Rachel Anderson, the Director of Faith-Based Outreach, Center for Responsible Lending, Washington DC and former Associate Director for Public Policy and the Burgess Urban Fund at Episcopal City Mission, recently posted her thoughts on faith and the economic crisis on the Faith and Leadership Blog at Duke Divinity School.
Here is an excerpt:
Well before the September 2008 implosion of Lehman Brothers, pastors and priests sounded the alarm that something was rotten at the foundations of the American economy. As far back as 1992, religious investors warned that securitization (the process of pooling and re-selling loans to investors) would encourage unsustainable lending by separating the risks of credit from its benefits. Cardinal Theodore McCarrick, Catholic Archbishop of Washington, told Congress in 2002 that predatory lending was trapping families in high-cost loans, provoking foreclosures and loss of wealth for low-income households.
It was not just the Wall Street-watchers and social justice stalwarts like Cardinal McCarrick who suspected problems in the American economy. Throughout the 2000s, I knew many pastors who worried about ever-expanding consumer debt and an economy premised upon it. As Quaker author Parker Palmer wrote last year, those in tune with their “deeper knowing” had long sensed the coming economic tremors.
We know now that these concerns were all too prescient. The loans that religious investors and advocates warned about ultimately resulted in millions of foreclosures. These surging waves of foreclosure, in turn, triggered the massive losses and bank failures at the heart of the current financial crisis. Since the economic crisis began in 2007, over 4 million families have lost their homes to foreclosure. Another 9 million are expected to experience the same fate by 2012.
As common-sense as the warnings voiced by many in the religious community were, they differed sharply from much of the prevailing philosophy on Wall Street, where the whole business of debt had undergone transformation. Rather than collecting payments from homeowners over the life of a loan, banks and mortgage companies began making huge sums by bundling and re-selling mortgages to investors. This model encouraged unsustainable and even deceptive lending for the sake of short-term gains. Regulators – many of whom shared the culture and philosophy of the bankers they regulated – stayed silent. Few were asking the holistic question of whether the risks and benefits of credit were adequately shared. Even fewer were investigating the impact of new credit models on the most vulnerable, as Cardinal McCarrick did.
As Christians seek to turn their wisdom – which served as an early warning system – into a moral compass for the economic rebuilding ahead, here are some key ways to engage.....
Click here to read the rest of Rachel's post on the Faith and Leadership blog.
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