“For I say unto you, That unto every one which hath shall be given; and from him that hath not, even that he hath shall be taken away from him.”
This parable from Luke was hard for me to figure out for a long time..
It was the one about the servants whose master left them some money to invest while he went on a trip. When he returned, those that invested wisely were rewarded. Those that didn’t were punished. The advice listed above is what we should learn from this story.
In modern context it just didn’t seem fair that those that didn’t understand investing and were fearful of taking a loss were punished. They didn’t steal the money. They just didn’t do anything productive with it.
I think that I better understand it now, however. What I think Jesus was trying to tell us is that we are all given an opportunity in this life to learn more about ourselves and our Creator. Learning these lessons involves taking a risk because you could fail. But those who are so fearful of how their world might change that they are unwilling to take any risks not only lose the opportunity to grow, but won’t be able to relate to their maker any better after they die than they were able to while they were here. In effect they will have to start all over again in the next life because they learned nothing in this one.
Unfortunately the current administration seems to have taken this Bible verse literally. Those that trusted in government banking regulation were misled into very risky investments which made those in the banking industry very wealthy, but now threaten the financial stability of the country.
Five or so years ago, financial deregulation and a rapidly appreciating real estate values spawned a market for high risk (called sub-prime) adjustable rate mortgages. Now five years later many people, who may not have been able to purchase a home otherwise, are discovering that as their rates adjust upward, they can no longer afford to make the mortgage payments. Worse than that, they are also discovering that the house they purchased with that mortgage can’t be sold for even the price necessary to pay off the mortgage.
This was a sweet deal for those in the banking industry because those that sold these risky loans could do so without all of the credit checking normally required for more conventional loans. So they were selling to every warm body they could find. The banks and mortgage companies that they worked for were able to easily sell off the loans to other institutions, so they didn’t have the risk of loans going bad. The institutions packaged up big bundles of loans and sold them off on the stock market, so they made money and didn’t have the risk of the loans going bad. The banks that bought these securities felt that the risk of any individual loan going bad was minimized by the huge numbers of loans in these packages. Everyone was happy as long as interest rates stayed low and real estate prices continue to go up.
The problem is the all pyramid schemes eventually topple. By the time this one did, there were huge amounts of money are tied up in these securities. When the loan defaults began to rise, the value of those securities went down. The even bigger problem is that many banks invested their customer’s money in these securities. When the value of these securities decline, the bank’s ability to borrow money to fund its own operations declines. As the financial markets began to discover how many banks were at risk, the banks that lend money to banks stopped making new money available until they could determine the real asset status of the securities which backed the bank-to-bank loans that they provide. As a result, the financial markets pretty much ground to a halt last week. Governments lead by the US had to step in and provide more credit in order to allow banks to keep everything going.
How does the US provide credit? It borrows money too through the sale of bonds. Who buys those bonds? Why our old buddy China.
Some estimate that China now has the financial ability to bankrupt the US if it chose to sell all of its holdings. How do you think that will affect our ability to exert political influence over the Chinese about things like export safety, Taiwan, greenhouse gases, or say sale of arms and technology to Iran?
How did this happen?
It happened the same way a lot of things like this happen in Republican administrations. The current administration felt that government shouldn’t be in the banking regulation business. Lots of financial people made huge amounts of money. Lots of individuals made very bad mortgage/purchase decisions. Lots of banks made very bad investment decisions. Some were deceived by fraudulent practices.
Who is going to pay to clean this up? The same folks who paid to clean up the last big savings and loan scandal in the 80’s – you and me. Ronald Regan was the guy who created the last scandal with the same Republican deregulation philosophy. Neil Bush (brother of George) was one of the guys who made money off that scandal. It cost us $1.4 Trillion dollars to clean up.
It isn’t clear yet what this one will cost. But we’re already seeing some of the costs. The stock market is afraid that this financial crisis could bring down companies like Countrywide and folks like Walmart are concerned that many of their customers will have less money to spend because more of it is going to pay their mortgage bills. This is just the start too, because another $150B in loans will adjust up an average of 35% by the end of the year, and $250B next year. That’s why the stock market is heading south in a hurry. If this tips our economy into a serious recession, life could get very interesting for our buddy China who is depending on us to buy all the stuff they are geared up to make.
Please think about this the next time you hear the next great Republican talking about how we have too much government regulation.