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The sub-prime crisis, which exploded in 2008, will continue to deepen in 2009, as the finance markets worldwide continue to reel. Only the Great Depression of the 1930s surpasses this crisis. Few doubt that foreclosures will continue to rise in 2009, as will unemployment rates. The term “bailout” has taken on a whole new meaning. Governments worldwide are taking unprecedented actions to forestall a further deepening of the crisis. In 2009, the US government will borrow at truly incredible rates and will print money from the Federal Reserve at equally remarkable rates. The sentiment of Americans is that the US government must take the risk out of everything we do. There is perhaps no greater example of this than the US auto industry. I have little doubt that the US government will end up performing a massive bailout—through loans and outright infusions of money. More than probably, the US government will end up owning or needing to manage some or all of the auto industry. Is it reasonable to assume that the government can truly be the savior—of everything?
What should we learn from this mess? Obviously, there are so many lessons. But perhaps the most important one is that ethics do, after all, matter. There have been massive political blunders (e.g., how the US government used and milked Fannie Mae and Freddie Mac). But the most egregious cause of this financial mess is that a new “product” was promoted by a group of Wall Street brokers: Buy mortgages from banks, bundle them into mortgage-based securities and then sell them on the open market. This “product” took the risk away from banks and the mortgage brokers and shifted it to hedge funds and derivatives. Hence, mortgages exploded across the US, many of them to folks who should never have received a mortgage in the first place. The scheme worked as long as home values continued to rise. But when the values began to drop, the entire system collapsed. This is what we are now living with—all the unintended consequences of this ridiculous scheme. Chuck Colson writes: “The dominant attitude of recent decades says there are no moral truths—that we should simply live for the moment and get whatever we can out of life. This worldview has led to the [financial] chaos we are experiencing. By contrast, the Christian worldview teaches us to live within our means, defer gratification, and treat others honorably—all the requirements for sustaining personal property and the free-market system.”
The current crisis, then, is a crisis of ethics and of character. This is a significant opportunity for our nation to restore some common sense principles on how we operate. As a nation, we will not lend money to someone who cannot repay the loan. As a nation, we must commit to once again living within our means. We must defer gratification and end our credit card mentality. As a nation, we must embrace once again the centrality of personal virtue and personal responsibility. And, one more thing. No matter what the federal government does and no matter how much debt it assumes, the government cannot take the risk out of life. Those who invest in markets (e.g., bonds or stocks) do so with the understanding that there is a risk in their investment. Year 2008 ends with the government assuming the risk of so much of this bad debt. Is that wise? Can government truly remove the risk that goes along with living? Of course not! We should remind ourselves of that truth! If we do not do this, the American dream will die in 2009 or shortly thereafter! As a people, we will either take the path of surrendering our freedoms to the state or re-assert our freedoms centered on personal responsibility and virtue. Year 2009 will be a critical year to determine exactly what kind of nation we wish to be. We must choose either decay, decadence and self-destruction, or reaffirm our commitment to personal responsibility, values, virtue and personal ethics. This will be a watershed year for the United States.
See Colson editorial in Christianity Today (December 2008), p. 72. |
