is not so far from Pat Robertson’s hatefulness. Who, after all, would want to worship the kind of God whose “grace” protects Americans from Haitian horrors?

There, but for the grace of God, go I. While we may not think or say those somewhat archaic words, many of us express a similar sentiment when we encounter someone else’s misfortune. But what do we mean by it? What did President Obama mean? It can be a friend, a neighbor, a coworker, or a stranger in a news story that catches our attention: hit by a car, diagnosed with cancer, or (common today) loses their job and falls into financial ruin. “There, but for the grace of God, go I.”

That could have been me, we think. But it wasn’t me because . . . God protected me? I’m lucky or the other person was unlucky? Or what?

Under any kind of theological system, Robertson’s analysis is pretty farfetched. Even if true, it makes no sense that a “pact with the devil” (as Robertson alleged) made centuries ago would cause God to send an earthquake today. But what about the individual victims? Woods quotes several responses by Haitian survivors:

“We have survived by the grace of God.”

“I blame man. God gave us nature, and we Haitians, and our governments, abused the land. You cannot get away without consequences.”

“Why give thanks to God? Because we are here. What happened is the will of God. We are in the hands of God now.”

The last was spoken by Bishop √Čric Toussaint as he stood by the heavily damaged cathedral in Port-au-Prince, where the Roman Catholic archbishop was killed. Woods appreciates why BishopToussaint would speak such ambivalent thoughts but he doesn’t buy them.

This response is entirely understandable, uttered in a ruined landscape beyond the experience of most of us, and a likely source of pastoral comfort to the bishop’s desperate flock. But that should not obscure the fact that it is little more than a piece of helpless mystification, a contradictory cry of optimistic despair.

“A contradictory cry of optimistic despair”? The judgment sounds harsh but it may not be far from the truth. As Woods says, none of us can truly appreciate what it is like to experience something as catastrophic as the Haitian earthquake and then trying to regain our equilibrium in a homeland shattered almost beyond recognition. Would we be surprised to find that many/most survivors are in some state of shock? As is becoming increasingly well known, PTSD is not simply an experience of veterans but can afflict anyone who has gone through a traumatic event. Inevitably people’s feelings, thoughts, and perceptions are distorted and jumbled as they try to comprehend the incomprehensible.

For most of human history, there was no explanation for natural disasters like earthquakes, hurricanes or outbreaks of plague other than, “God/the gods did this.” Today it’s different. Regarding earthquakes, we all know about fault lines and plate tectonics. Indeed, seismologists had told the Haitian government a short while ago that a major earthquake there was a highly likely in the near future. They even told them about how strong it would be and they were right on the money. Time and Haiti’s poverty prevented anything really useful being done with this information.

Telling Haitian victims now about plate tectonics wouldn’t be cold-hearted as much as it would be irrelevant. At times of trauma and loss, literal explanations may be of some help but what we really need is to somehow integrate such events into our life story. Hence the most typical response at such times is, Why me?

There is growing scientific evidence that humans are hard-wired to look for explanations for our experiences. It sounds obvious but it isn’t really. Indeed it’s one of the things that sets us apart from other animals and is one of our primary survival skills. Formulating explanations helps us predict events and behaviors and plan responses. For better or for worse, though, we can’t seem to turn it off. We look for—and find—explanations for lots of things that may have no explanations or very simple ones. It’s what leads to superstitions (an athlete’s lucky t-shirt—he always wins with it), scapegoating (“It’s all the Jews fault”), and yes, sometimes to God (“God has done this”).

Did God cause you to get cancer? No, you have a faulty gene, you ingested polluting chemicals in the air or water, you were a smoker. Did God cause your car crash? No, there was ice, the other driver was drunk, you were driving too fast. Did God cause your house to fall and kill your wife? No, there was an earthquake and your house was not strong enough to withstand it and she was inside while you were coming home from work. Emotionally and psychologically, however, we may not be able to hear such explanations. They don’t help us make sense of the world we live in which has suddenly gone crazy and out of control.

So, is God irrelevant? As an explanation for Haiti’s earthquake, basically yes. Is God absent? That’s a tougher question and one the Bible struggles with in many places. In the end, I think, the Bible concludes that theological speculation is a dead end. Instead, it keeps coming back to the practical and human question: What does suffering and tragedy mean for me?

Near the end of Matthew Jesus tells his famous sheep and goats story. People get into the kingdom based on how they treated the king when he was naked, sick, or imprisoned. “But when did we see you?” they ask. Whenever you cared for or ignored a person in such situations, that’s how you treated me, the king says. Based on that story and in the Bible’s paradoxical way of thinking, if we want to find God it seems Haiti is just the kind of place where we ought to look.

Smoke & mirrors (continued)

Reuters financial blogger Felix Salmon discusses the continuing distress in the mortgage market. The chart he includes shows that foreclosures and mortgages in distress are still climbing, belying the talk about economic recovery. Thus far, loan modifications are not working because they still leave homeowners underwater. The only thing that will help is reduction of mortgage principle but banks won’t go there. The reason Salmon says, and as I indicated in my previous post, is that banks don’t dare acknowledge that the value of the mortgages they hold aren’t worth anything close to what they say they are.

Why are the banks behaving like this? I think the obvious answer is the right one: they’re holding these loans on their books at much more than they’re really worth, and they can’t afford to take the write-downs which would accompany principal reductions of roughly the same magnitude as the decline in housing prices. This kind of head-in-the-sand behavior can only possibly work if housing prices suddenly rebound in the next couple of years, and that ain’t gonna happen.

