Politically Speaking: What would Jesus do (for the economy)?

The Dow vomited up a biblical number on Monday: 777 points. In the face of such an eternal number, analysts have begun to ask: Does that mean that God has finally declared his hatred for global capitalism, and will bury us like Sodom and Gomorrah? Does it mean we are headed for the next Great Depression? For a generation headed into the job market, these are important questions. Where better to find the answer than from our Christian heritage?

To get our answer, we must turn to first principle. Jesus tells us we are to forgive our neighbor 70 times seven times. What he does not tell us is what to do when our neighbor defaults on his mortgage, has his home foreclosed (lowering our property value seven times $1,000), and then heads into bankruptcy, costing his bank and its investors their investment in his property (seven times $10,000). That seems like a lot more than seven times 70 times.

We are told that if our eye causes us to sin, we must pluck it out. Why can we not pluck out the bad mortgages from the rest? Why not make the subprime borrowers and the mortgage companies that made loans feel the burn of their poor decisions? Answer: Unfortunately, the banks that made the bad mortgages packaged them up as bonds (AAA rated of course) with thousands of other mortgages and sold them off in pieces to thousands of investors. These investors then reaped the huge losses when the mortgages underlying these bonds turned out to be worthless. How do you pluck out an eye that has been chopped up into a thousand pieces, packaged up with other like pieces of eye, and sold to investors? Answer: You take $700 billion of taxpayer money and buy all the pieces of eye from everyone willing to sell.

For verily, I tell you, on the Day of Judgment, all the nations (banks) of the world will stand gathered before the Lord (the Federal Reserve). He will separate them as a shepherd separates sheep from goats. To the sheep he will say, "You had good risk analytics and a stolid credit culture - reap the benefits of your conservative lending standards."

To goats, he will cry out, "Away with you! Your lax standards and subprime obsession were never sustainable business practices. You had to know that housing prices would one day fall. Whoa to you, the unprepared, for you, the Lehman Brothers, Washington Mutuals, and IndyMacs are to spend eternity with other expired brands - ValueJet, Prodigy Internet, Standard Motors, et. al. and it is a hot corner of hell they now reside."

Then Jesus noticed there were still some nations standing before him. To these he said, "Ah you must be the companies that are too big to fail. Put your hand in the cookie jar, for, despite your incredible losses, you must be kept afloat for the good of the financial system. We'll stop those dirty short-sellers, and, did I mention something about taxpayer money."

Now ye taxpayers, before you start cursing the "masters of the universe" on Wall Street, recall that Jesus tells us that when our neighbor asks us for our cloak, we are to give him our tunic as well. This may be the only convincing argument advocating that when we (the taxpayers fronting hundreds of billions) are buying this toxic sludge from banks that don't want it on their balance sheet (giving them our cloak), we should pay held-to maturity prices, which may be multiples of the actual mark-to-market value of these securities (giving them our tunic as well). It's tough to be charitable when $700 billion is involved.

But before we remove the splinter in our neighbor's eye, we must remove the log in our own. We've all benefitted from easy credit. Students, homeowners, auto buyers, credit card wielders - we've all lived a life a little higher than our means. Article after article chronicled the growing consumer debt. But did that stop us from using our house like a credit card through home equity lending, applying for credit cards at every shopping outlet, or running up student loans in the hundreds of thousands? Obviously not.

My point is that we've all had a part to play in the credit crunching of America. Jesus tells us that if our brother sins, we are to go and tell him his fault. We were never comfortable doing that. In America, our regulatory regime was not up to this task. Instead, we approved of a laissez faire economic regime that let the fat cats on Wall Street and stockholders across America make record profits while Main Street banks and average Americans struggled to make it in our post-industrial economy.

Our elected leaders have been behind the policies that helped drive up home prices in the first place and failed to stop them from coming crashing down last August.

So what now? We know that God helps those who help themselves. Hopefully, our leaders will come together and do what we pay them to do - make good policy, especially in times of crisis. Good policy here is not no policy (where we stand right now), but rather it helps out Wall Street banks (greasing up the wheels of capitalism and unfreezing the credit market), it bails out Main Street banks (creating confidence across the financial sector), and perhaps most importantly of all, it helps out homeowners who have seen their assets devastated by falling home prices and foreclosures.

This crisis started when home prices fell precipitously. It will not end until they start to rise again. For that to happen, we must restore confidence in the market, free up some credit to allow well-qualified buyers to purchase houses, and make sure these mortgages are not becoming the object of gross speculation. In short, trust must be restored. For if we fail to trust one another, like Peter we will sink into the Sea of Galilee. But if we can restore the trust that is so essential to the functioning of the economy, we will walk forward, even on the stormiest of seas.