Tuesday, October 2, 2012

Tuesday, October 2, 2012 - The Church of England and the Case Against Usury

The Church of England and the Case Against Usury
- by Sinclair Noe

DOW – 32 = 13,482
SPX + 1 = 1445
NAS + 6 = 3120
10 YR YLD - .01 = 1.62%
OIL – 22 = 91.67
GOLD - .80 = 1775.40
SILV - .03 = 34.72

Late yesterday I noticed a report citing the Church of England taking on British Banks. I'd like to thank an astute and alert listener for another version of the story to my attention. As many of you know, I wrote a book about the bankers' role in the financial crisis, and I paid particular attention to the role of usury. The book is “Eat the Bankers: The Case Against Usury, the Root Cause of the Economic Crisis and the Fix”. (Click here for more info on the book.)

There is a direct relationship between usury and the current economic problems. The rise in usury led directly to predatory loans, foreclosures, personal and business bankruptcy, debts that spiral out of control and never seem to get paid despite good intentions. Many families have suffered quietly, blaming themselves for what was happening. Bankers have no moral compass. They reject compassion and try to shift culpability.

Usury traps the most desperate; it is a form of regressive taxation that chops away at the middle class and working poor. Usury enslaves the borrower and oppresses the poor. Usury wasted a great economy by shifting investment capital away from productive purposes. Usury stunts economic development and perpetuates poverty.

Usury was condemned by virtually all the world's religions. There is only one known instance where Jesus turned to violence; one instance where he destroyed property; one instance where he took a whip to another man – when he chased the money changers from the Temple.

Despite nearly universal condemnation, usury slowly and surely crept into common acceptance. Today it is rare to hear criticism of usury in a church, synagogue, mosque, or temple. This is sad because the family and finance are interconnected. Man as an economic being cannot be abstracted from other aspects of life. Every house of worship includes the faithful whose faith is tested by economic stress. The Golden Rule applies to all religions and it is not just an educational tool for children, it is a core principle for commerce and life. To ignore usury is to become the people Jesus warned us about.

And so, there was some satisfaction yesterday to see the Church of England has submitted comments to the British parliamentary commission investigating the Libor rate-fixing scandal and other banking misdeeds, saying that the bankers should repent.

Here are portions of the Church of England's submission:

A flourishing economy requires sound banks. Simply waiting until memories of recent scandals fade would not be an adequate strategy for rebuilding public trust. Regulatory and cultural changes are necessary.

The Biblical claim that ‘the love of money is the root of all evil’ holds true because, ultimately, treating money as an end rather than a means is dehumanising for creatures made in the image of God: ‘You cannot serve God and mammon (wealth)’.

The roots of the crisis in banking are, therefore, ethical. … "What would it mean to be a good banker?" A strong and virtuous professional culture in banking is the best way to guard against abuse without constraining innovation.

Inadequate levels of competition have distorted the proper operation of markets and increased the problems of ‘too big to fail’. The banking sector has violated some of the fundamental principles of the free market economy: free entry and exit, the avoidance of monopoly and oligopoly, and independence from external subsidy.

The nature of risk – and the basis of remunerating people for managing risk – has been badly misunderstood within the banking sector. Those who have been handsomely rewarded for risk taking have not been those who have borne the consequences of those risks.

Christianity has always recognised that money, interest and debt are not merely technical problems for economists but are moral questions for everybody. In a modern market economy, interest and debt may be unavoidable, but they are not amoral matters.

There is evidence that in many professions, but notably in finance and banking, ... the culture of their working environment does little or nothing to encourage virtues such as truth-telling, loyalty and prioritizing what is right over what may be expedient.

There is also evidence that the culture of banking has changed in the last 25 years or so. In 1991, a study of professionals in different sectors suggested that many in retail banking, who had entered the profession believing it to be about serving the customers’ financial interests, were dismayed that the job had come to value the sale of financial products as the objective, with little thought for customers’ needs. The shift from a culture of personal service to one of maximizing sales appears to be more marked in banking than other sectors.