Tuesday, January 26, 2010

A "moral obligation"?

This morning on NPR I heard a man talk about his mortgage refinancing dilemma. He owes approximately $300,000 on a house now worth less than half that much. He is seriously “underwater.” Through the federal mortgage modification program, the bank holding his mortgage offered him a significantly reduced interest rate and much lower payments. There was just one catch with the new terms: a balloon payment of over $100,000 to pay off the loan.

The man figured he would accept the offer even though he knew it was a bad one. He doubted if he would ever break even on the house (he’s probably right). A lot of his neighbors in similar situations had walked away from their houses and mortgages but he was reluctant to do that. His mortgage was a contract and it just didn’t seem right to break it.

This news segment also interviewed a bank spokesman who endorsed this man’s attitude. Customers have a “moral obligation” to honor their mortgages. They’ve made promises to their banks and should abide by their commitments.

What’s good for the goose apparently isn’t necessarily good for the gander, however. As reported on Huffington Post and elsewhere, over the weekend an investment group turned over its keys to one of the largest residential properties in the country: the 56-building, 11,232-unit Peter Cooper Village and Stuyvesant Town apartment complex in Manhattan. Tishman Speyer Properties and a group of other investors bought the property just before the housing bubble burst for $5.4 billion—the single biggest residential property purchase in U.S. history. Today it’s valued at $1.8 billion. The loan default: $4.4 billion. Among the biggest losers is California’s public employees’ pension fund which invested a half-billion dollars, now all gone.

Last month, Morgan Stanley walked away from buildings it had purchased in San Francisco for almost $2.5 billion. Now worth much less, the bank decided to cut its losses and give up the property in what it called “a negotiated transfer to our lenders." It’s not clear anything was actually negotiated besides what drop box the keys should be left in.

There has been no outburst of moralizing outrage on Wall Street at these and other multi-biillion dollar corporate walk-aways. The prospect of individual home mortgage holders following this example has many banks and mortgage companies scared to death, however. It’s estimated that a quarter of all home mortgage holders are underwater, i.e. they owe more on their houses than they are worth. A million mortgaged properties were returned to banks last year; double the number in 2008, which was double the number in 2007.

The prospect of millions of houses suddenly being given back to the banks has caused many to play the morality card. Former Treasury Secretary Hank Paulson denounced anyone who does this as “not honoring his obligations.” A mortgage association president asked rhetorically what message such behavior sends to one’s family, kids and friends.

Many financial advisors and economists say the message probably is, “Mom/dad, you’re pretty smart.” They’re smart in at least recognizing their first mistake in purchasing the property and deciding not to throw good money after bad. Of course, every situation is different and anyone contemplating such action should consult both a disinterested financial advisor and an attorney. A mortgage default will adversely affect one’s credit rating. It may well, however, be the start of a personal and family financial recovery—something holding an underwater mortgage could well prevent ever happening.

But is such behavior immoral? What the corporate mega-defaulters know, and what everyone else needs to remember, is that one’s moral obligation is to abide by the terms of the contract—including its provisions for breaking the contract. It's common knowledge that when you borrow money to purchase property and then stop paying on the loan, the property can be claimed by the loan holder. That’s in the contract which both sides agreed to. The defaulter isn’t jailed, put in stocks, or made to wear a funny hat. He or she just loses the use of the property and any accumulated equity—which is non-existent for millions of people today. It’s the risk the bank accepted in giving you the loan. It’s one of the reasons you’re paying interest on that loan. (The New York Times also has a good piece on this topic.)

As I’ve written before, the bank bailout has involved a lot of smoke and mirrors. Many banks are claiming on their balance sheets the full pre-recession value of mortgaged properties in their portfolios. This charade will be painfully exposed if the owners of these properties default. It could yet cause some of the “too big to fail banks” to fail.

Banks knowingly shoveled hundreds of billions of dollars into the over-heated housing market, making enormous profits at each step of the process. That’s what blew-up the bubble. Now that the bubble’s burst, banks are scrambling to avoid the consequences of the risks they took, hoping to pass them off to their underwater mortgage holders. Homeowners have every right to pass them right back. Banks are only adding to the distress of such people by manipulating them with guilt and claiming their behavior is immoral. If there is any immoral behavior here it's with the banks, not distressed mortgage holders.

Thursday, January 21, 2010

A congregation's hopes and fears

Many of my blog posts the past year have been about the contemporary trials and travails of the church and its congregations. So it seems appropriate that I reveal a bit of my own situation in that regard. The annual meeting of my congregation, Acacia Park Lutheran Church, is coming up. Here is a portion of my report for that event. I’ll comment more at the end.


As I wrote in my report last year, and as I have said and written on many other occasions, Acacia Park’s ability to continue to offer these opportunities [for ministry] is increasingly in doubt. In that we are not alone. Last spring, Metropolitan Chicago Synod Bishop Wayne Miller reported that two-thirds of synod congregations are losing members. Later, one of his assistants reported that the 15% of synod congregations that are growing are doing so primarily by transfer of members from other ELCA congregations. Very few genuinely new people are joining synod churches. Thus, most congregations are growing smaller and older, just like Acacia Park. This story is repeated across the country and across denominations.

