It’s been a long time since anyone paid attention to old Ben Franklin’s preachments on fiscal prudence:
“If you would know the value of money, go try to borrow some; for he that goes a-borrowing goes a-sorrowing.” “Never forget that credit is money.” “Necessity never made a good bargain.” And my own personal favorite: “Rather go to bed supperless than rise in debt.”
Why the long inattention to basic precepts for wholesome living? May I suggest that apart from finding beady-eyed, thrift-obsessed old Franklin somewhat repulsive today, it is also the case that we also no longer inhabit his mental world in such a way that anything he might have to say about credit or debt makes any sense.
I owe, therefore I am.
That has been our new reality for some time. The question is: how did this happen and who, if anyone, is to blame?
I am very much afraid that our masters, both corporate and civic, may be about to put all of us now-sorrowing borrowers through a public shaming to the point that we will begin to think it’s completely our fault that we took advantage of all the shiny new financial “products” that got us into trouble. There’ll be enough moralizing and shaming going around so that the far greater excesses and far greater misfeasance of corporate creditors get airbrushed out of the picture.
In this case, we should refuse to settle for a neo-evangelical formula that attempts to treat all sins as equivalent. Ethically speaking, the “all have sinned” approach confuses big-time criminality with small-time folly. It creates yet another bubble, only this time a bubble of moral obfuscation. It allows those who enticed small-time sinners to stumble get off the hook.
Not that we regular folk weren’t kind of stupid and credulous to think that we could live forever in a wonderland of easy credit with no money down. Or, in the case of our houses, that we could borrow hundreds of thousands of dollars for real property with, in some cases, no income, no job, and no assets. “Ninjas” is what the cynical mortgage lenders called such borrowers just a couple of years ago. They loved making phone calls that even their supremely unqualified mortgage applicants found somewhat hard to believe: “Congratulations: your loan has been approved! You will close in 15 minutes. And lucky you: there’s no need to show up or even supply a check. Everything is rolled right into the loan. Woo-hoo!”
Yeah, we all went for it. We were approved so easily. Who doesn’t what to be “approved” by somebody powerful and (presumably) smart, who wants to lend you a lot of money?
Cupidity Unbound: How Big Capital Fell in Love with Low and Dishonest Gain
Lately Thomas Geoghegan, Chicago labor lawyer and great storyteller, has provided a whole new dimension to the conversation about easy credit and the collapse thereof. “Infinite Debt” is the title of Geoghegan’s remarkable cover piece in the April issue of Harper’s.
But even though Geoghegan takes us to the heart of the matter, he has so much of interest to report—about how, in effect, workers traded in their union cards for credit cards in order to capture some of their own rising productivity gains; about how the FIRE (finance, insurance, real estate) sector of the economy more than doubled its share of corporate profits between 1988 and 2003; about how, even last year, 39% of Harvard’s college graduates were aiming for careers in finance; about how America’s ballooning trade deficit is directly related to our borrowing spree—that his main ethical and religious point still remains somewhat undeveloped. Hence this supplementary fantasia on his dolorous theme.
Geoghegan frames the main ethical point this way: “The problem is not that ‘we deregulated the New Deal’ but that we deregulated a much older, even ancient, set of laws.”
What he means is that, coincident with a Supreme Court case in 1978, we started setting aside the commonly-accepted prohibition against usury that had been in place so long that “no one ever mentioned it to us at law school” (Geoghegan).
What began to ensue after longstanding statewide limits on interest rates got invalidated was entirely predictable: “When banks get 25-30 percent on credit cards, and 500 percent or more on payday loans, capital flees honest pursuits.” And did capital ever flee, according to Geoghegan’s great tale of cupidity unbound. He describes what happened, accurately, as an “autocatalytic reaction”: there was so much worldwide investment capital demanding a piece of the lending action in this country that Wall Street couldn’t resist inventing sketchy new products to induce consumers to sink themselves in infinite debt: ARM loans, obviously, but also still-riskier “mortgages” in which the “borrower” didn’t have to pay interest or principal.
One lovely side note in Geoghegan’s account is the way in which he makes a famous movie villain—Lionel Barrymore’s Mr. Potter from It’s a Wonderful Life—look positively angelic in relation to today’s big boys at Citi and Chase and Bank of America. At least Mr. Potter wanted his loans to be repaid. But in the new lending environment where there’s no limit on interest, today’s bankers would actually rather that borrowers don’t pay. They can collect far more in interest, not to mention in penalties and fees, from delinquent loans than from loans that are repaid. Geoghegan doesn’t mention this, but it is certainly telling that the word today’s lenders use for people who repay their loans on time is “deadbeat”: exactly the reverse of the meaning Mr. Potter would have ascribed to the term.
Debt Peonage vs. A Moral Economy
Geoghegan wants us to feel that, in view of the manifold oppressions wrought by the bankers, fighting against the banks is the contemporary moral equivalent of the fight to unionize. It’s a basic civil rights struggle.
I agree, of course, but I would go still further. Did not Jesus say, in the great prayer he taught us, “release us from debt even as we release others from debt?” (Luke 11:3) I suggest that struggling against the banks is actually a sacred calling, a holy obligation, in relation to the central tenets of biblical faith.
The stakes, in fact, are still higher than even Geoghegan imagines, as the big bankers are now actively in the process of putting the rest of us into new and horrific double debt peonage.
As Matt Taibbi explains in Rolling Stone, the Paulson-Geithner approach to “fixing” the credit crisis amounts to giving the banks direct access to the rest of our money, via taxes we will be paying as far as the eye can see, along with all of the money they have already been extracting via their ongoing predatory lending. It’s one thing for Geithner to say “we’re not Sweden” in explaining why the government still declines to take the big banks public with full public oversight. He has yet to explain why he is letting the banks take the government private—and thereby take all of us into permanent captivity.
I said that there are core biblical principles at stake. Biblical scholar and teacher Ched Myers notes how the basic liberation narrative in the Bible has everything to do with abolishing debt servitude. When God says to the newly liberated Israelites, “I am going to rain bread from heaven for you” (Ex. 16:4), God is setting a basic moral test: God is putting in place an alternative moral economy in which want is eliminated provided that hoarding, or surplus accumulation, is also eliminated. The manna reminds Israel that the purpose of economic organization is to guarantee enough for everyone, not to create opportunities for the strong to exploit the weak.
Integral to the manna story is the Sabbath principle: our labor is interrupted each week to remind us the divine economy of abundance for all. The weekly Sabbath in turn leads to the biblical Sabbath of years (Ex. 23), in which cultivation ceases and commonwealth is re-established, and leads finally to the great Jubilee every 49th year (Lev. 25), in which all concentrated power and wealth is to be dismantled, all expropriated land is to be restored, and all other forms of debt peonage are to be abolished.
Whether historic Israel ever fully implemented Sabbath and Jubilee prescriptions is beside the point: Sabbath and Jubilee remain moral economy touchstones for the prophets, for Jesus, and for us.
Thus Isaiah to his bankers in the eighth century BCE: “The spoil of the poor is in your houses; what do you mean by crushing my people, by grinding the face of the poor?” (Isa. 3:14f) And thus Jesus to his bankers—to the money changers in the Temple courtyard—“It is written, ‘My house shall be called a house of prayer’; but you are making it a den of robbers.” (Mt. 21:13)
What will we say to our bankers? Obama’s administration is apparently content to hope and pray that they will start lending again, once we’ve given them enough public subsidy. I was kind of hoping that we might begin to imagine something a little different from the world we have known: a world of infinite debt, infinite captivity, and infinite pain.
