We're now far enough past the depths of the 2008 economic collapse to begin to examine not just why it led to the Great Recession, but -- more to the point for people of faith -- why moral failures caused it.
The subprime lending crimes that helped create this financial and ethical disaster came to my attention again recently when I read about a federal judge who recently approved a $970 million settlement over claims that American International Group Inc. shareholders were misled about its subprime mortgage exposure.
It has taken this long for just that one case to work its way to a settlement. And there still are other cases and other ripple effects that have yet to complete their full journeys through our legal and economic systems.
I'm no economist. But I've read enough and talked with enough people -- including a Presbyterian elder named Lawrence E. Kreider of Lake Ridge, Va., who once taught economics at Indiana University and who used to supervise state banks -- to know that the subprime mortgage scandal, which in many ways was at the root of the 2008 collapse, was fueled by unethical behavior in both the private sector and government.
Greed, that sin of passionate idolatry, led to avaricious behavior that allowed financial institutions to make ridiculously unwise mortgage loans to people who had almost no chance of repayment. Those loans then were bundled together, given wildly optimistic AAA ratings by security ratings agencies, and sold as allegedly wise investments by such financial giants as Goldman Sachs, which then used the money to create more poorly underwritten mortgages.
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Boys and girls, can you say Ponzi scheme?
Well, the details, for my purposes here, don't matter all that much, though for sure they matter to how we move forward and they matter to the global economic system. What matters much more to me, however, is the astonishing moral bankruptcy that allowed this to go on for long enough to bring the nation to the edge of the kind of economic collapse from which we might never have recovered.
I don't want to suggest that everybody in this whole system was unethical or acted in illegal ways. There were -- and are -- honest bankers, lenders and real estate people. And there are honest borrowers who know their limits.
But the system was infected with enough bad actors -- people with the morals of a vacuum cleaner -- that the ethical folks never really had a chance.
Who was speaking out against this subprime mortgage system (or the current subprime auto loan system) while it was planting its seeds of destruction? Did you hear sermons about it in your churches? I didn't. Did you read financial, political or religion columnists raising persistent red flags about what was happening? Not that I can recall until far too late in the game. So I, too, am guilty of not understanding what was running amok and of not using my prophetic voice to call out the wrongdoers and point out how the system was rigged.
But where did the culprits who profited from this economic house of cards get their standards of morality that allowed them to destroy lives and fortunes? In business school? And how did our legislators, who should have been protecting consumers and borrowers, lose their way so that in some cases, they not only did nothing, but actually abetted the dissolute financiers?
Life in the age of subprime mortgages, credit default swaps and exotic derivative investment vehicles is much more complicated than it was when my parents borrowed money from their parents to pay $11,000 cash for the house in the small town in which I grew up. But complexity doesn't leave us off the moral hook. It just means we must be smarter and more aware.
And it means our faith communities must help us identify such public immorality and show us how to work against it.
[Bill Tammeus, a Presbyterian elder and award-winning former faith columnist for The Kansas City Star, writes the daily "Faith Matters" blog for the Star's website and a monthly column for The Presbyterian Outlook. His latest book is Woodstock: A Story of Middle Americans. Email him at firstname.lastname@example.org.]
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