This situation has been developing and intensifying for at least forty years. Needless to say, people across the church have been trying to figure out why this is and what to do about it. Most responses have been of the type I first heard described by a Methodist minister: “If it doesn’t work, do more of it.” It is incredibly difficult for organizations to create really new ways to carry out their mission or to redefine their mission altogether (think General Motors). Churches are no different.

For tens of thousands of congregations across the country, this is a time of experimentation and trial-and-error. As is always the case, most such efforts don’t work. Every year an increasing number of congregations run out of time and resources for these efforts and close their doors. Yet some congregations do succeed, or succeed enough that they can continue this project of rediscovering what it means to be Christian communities of faith and service in 21st century America.

As we will discuss at this year’s annual congregational meeting, we are facing serious decisions about the future of the congregation. For many years, Acacia Park has been meeting some of its budget with reserve funds. That spending, plus the stock market’s fall in 2008, has significantly reduced those funds. As a result, the finance committee has proposed that the congregation cut its spending by no longer having a full-time pastor.

It may well come to that but I don’t believe Acacia Park is at the point where it needs to take such drastic action. To avoid this in the short term, the congregation will have to allow use of endowment funds to meet budget expenses. More importantly, however, we need to consider how we can re-make our congregation and its mission in order to become financially viable.

One possibility which I believe has real merit is to transform Acacia Park into a center for community service. In doing so, we would make better use of our under-utilized yet very functional building. Rent and building use fees would provide additional income to support our more traditional ministries.

To make this happen, we would need to explore as many ways as we can to offer programs that meet the needs of people in surrounding communities. These could involve children, the elderly, recent immigrants, those experiencing financial difficulties, providing family and mental health services, programs promoting the arts and education, and creating new opportunities for physical and spiritual health and wellness. We would contact community leaders, schools, and other organizations that are aware of local unmet needs. We would make use of church resources and organizations, such as Lutheran Social Services. We would learn from other congregations that have taken this path (Concordia Lutheran in Chicago has been a pioneer in undergoing such a ministry transformation).

Such a rethinking of ministry would enable Acacia Park to continue to carry out the traditional functions of parish ministry. At the same time, it would create a new mission of service to our community. At a recent pastors’ gathering, a colleague said that the key to the church’s future is for congregations to make themselves essential to their communities. The question then for us to ponder is: What do we need to do and to become in order that people in our community will say, “We can’t do without Acacia Park Lutheran Church?” Rather than succumb to our fears and anxieties, I believe the Bible calls us to be inspired by our visions and our hopes.


The heyday for Acacia Park (as for so many congregations) was in the 1950s and 60s: multiple Sunday services, bustling Sunday school, and active youth, men’s and women’s organizations. All that has changed. Many former members have moved to further out suburbs. The community has become heavily Eastern European (many first-generation), who are not traditionally Lutheran (though most don’t seem to be attending Catholic or Orthodox churches, either). Approximately half the congregation now is retired and many of those are elderly. Most mainline churches in our area are struggling as we are. Many have already closed.

The temptation for congregations like mine is simply to coast to the end. They want to conserve resources in order to offer the bare minimum of services as long as possible. People openly talk of wanting the church to last long enough for their funeral. Then: Last one out, turn off the lights. As I indicate in my report, it is a very common story.

My goal is to offer another possibility. The challenge for Acacia Park and the church generally is to re-imagine its role and identity. What I describe briefly above is one option: to become a community services center which also hosts a worshiping congregation. We have a pretty good physical facility and I think it could work.

The needs are certainly there—and growing. Just recently I read an article about the movement of poverty into the suburbs and how many of these communities are not well resourced or experienced to handle this. Knowing how popular it is in the city, I had been thinking yoga classes might worth a try. Sunday a member, who I would not have expected to hear this from, told me he had fallen in love with the yoga class at a nearby health club. The principal of the school across the street says there is a need for affordable after-school care. You get the idea.

Is this church? Does the tail start wagging the dog in such a scenario? Does it matter? These and other questions keep me puzzling and pondering. Right now, I think the answers are: Yes, perhaps, and no. The bottom line, as I say in my report, is that we would be making ourselves useful, finding creative ways to be of service to our neighbor. I think you can make a case for that being God’s work.

Tuesday, January 19, 2010

Haiti contribution caution

Reuters’ economics blogger Felix Salmon offers a pragmatic caution regarding donations for Haiti earthquake relief. His title, “Don’t give money to Haiti,” is intended to get attention but it doesn’t mean what you might think. His point is to urge unrestricted donations to worthy charitable organizations.

Salmon’s supporting example is actually pretty startling. Five years after the 2004 Asian earthquake and tsunami, the Red Cross is still sitting on over a half-billion dollars in contributions towards its relief. This is not due to ineptitude or malfeasance by Red Cross. Rather, people simply gave more money than it could use for that disaster. If those contributions had been unrestricted, they would be available now for the Haiti catastrophe.

Organizations like Red Cross, Doctors Without Borders, and countless others operate year-round and around the globe. If anything good can come from these enormous disasters it is that they are very effective fund raisers for such organizations—and I am not being at all cynical in saying this. They genuinely need the money. In reality, these mega-disasters raise more money than aid organizations can use in those locations but—quite legitimately—they aren’t going to say that.

It should be realized that the majority of aid for Haiti will be coming from foreign governments. As April 15 draws near, perhaps you’ll feel better about the phrase “Your tax dollars at work” if you imagine American GIs passing out bottles of water and MREs on the streets of Port-au-Prince. Yet obviously NGOs also are doing, and will be doing, very important work and now have a much greater financial need to support their Haitian relief efforts. So give generously, but don’t tie their hands. They are also doing important work needing funding in places that aren’t in the news—unless another disaster strikes.

