Tag: economic crisis

Let’s stop blaming homeowners for our economic crisis

Politicians and pundits quickly found an easy target to pin the nation’s economic crisis on — homeowners who bought more house than they could afford.  I, for one, think we should stop blaming homeowners for bad public policy, poor government oversight, and greedy lenders.

“But,” the critics argue, “it’s the irresponsible homeowners who caused this crisis because now they can’t repay their mortgages. This creates bad debt at banks, further reducing the banks’ ability to lend.”

That argument is flawed and here’s why:

  • Homeowners didn’t package and slice up mortgages into untraceable, unmeasurable and risky economic instruments.
  • Homeowners didn’t relax the rules allowing banks to increase their debt-to-deposits ratio.
  • Homeowners didn’t run the SEC, Fannie Mae or Freddie Mac whose lax oversight and loose policies allowed the Bernie Madoffs to steal billions, and predatory lenders to defraud millions.
  • Homeowners didn’t create the shellgame called credit default swaps, a house of cards created by the lenders to provide the illusion that real “insurance” covered their loan portfolios.
  • Homeowners didn’t create the housing bubble, or inflate the market price of property, or assure others that “your house value will always go up.”
  • Homeowners didn’t rate the riskiest of financial instruments as sound and solid, like the rating agencies did.  Those same agencies are supported by the companies they rate.

No, homeowners didn’t do any of those things.  I personally know of instances where bankers encouraged borrowers to borrow more, to take out 100% loans, to apply for no-money-down loans, and to accept variable rate loans with ridiculously low initial teaser rates.

I also know families who have lost their homes during this crisis.  Families for whom the American dream came within reach while both were working, but when the husband lost his job that dream evaporated quickly.  I do not blame hardworking families for trying to better their lives by buying their own home, or by moving to a newer home in a newer neighborhood with better schools and services.

Were there abuses?  Absolutely.  Two houses down from us is a house bought under a government program by a family who never paid a penny on its mortgage, and rented the house to any and all comers.  When the bank foreclosed, it wasn’t a bank here in Chatham, or Danville, or even in Virginia.  The bank that held the mortgage on that little house in Chatham, Virginia is headquartered in Texas.  How did that happen?  Bad policy, poor financial oversight, lax government regulation, and, in that case, unscrupulous borrowers.  But let’s stop blaming all families who dreamed of a better life for the misdeeds of the few.

What does this have to do with churches?  Just this — the people who live in your communities and mine may have made mistakes, may have taken on too much debt, and may be in trouble financially.  Churches can minister to these families with solid financial training, personal support, financial help, and spiritual encouragement.

In the past few months our church has helped one family stay in the home they were going to lose, helped another family pay their rent during an illness, and found a better house with lower rent for a third.  These are real problems faced by real people who only wanted to live a better life.  Now we in churches in these communities have the opportunity to stand with them.  And when we do, we must not be tempted to explain this complex economic crisis by blaming our neighbors.  That’s my opinion, what’s yours?

Bread lines and tent cities

 I’ve been writing about the coming, and now present, economic crisis since last year (here, here, and here).  Popular financial advisor, Suze Orman, speaking on Anderson Cooper’s show tonight, said that the economy is in “intensive care” right now and will be for a year to 18-months.  Then, she continued, we’ll be in the “hospital” for another year or two, and then we’ll move to “rehab” for a couple of years.  Bottom line:  we’re looking at 5-years of decline, struggle, rebuilding, and finally recovery.  Five years.  

When asked if this means “bread lines” or something else, Orman said, “It could mean bread lines.”  Wow.  She went on to add that some who are calling in to her show are already living in their cars.  In America.  In 2008.  And, it will get worse. 

My question is:  Are church leaders paying attention?  I read a lot of blogs, both on my feed and browsing.  Several have made comments about the presidential election, the debates, or hot-button cultural issues.  Very few — I found only one today — are addressing the current economic meltdown.  Shouldn’t somebody be giving churches advice, guidance, and help through these rough economic times?  Shouldn’t we in churches be thinking about how our churches will help our communities during the next 5 years?  

Of course, this stuff isn’t attractive.  It isn’t about growing our churches.  It distracts us from parsing arcane theological positions or running off to the next conference.  But, this crisis is unprecedented, pervasive, and pernicious.  This is not “the-sky-is-falling” alarm.  The sky has fallen, and now we have to figure out how we will function in this new global economic mess we find ourselves in.  What are you doing?  What conversations are you having at your church?  I’d be interested to know.

Economic fallout hits churches

If you understand the current economic meltdown, your are lightyears ahead of most of us.  Basically, we have a serious, global economic collapse underway.  News from financial markets from Brazil to Shanghai to London to New York was all bad today.  All the indicators are pointing in the wrong direction — job losses, unemployment, credit crisis, bank insolvency, unregulated securities, and the list goes on.  People who understand this are worried and furious that this house of cards has collapsed of its own greed and manipulation.  