Public disquiet about the scale of bonuses ... has shed some light on a culture where large bonuses are valued, less for their monetary worth than for their significance as status indicators within the industry. This in itself suggests that the culture of banking has lost touch with matters of virtue – in short, there seems to be no reflection upon the question, "What would it mean to be a ‘good’ banker?" beyond the crude measure of monetary profit.

The financial crises and emerging scandals of recent years have ... raised profound concern not simply about the ability of the system to prevent extreme and criminal behaviour by individuals but about the system itself and a whole cadre of professionals within it. The question is not whether systems have been adequate to identify and deal with the bad apples but whether the whole orchard needs replanting.

Smarter regulation is, therefore, part of the answer, but only part. The sharp question is how banking can restore its internal professional standards in ways which communicate trust both within the industry and with stakeholders throughout the community.

The impact of recession on the most vulnerable is both well documented and deeply injurious to a cohesive society. And, in so far as all gain from greater social cohesion, all lose when social bonds are damaged through widening material inequality and the exclusion of significant numbers of people from meaningful employment.

Economic growth is a good thing but only to the extent that it is sustainable, realistic and achieved morally.

The damage done to the reputation of banks by the current crisis could prevent the banks playing their most effective role in promoting recovery. Restoring trust frequently requires symbolic, as well as merely effective, change to take place.

One insight from the Christian tradition of penitence and forgiveness is that it is often not enough to put matters back to where they were before things went wrong; some demonstration of a change of heart by means of restitution and a visibly robust refusal to let the same failings occur again, is necessary before a bad situation can be made good. Exactly what kind of action by the banks, or by the government, would be necessary to restore trust in this way would probably emerge if the debate about banking ethics were to take place openly in the public realm.

The question of the incentivizing of risk is a good example of how a failure to consider ethics in terms of the Common Good can distort judgments. The rhetoric of the risks taken within the banking sector tends to exclude the demonstrable fact that the consequences of banking failures have been borne by the people of the nation, and indeed of the world, and not just by the so-called risk takers.

"My word is my bond" only works if it is possible to identify with whom the bond is supposed to be forged. The impersonal nature of trading is one factor in the miscalculation of risk and one factor in the diminution of the reputation of the industry. 

We do not regard it as an accident that a sector of the economy which most robustly championed the free, unregulated, market economy should have found itself a victim of that innate tendency toward monopoly. Adam Smith recognised that markets need to operate within an external moral structure if they are to flourish, but that markets of themselves do not sustain such moral structures.

(end of excerpts from Church of England)

Capitalism won't achieve its ends without the things a moral sense can offer, and if you discount your brother's plight you've forgotten what capitalism is about. The structures of business and the mechanisms of capitalism need to recognize that, in the end, people need to be human to one another. Self interest prompts what justice demands. Repentance implies a complete turning around and making good. As things stand, the banks refuse to admit or deny wrongdoing, and they have completely failed to demonstrate any sort of repentance.

I do not belong to the Church of England but I applaud their courage.

The church of England is not alone. In 2005, Pope Benedict XVI condemned the “deplorable social plague of usury”. In the 2009 encyclical, Truth in Charity, Benedict wrote, “The weakest members of society should be helped to defend themselves against usury.”

This should be the issue of the day. And in reality it is. Over the next few days and weeks you will hear this debate phrased differently, but be aware that when you hear debate about the economy and finance, you are really hearing a moral debate.

Political leaders avoid usury like the plague. They think their job security depends on campaign contributions and the bankers know how to play that game. Politicians delude themselves that they can accept bribes and still represent the people. They lie when they say they are serving one master while collecting money from another.

What if there was an economic system that did not experience booms and busts, inflation and deflation, recessions and depressions? What if there was an economic system that promised universal prosperity? There is.

The laws of this marvelous economic system have been laid out by virtually every society. The guidelines for this beneficent and harmonious economic system were given to us more than 4,000 years ago; the rules are more relevant and necessary than ever. What is this miraculous economic system? It is simply to eliminate usury. When we see the violent results of modern economic experiments wouldn't it make sense to consider the ancient God given wisdom which promises social and economic justice and abundance?

I leave you with these final thoughts.

Rom. 13:8: “Owe no man anything, but to love one another.”

Luke 6:35: “Lend, hoping for nothing in return.”

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