Friday, January 15, 2010

We won! (Why aren't we cheering?) (Sunday Reflections for January 17, 2009)

Within hours of the catastrophic earthquake that struck Haiti this week, individuals, charitable organizations, and governments around the world began mobilizing rescue and relief efforts. Monetary donations began coming in almost immediately to support those efforts. Haiti was on everyone’s mind and people wanted to help.

It’s what we have come to expect. So much so, that a day after the quake there was some criticism that relief efforts were not happening fast enough. A corner of some kind was turned in public response to disaster with the horrific Indian Ocean earthquake and tsunami just after Christmas, 2004. It killed over 230,000 people in 14 countries and generated an enormous worldwide humanitarian response, including monetary donations of over $7 billion.

The assumption that unaffected people should aid those suffering from disasters in other parts of the world has been taking hold for some time. What has changed most recently has been greatly increased awareness and ability. Global media coverage, now supplemented by a variety of internet outlets, brings almost instant news of major disasters. Modern transportation and organizational resources make it possible to deliver aid within days or even hours of these events.

Yet as impressive as those technological abilities are, what is even more remarkable has been the change in attitude. It is simply assumed that when people are suffering, wherever they might be, we will come to their aid. Why? How did that happen? And do we even realize what a tremendous human advancement this has been?

Helping the poor, sick or other victims of misfortune is encouraged or commanded by most of the world’s religions. For Christians, nowhere is this better summarized than in Jesus’ parable of the Good Samaritan. Indeed both the Old and New Testaments say that acts of charity are more important than observance of religious ritual. Thus, the parable both lifts up the Samaritan’s generosity and condemns the religious authorities who pass by the injured man they meet on the road.

Over the centuries institutions like hospitals and orphanages were established by the church to care for the poor and weak in fulfillment of Jesus’ injunction to love one’s neighbor. Still, at times of major disasters like wars, famines, plagues or earthquakes, most everyone was on their own—as they knew. The resources and social organization simply didn’t exist to provide large scale help.

Two developments which mark the Modern Era caused that to change: the Enlightenment’s social revolution and free market capitalism’s Industrial Revolution. From the former came the notion of the essential equality and worth of all people and from the latter came the ability to turn those ideas into reality.

Perhaps the best known literary example of these two developments coming together is Charles Dickens’ A Christmas Carol. Ebenezer Scrooge holds to the ancient notion that misfortune is somehow the victim’s fault. When asked for a contribution to help the poor at Christmas he expresses mocking dismay at the possibility that the poor houses (debtor prisons) have gone out of business. The poor should be punished for their condition, not rewarded.

After a series of Christmas Eve visions, Scrooge experiences a dramatic change of heart and becomes a benefactor to Tiny Tim and Bob Cratchit’s family. In Dickens’ secular view this is redemption, yet it actually comports well with the Bible’s own practical understanding of repentance and salvation. A Christmas Carol was an instant success and gave voice to the growing belief that all people have a duty to come to the aid of those in need. In the decades to come, large-scale aid organizations would be established (Red Cross) and a growing body of legislation would: first, restrict abusive practices (slavery, child labor), and then, create government programs to help people in distress (unemployment benefits, public hospitals).

The biggest change, however, came with the global catastrophe of World War II. Millions of people were displaced and needed aid of all kinds. Donations of food, clothing and shelter were made on a scale never before seen. The shattered economies of Europe also came in for help in the first true foreign aid program, the Marshall Plan. But the really dramatic change came in the victors’ treatment of the vanquished. After World War I, enormous reparations were laid on Germany in punishment through the Versailles Treaty. This was now recognized as simply planting seeds for the next war. This time Germany and Japan also received aid to rebuild as a means to keep them from returning to their militaristic past.

So not only has Jesus’ admonition to love our neighbors been accepted as a standard of human behavior, so too has his much more ambitious challenge to lover our enemies. Are either of these observed fully or perfectly? Of course not. Yet they are now seen as norms, not just for individuals, but for nations as well.

This dramatic advancement in human relations has not gotten the notice or appreciation it deserves. Oddly, this is especially true in the church which, it can be argued, should take some credit for this change by its spreading of Christianity over the centuries. The reason for this, I suspect, is the strange ambivalence the church feels about its own mission.

In spreading the message of Jesus, does the church really want, or expect, to succeed? I don’t think it is a stretch to see that one of the church’s problems today, and at least a partial explanation for its modern decline, is the success of its outreach. It has succeeded in convincing people of Jesus’ and the Bible’s view that all people are of equal value and all need to be cared for: we are our sisters' and brothers' keepers. In the struggle for people’s hearts and minds, the church won!

But there hasn’t been a lot of cheering. For one thing, I don’t think Christians really believed it would or could happen. Did Jesus really believe the kingdom of God was at hand? Aren’t people inherently evil? Hmm, we may need to rethink that one. Second, whenever an organization accomplishes a task it’s faced with a new challenge: What next? In some ways that is the church’s dilemma right now: What do we do for an encore? This is another twist on the popular adage: Be careful what you pray for because God may just give it to you.

Yet we should be cheering, even as we recognize that humanity still faces many challenges ahead. Besides the earthquake's damage, much of Haiti’s misery now is the result of its poverty and the abuse it has suffered from its own leaders and as well as foreign governments. What’s needed is the will to do what’s necessary to change that situation. And while not easy, that challegne is nonetheless obvious and accepted, demonstrated by the aid flowing in from around the world.

