Bless the Child that has his own
“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.”
Luke 19:26
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.
October 17th, 2007 at 11:51 am
So to be balanced Jeff….the Clinton administration was responsible for the
stock market bubble because it refused to step in and prevent the masses from buying “anything.com?” This is not a good agruement you are making about Rebuplicans….your bias clearly shows as you mention the last scandel as being in the Reagen era (as you’ve defined scandel above)…..preventing people from themselves on 3 year interest only loans makes as much sense as preventing people from sticking all their investable cash in anything.com…..Where were the defenders of “working America” in the Clinton administration?
October 18th, 2007 at 6:28 pm
Kieth,
Nice to talk with you about a different subject.
The reference here was regulation. The general trend is that Republicans reduce regulation in an attempt to make government smaller and Democrats increase regulation to curb the excesses of the market. Depending on where the economic pendulum is, the country needs both forces to balance the excesses of the other.
The tech stock bubble wasn’t the result of too little regulation directly. It was indirectly the result of too much venture capital money chasing too few opportunities as well as the sorts of market dislocations which occur in any paradigm shift.
Contrary to the savings and loan scandal during the Reagan years or the more recent implosion of the sub-prime lending market, the bursting of the stock market bubble was not the result of relaxing regulations. It was the result of the growth of the Internet as a viable new business model.
That said, the bursting of that bubble was inevitable and there were some additional tweaks to the investment and “going public” regulations which cut down on some of the abuses that occurred. Comparing that to the outright fraud that went on in both of these banking scandals, however, is a far more biased view of history.
Jeff
October 19th, 2007 at 5:38 pm
Bubbles are bubbles and will occur when ever excesses occur, regardless if it’s a Rebulican or Democrat in office. It is party generic. Tulpis 500 years or so ago, land in fla 300 years ago, railroads in the 1800’s, dot.coms in the 90’s or housing now, etc,etc,etc…..doesn’t matter who’s in office and what they do to try to regulate our herd mentality, bubbles will ALWAYS occur from time to time in a free market.
Oil hit $90 a barrel the yesterday. It is traded in U.S. dollars. Euro up over 40% verse the dollar. That means oil is really $64.28 per barrel in 2003 dollars (I’m guessing the euro and dollar were on par in 2003) Iwonder how far the price of a barrel will drop when this bubble, if in fact it is, bursts? The piont is this, what should our gov’t do to prevent this bubble from popping? i’d hate to have cash tied up in oil when it does. Bubbles always burst when a more efficant use for cash arrives. The free markets always correct bubbles.
Also, I would love to hear comments from you regarding Rep Pete Stark and the slanderous comments he made from the floor of the house yesterday. I think, I hope, you and I can agree that this level of, dare I say comtempt or even hatered, from either side is never called for and has no place in our politics.
October 21st, 2007 at 11:00 pm
Keith,
I think that we both agree that bubbles are bad.
The two bubbles I mentioned were created by the free market RESPONDING to government deregulation driven by industry lobbyists. If the government hadn’t relaxed savings and loan reserve requirements or the methods by which mortgages could be bought and sold, there would have been NO BUBBLE. That’s the difference.
As far as Pete Stark is concerned, I believe he feels that he is representing the views of his constituency. If he isn’t giving voice to the concerns of his district, they should vote him out.
I don’t agree with the way he chose to voice his opinions, but if I had an opportunity I would ask many of the same questions. These are questions that we have to be able to ask and debate for our democracy to work.
The only way for us to get to the point of civil discourse is to stop the sort of “gotcha” politics that are played on by both parties. This is just another example of that. Rather than address the issues he raised, the only debate is about the way that he raised them.
So instead demanding that they devote their time to the business of the people, we encourage our representatives to waste time calling each other names.
BTW, Pete Stark is also the only elected official in the history of this country to admit that he doesn’t believe in God. Simple statistics suggest that there are more than him, but he was the only one with enough courage to speak honestly about his beliefs.
Jeff
October 22nd, 2007 at 12:39 pm
We’re on the same page here. In no way should he have spoke about our commander in chief the way he did. Does he really believe GW take pleasure in sending our guys out to have there head blown off. And this while agrueing for the schip program were honest people can have an honest debate. YOu can suggest that universal health care is a right and i can say it’s not…but to then say it’s only becuase you waould rather support our kids heads being blown off then get kids health care is obserd and in my judgement classless.