Churches are not exempt from the economic fallout.  Here are some of the impacts that await us:

 

  1. Retirement accounts lose value.  The stock market has fallen 30% in the past year.  In real terms, if you had $30,000 in your retirement account, you now have about $21,000.  And, you might have lost more if you had stock in Wachovia, accounts guaranteed by Lehman Brothers, or Fannie Mae/Freddie Mac you lost even more.  Loss of investment principal will delay retirement for some, or make life in retirement more difficult. 
  2. Unemployment increases.  760,000 jobs have been lost in 2008.  More job losses are on the way with bank mergers, financial institution failures, and the ripple effect that tight credit has on business capital.  
  3. Increase in cost of necessities, decrease in discretionary spending.  Consumer spending is already declining as people wisely start to hold on to what they have.  More will do the same, and because our economy runs on ‘borrowing and spending’ versus saving, fewer sales will be made, stores will close, factories will shut down, and we might actually approach deflation, or a shrinkage in the money supply in the market.  
  4. More people in need of basic services.   The social services director for our county told me that they have more requests for help now than their staff can keep up with.  Watch for this to increase as more people need help with food, medical care, transportation, housing, clothing, and jobs.  This presents an opportunity for churches to feed the hungry, clothe the naked, care for the sick, and do the very things Jesus instructed us to do.
  5. Decline in charitable giving.  Charities (substitute “churches” here) are already reporting decreases in contributions.  Churches are not exempt from the crunch many will find themselves in.  
  6. Limited financing/refinancing options.  If your church needs financing or refinancing you might run into difficulty due to tight credit conditions.  Think about delaying  your plans for building or remodeling.  As a local businessman told me today, “This is not a good time to have debt.”  
The economic turmoil we are in does have some positives, however.  Tomorrow, “The Upside of the Economic Downturn.”  See you tomorrow. 

Church at the end of oil and other crises

Last November, I posed the question, “If gas hits $4/gal, what will your church do?” We are beyond $4/gallon gas now, and the future looks different than we ever thought it would just a couple of years back. But, there are other crises which will affect churches in the next few years:

  1. The gap in moving from oil to other fuels. The buzz is already out there about electric cars. T. Boone Pickens and Al Gore have both challenged America with their visions of an alternative energy future. Talk about $12-$15/gallon gas is getting serious airtime, and no one is predicting a drop in oil prices. In the transition from oil to other fuels, transportation will change from private cars to public conveyance. The entire automobile culture that we have known in America will slowly and painfully be reformed to meet new energy challenges. How will congregants get to church in the future?
  2. Increasing electricity costs. Google “rising electricity costs” and you find articles like this one predicting that electricity costs will double in 5 years. Why? Increasing demand as we move away from oil. Electric cars will only add to the demand, straining an already over-burdened power grid that is in serious need of upgrading. Imagine that the electric bill for your church, and each family in your church, doubles in 5 years. How do you cope?
  3. Rising food costs. Accompanying rising gas prices — and increasing scarcity — and rising electricity costs are rising food prices. Riots have broken out in developing countries this year over the price of staples such as rice. According to Paul Roberts, author of The End of Food, the entire food industry is facing a crisis of quality, nutrition, and cost. Roberts might be easy to ignore as “Chicken Little” alarmist, but he’s also the author of the 2004 book The End of Oil which predicted the current oil crisis. We might want to pay attention to what he says about food.
  4. Scarcity of water. If you think it’s not possible for America to run out of water, talk to the residents of Atlanta where last year Lake Lanier dried up to record lows.
  5. Economic/financial institutional uncertainty. The federal government’s “bail outs” of investment banks, and Fannie Mae and Freddie Mac, plus the falling dollar, the increasing national debt, the war in Iraq, low consumer confidence, and the continuing subprime mortgage crisis have converged to create an atmosphere of uncertainty. The next couple of years will not be business as usual for any institution, churches included.

The implications for the future of churches are great if only one of these crises matures. But, if all continue to move toward more critical levels, then churches will have to rethink standard operating procedures. Implications include:

  1. More family income spent on basics. Food, housing, utilities, and transportation costs are all basics. If families have to spend more on these items, they will have less to spend on other things, church and charitable gifts included.
  2. Increased building operating costs. If electricity doubles, and natural gas and heating oil prices double, the costs to maintain and operate church buildings will displace staff, program, and missions expenditures.
  3. Rising unemployment or underemployment. Churches will be faced with more families needing help than ever before.

Experts are predicting these scenarios in the next few years. More tomorrow on what churches can do to transition to effective ministry as these crises unfold.