It’s easy to be discouraged or depressed by the world’s many problems. We also need to recongnize that there have been real accomplishments, to give us strength and hope for the struggles ahead. Only then can we look past the horror and suffering that is Haiti today and see the new world of justice and peace emerging at the same time and in just such places.

Here come the bonuses (again)

Wall Street banks are announcing their newest round of mega-profits and mega-bonuses. This morning in his blog The Big Picture, Barry Ritholtz (Bailout Nation) provides a simple explanation: "Record Bank Bonuses Based On Record Bank Fraud."

Top biggest banks and brokers are on pace to award $145 Billion for 2009, Up 18% from the year before, according to a WSJ study.

This is based on two factors: Zero % money from the Fed, and a massive accounting — and legal — fraud.

How hard is it for any finance firm to make risk free money when they can borrow from the Federal Reserve at zero, and lend that same cash to the Treasury (by buying bonds) at 3%?

I suspect this is essentially the Bernanke/Paulson plan (now Bernanke/Geithner) to slowly recapitalize the banks via the Japanese model, rather than force insolvent institutions to reorganize. What may thwart the massive Fed giveaway are the self-interested institutions, who are not lending, and capturing the lion’s share of this wealth via bonuses.

On top of this, the recapitalization plan can only work if these insolvent institutions get to hide their massive losses from their owners — namely, the shareholders (and in some instances, the taxpayers).

Thanks to the congressionally mandated FASB rule changes back in March of 2009, Mark-to-Market has been changed to Mark-to-Make-Believe. We do not know if these banks are actually profitable, whether they are barely solvent (Chase/JPM), somewhat insolvent (BofA) or totally insolvent (Citi).

Hence, these record bonuses based on huge risk free profits that may not be real. And we won’t find out the truth until the FASB forces accountants to accurately report losses.

There you have it: Our financial system, based on a fantasy!

In short: borrow money from the Federal Reserve for free, invest it (but don't loan it) any way you can (been wondering why the stock market keeps going up?), and hide the real value of billions in mortgages and other loans you know are bad and which you are eventually going to have to pay for. Then, give yourselves big bonuses for your "success" (and just make sure you get out of town before it all comes crashing down—again).

Tuesday, January 12, 2010

Fannie, Freddie, and the new Red and Blue

Matt Taibbi writes for Rolling Stone and blogs at True Slant. Let me warn you up front: Taibbi has a sharp tongue and somewhat of a potty mouth. More importantly he has a brain and uses it well. Recently he has been focusing his attention on Wall Street’s and Washington’s role in the financial crisis. Last summer he wrote a blistering attack on Goldman Sachs.

In this piece, Taibbi goes after the notion that our problems lie either with Wall Street greed or with Washington socialist incompetence. Clearly it’s both, he insists, and much more. Here in Illinois columnists and political critics talk of the Springfield “combine,” the sinister cooperation by politicians of both parties to award no-bid contracts and accept payouts from businesses and lobbyists. Thus, two governors in succession—of different parties—have both been jailed or indicted for corruption.

Much the same is going on in Washington Taibbi asserts. Which party is in power has become irrelevant to Wall Street interests because both are in their pockets. Thus the 2008 TARP bailout was created and sponsored by the Republican Bush administration but then passed by Democratic majorities in Congress. The strident Red/Blue divide is actually a side-show which conveniently distracts attention from cynical bi-partisanship that works for Wall Street’s interests.

“The essentially complicit nature of the two ruling political parties was in this way covered up for decades, as the crimes of the Democrats were greedily consumed as entertainment by the Limbaugh crowd while the crimes of the Bushies became hot-selling t-shirts and bumper stickers for the Air America listenership. The abiding mutual hatred the red/blue groups shared consistently prevented any kind of collective realization about the structure of the overall scheme.”

Read, laugh, get angry--repeat.

(An explanatory note for the article: “GSEs” = government sponsored entities, e.g. Fannie Mae and Freddie Mac.)

Too Big to Jail

On his program last Friday, Bill Moyers interviewed David Corn and Kevin Drum. Corn and Drum are two of the contributors to Mother Jones’ cover story expos√© “Too Big to Jail,” which tells how Wall Street has been able to avoid being held accountable for the 2008 financial crisis. Their emphasis is not so much on the problems of Wall Street but on those in Washington. Here’s a short preview:



The financial crisis revealed not just shortcoming in our economic system. More seriously it showed how Wall Street’s influence is now virtually dictating policy in Washington and thus preventing the reforms necessary to correct our seriously flawed financial system. Indeed, Wall Street has carried out an “intellectual capture” of the country’s mindset so that we assume, like GM in the 1950s, that what’s good for Wall Street is good for America. David Corn likens this to a new form of the “Stockholm Syndrome”:

“While [people are] angry at Wall Street, particularly on the corporate compensation front — which is very easy to get angry about — they also are fearful of taking Wall Street on, because they've been taught that if the Dow falls, if you take on the big banks, it's going to be bad for all of us. So, it really is this ‘Stockholm Syndrome,’ where we're forced to identify with people who are holding us hostage without our interest in mind.”

People are angry and frustrated but don’t know what to do. Moyers correctly sees this endangering our whole democratic system.

“The worry is, have we become so big and things become so complex? Have people been so politically abused, as a psychologist recently said, that the will to fight for democracy, the political will has been dissipated?”

Understanding what has happened, and what is going on now, is essential for the public to demand meaningful change, in Washington and on Wall Street. Listen to the two-part conversation and Moyers' commentary.

Monday, January 11, 2010

Let the inquiry begin

Frank Rich writes in The New York Times to echo the sentiment of my previous post that our economic ignorance is putting us all in grave danger. At long last, public hearings begin this week to examine the chicanery that led to the 2008 financial crisis. The Financial Crisis Inquiry Commission may be our only chance to learn what really went on, not only on Wall Street but on Pennsylvania Avenue, as well. Rich makes clear how vital it is that we truly understand what happened and why, if we are to avoid another even worse economic calamity:

"What we don’t know will hurt us, and quite possibly on a more devastating scale than any Qaeda attack. Americans must be told the full story of how Wall Street gamed and inflated the housing bubble, made out like bandits, and then left millions of households in ruin. Without that reckoning, there will be no public clamor for serious reform of a financial system that was as cunningly breached as airline security at the Amsterdam airport. And without reform, another massive attack on our economic security is guaranteed. Now that it can count on government bailouts, Wall Street has more incentive than ever to pump up its risks — secure that it can keep the bonanzas while we get stuck with the losses."

Why economics?

Some of you may wonder why I post on economics since most of the time I focus on religion and theology (I know my Lutheran news and gossip posts get a lot more hits than my economic ones ever do). While it has always been an interest of mine, last year’s financial crisis convinced me not only of the enormous impact economics has on everyone but also of its vital moral dimension.

The implosion of the banking system showed that something had gone seriously wrong with our economic system. That the multi-billion dollar taxpayer bailout was followed by billions in Wall Street bonuses proved something was seriously morally askew, as well.

I have been trying to follow all this as closely and carefully as my time allows. Internet bloggers not only provide a lot of helpful information and analysis but also lead to other authorities, books and articles. Needless to say, this is a HUGE subject with often violently contrasting viewpoints. One thing I have learned, however, is that most of the “experts” relied on by the mainstream media (MSM) are themselves part of the flawed system. Thus, for example, the economic talking heads on news shows who are financial advisers (as many are) will always be essentially optimistic about the economy. Otherwise people will have no incentive to give them their money to invest.

After sorting through the experts and finding those that seem sincere and honest (especially about their limitations), the message I have gotten loud and clear is that our financial problems are far from resolved. The bailouts in the fall of 2008 stopped the immediate crisis from turning into a financial meltdown. The serious economic problems which created this crisis are still almost entirely unresolved, however, and could easily erupt again.

I have become convinced that this is ultimately a spiritual crisis. The economic questions we are facing are not just technical but are fundamentally questions about values and life. This life is now so much more complex than our ancestors could have imagined, and more complex than most of us are aware. Our ignorance of both micro- and macro-economics leads us to feel overwhelmed and victimized, forced to rely on experts we know nothing about. Yet if we cannot come to a consensus about what constitutes essential economic health for ourselves and our communities, then the future of our democracy is seriously in danger.

So, you can expect more economics posts from me. I hope you’ll read them, read the articles they link to, and start your own economic education program. Economics is not money, numbers and statistics. As its Greek origin suggests, oikonomia is the management of our households, personal and collective. Right now, economic mismanagement is threatening the livelihood and future of every one of us.

Thursday, January 07, 2010

Geithner cover-up disclosed (with two updates)

The economic blogosphere is lighting up with new revelations about the bank bailout. Emails obtained by the House Oversight and Government Reform Committee show that the New York Federal Reserve, under the direction of now-Treasury Secretary Timothy Geithner, told AIG to keep secret the size of its insurance payments to major banks. (Bloomberg was first to report the story. Worthwhile blogger responses can be found here, here and here. There will undoubtedly be others and I will add more if they add to the discussion.) These payments were made after AIG had, in effect, been nationalized by the federal government.

Over a dozen institutions, including Goldman Sachs and several European banks, were paid 100 cents on the dollar for credit-default swaps (CDS) issued by AIG to insure billions of dollars worth of mortgage-backed securities (MBS). The value of these securities dropped dramatically in the real estate collapse. AIG could not have made good on the CDS claims banks would have made on it, resulting in huge losses for them. To prevent this, billions of dollars were poured into AIG via TARP thus enabling full payment to the banks. Thus the banks losses were transferred to AIG and then to the federal treasury—in effect, a backdoor bailout. It was the size of these payments which were suppressed.

This story has legs. Barney Frank is already supporting congressional hearings to investigate. There could be indictments of NY Fed officials but questions will undoubtedly be asked whether direction for this cover-up came from Treasury officials in Washington. Calls for Geithner’s resignation are also being heard. It is very possible this time that he will oblige as this could become a major distraction for the Obama administration. The assumption in Washington seems to be that, as of now, the public cannot handle a full disclosure of the government’s role in the 2008 financial crisis. Until a thorough investigation takes place, we will have to make do with revelations in this drip-drip fashion

Update: Here are three commentaries from Huffington Post. One is from the Rep. Darrell Issa who obtained the emails, another is from a trio that includes former NY Attorney General and Governor Eliott Spitzer, but the best may be by columnist/author David Sirota.

Update 2: The story of AIG, like nearly every aspect of the financial crisis, is an octopus with tentacles reaching in all directions. The mainstream media (MSM) does a poor job of "connecting the dots" (to use a popular phrase from another context) and obviously those who created the mess don't want the dots connected. Independent of today's story above, Bloomberg commentator Jonathan Weil asks about the shenanigans involved in hiding the fact that AIG is, in fact, bankrupt. Again, government agencies are directly involved and of greater concern, Weil says, is that this charade really permeates the whole financial system. Tyler Durden at Zero Hedge, in his reaction to Weil's piece ("AIG Has Become A Figurehead Of All That Is Broken In America"), concludes with this lament:

"Moral hazard reigning supreme, regulatory capture, incompetence, misdirection, and outright fraud, auditor complicity, broken equity markets, and an administration whose only answer to every problem is to stuff it ever deeper under the carpet and throw ever increasing amounts of money... This is what this once great nation has become."

The gospel according to Brit Hume (Sunday Reflections for January 10, 2010)


Since we live in a secular culture, religion does not have a defined place and it can pop up anywhere. One of its most recent public eruptions involved FOX newsman Brit Hume. He created a hullabaloo last week by providing on-air spiritual advice for Tiger Woods. In Hume’s view, Woods is most in need of the “forgiveness and redemption” which only “the Christian faith” can provide. Or at least it provides it much better, in Hume’s view, than the Buddhism that Woods reportedly practices. A lively discussion of Hume’s comments has broken out among other news people, comedians, bloggers, and religious commentators.

There are so many things that are odd about this story it’s hard to know where to begin. Even in that, it tells us something our culture and our confusion about spirituality and religion. The first thing to remember about Hume’s comments is its context, a news talk show, and the second is the subject, the marital infidelity of a pro-golfer. What are these two things even doing together? For better or for worse, many 24-7 cable channels fill in their schedules with what is little more than water cooler conversation. Supposedly smart people sit around and talk, often about whatever pops into their heads.

Then, of course, there is the popular obsession with celebrities. Just as we gossip about our neighbors or coworkers, we enjoy talking about the outsized lives of entertainers, professional athletes and anyone else who manages to get them self in the national media spotlight (including the “famous for being famous”). A talk show like this one is an example of a common twist on this phenomenon, which is basically celebrities talking about other celebrities.

Seeing only the Hume clip, I don’t know how Woods came up in the conversation in the first place. The rest of the panel did seem a bit stunned by the earnestness of Hume’s comments, however. Hume expressed great admiration for Woods as a golfer and as a “person.” The latter seems strange and rather artificial. Hume never indicated he personally knows Woods or really has any relationship with him. Woods has been notoriously protective of his private life (ending only recently with his very public driveway car crash), projecting a carefully managed but rather two-dimensional image through his product endorsements. Beyond his golf, Woods really hasn’t tried to be much of a role model, except perhaps as a savvy businessman.

So without any real personal relationship with Woods, it would seem Hume really took this as an opportunity for some old-fashioned evangelical witness, talking more to his TV audience than to Woods. And that brings us to Hume’s own story. He is now semi-retired. Among the things he said he wanted to do by working less was spend more time with his family and work on his recently revived faith life. Hume is himself divorced and remarried, so this may partially explain his interest in Woods’ domestic problems.

Hume also lost a son to suicide and this he credits with renewing his interest in religion. He specifically cited this event as leading to his own experience of the forgiveness and redemption which he believes Woods now needs to “recover as a person.” Hume is certainly sincere in describing his own experience of personal transformation. However, he has fallen into a trap most of us are susceptible to, which is to assume that something that was of great value and importance to us should be the same for everyone else.

What does Tiger Woods need right now? I have no idea and I can’t imagine Brit Hume knows either. Evangelicalism often views Christian faith as a life saver, as a way to fix our personal flat tires. This is the experience of Amazing Grace: “I once was lost but now am found; was blind but now I see.” “Jesus saves” the billboards and bumper stickers tell us.

Of course, this is a genuine experience for many and a legitimate and valuable part of the Christian life. Yet not every Christian has such an experience and Christianity is much more than this. So I have a problem with Hume’s simplistic message to Woods: you have a big problem and should become a Christian to fix it. Such thinking over-simplifies Christianity, over-simplifies the person who is Tiger Woods, and over-simplifies life.

Christianity is not primarily, I don’t believe, about “fixing” things. It is a way of life that more often than not shows us how to live with all the stuff that can’t be fixed. Things in our lives “break” all the time and most of them can’t be put back together. Living by faith and grace helps us leave behind what’s broken and move on, rather than endlessly grieving and obsessing. We find the energy and courage to start anew. We internalize the gospel story of life arising from death. We learn to live with hope.

Can Woods save his marriage or family, as Hume is so concerned that he do? Maybe, maybe not. For one thing, it’s not just up to him. And becoming a Christian certainly won’t guarantee that or any other outcome. I don’t know a lot about Buddhism but I do know it has the spiritual resources that can lead to personal renewal and transformation, if they’re used and if that’s what’s needed. But perhaps what Woods needs is marriage counseling or psychotherapy or new meds or a vacation or a slap upside the head or . . . none of the above. We can’t know and we haven’t been asked.

Being entertained by celebrity pratfalls is mostly harmless. Schadenfreude, getting pleasure from others’ misfortunes, probably has been a human trait for a long time. In the media realm, however, perspectives get distorted and we can lose sense of what is genuinely meaningful and important. The salacious stories of celebrity lives rarely are.

In general, I don’t think media attention does religion much good either. The British broadcaster, Malcolm Muggeridge, who became a Christian in his later life, believed media—especially TV—distorts everything it touches. He once described a “fourth temptation” in which the devil offers Jesus a primetime broadcast. Jesus declines that temptation, as well. In most instances, the already unreal nature of celebrity life isn’t clarified by the media but made even more sensational and bizarre. It shouldn’t be surprising then that what the media tells us about the depth and complexity of spiritual life usually isn’t very helpful, either.

Update: Christianity Today published online today an interview with Brit Hume. I found two things of interest. One was his immediate assumption of the persecution mantle, a badge of honor for many evangelicals. He describes his experience as being "mocked for his faith" and yet I have found little that resembles a personal attack on him. The other comes near the end when he's asked if he attends church. Like so many contemporary Christians, the simple answer is "No." He attends "home church" and participates in men's Bible studies. In my experience, such groups also tend toward a more therapeutic, self-help oriented form of Christianity.

Monday, January 04, 2010

The messy truth of Christmas

As we near the end of the liturgical Christmas season, here is one of the finest theological essays I have come across in a long time. Writing in the Guardian, Anglican priest Giles Fraser reminds us why “the word made flesh” was so radical and offensive two millennia ago and still is today. The daily stress of our lives causes all of us at times to wish for a fantasy land of ponies and rainbows and margaritas. The stunning, and not entirely welcome, message of Christmas is that, rather than taking us to such a place, God instead has come to dwell with us. In Jesus God has “pitched his tent” (the literal meaning of the Hebrew word) among us, in the crazy mix of mess and beauty that is the real world in which we live.

For that reason, Fraser says, the problem is not that Christmas has become too materialistic but that it isn’t materialistic enough. Its antagonist is kitsch, the view of life that clears away all the dirt and pain for soft light and warm fuzzies. The kitsch Jesus is like that of the Gnostic Valentinius who “ate and drank but did not defecate.” But this is not the Jesus of the Bible, either of Christmas or of Calvary.

"From the perspective of official Christian doctrine, the story of Christmas is a full-scale attack upon the notion of kitsch. Valentinius's theology is declared heretical precisely because it denies the full reality of the incarnation. For Valentinius, Jesus only seemed human. "Veiled in flesh the Godhead see", as the equally heretical carol puts it. Orthodoxy turns out to be vastly more radical, not because it provides a way of squaring the circle of a God-man, but because it refuses to separate the divine from material reality. God is born in a stable. The divine is re-imagined, not as existing in some pristine isolation, but among the shittiness of the world."

And that is the bottom line: “the divine is re-imagined.” Read the whole piece. For me it falls in the category of “a sermon I wish I had preached.” Merry Christmas!

Note: For a related earlier post see Is it art or is it Thomas Kinkade?

Unhappy new year at Augsburg Fortress

(After an extended holiday absence, it’s time get blogging again.)

Obviously the ELCA is sailing through rough waters these days (like many denominations, it should be noted). Survival can’t be the only objective in this phase of its journey, however; there have to be other standards as well. Unfortunately, this morning’s disturbing story out of Minneapolis (from Pretty Good Lutherans) would indicate the bottom line is in danger of trumping everything else.

Past and present employees of Augsburg Fortress, the ELCA’s publishing house, were informed in a New Year’s letter that their pension program was being terminated. Plan participants, including retirees, will receive a final lump sum payment in March. The amount will be significantly less than benefits accrued under the plan.

Looking at the details laid out in the letter, the plan has apparently been a mess for years. Underfunded pension plans are a common story these days in many failing corporations and for state employees and teachers. States, of course, can fall back on taxes. Private companies participate in a federal program which takes over retirement plans when a company goes bankrupt (this happened to my father decades ago).

As the letter states, however, Augsburg Fortress has a federally exempted “church plan” which is not guaranteed by the Pension Benefit Guaranty Corporation. The letter also says that the ELCA has judged that it has “no obligations or fiduciary duties with respect to the Augsburg Fortress plan.” Frankly, this just smells.

Augsburg Fortress used its church-related status to avoid participating in the federal pension guarantee program (and the fees that went with it). Now the ELCA falls back on AF’s organizational independence to claim it has no legal obligation to bailout its faltering benefit plan. This is simply legal casuistry, letting AF weave in and out of its church relationship as ELCA lawyers find it most advantageous. Or are we to believe that Augsburg Fortress has somehow become a denomination in its own right?

Thus far there has been no comment from ELCA officialdom. While the lawyers believe the denomination has no legal responsibility (though I really wonder if there isn’t some actionable fraud here), it will be very interesting to see how they explain that the church also has no moral obligation to Augsburg Fortress employees in this default.

Augsburg Fortress exists for one reason only: to serve the publishing needs of the ELCA. With the ELCA’s declining fortunes, AF has also struggled and its survival is certainly in doubt. In the meantime, if the ELCA believes AF is performing a vital service for the church, then it needs to step up to the plate and provide whatever resources are necessary to keep it functioning. This would certainly include treating its employees fairly and not playing games with their lives and their futures.

This is a shameful turn of events. Before we adopt any more social statements, or the bishops publish any more letters of conscience, perhaps a churchwide study of Luke 6:42 would be in order. Unfortunately, and especially with the bungled lay-offs at ELCA churchwide last November, there is every reason to believe there are more of these hi-jinks to come.

A footnote: I just saw that at the bottom of the Augsburg Fortress website it states, "We are the ministry of publishing within the Evangelical Lutheran Church in America" (emphasis added).