Dedicated to the writings of Saint Luke.

Saturday, September 27, 2008

A Manufactured Crisis

The bailout is a bad idea. When a solution is proposed that gives dictatorial power without accountability to a Bush appointee near the end of his ignominious presidential reign, it becomes obvious that Bush would like to rule from the dead. The liquidity crisis has been caused by the promise of a government bailout. This crisis is now being cited as the reason why the bailout is necessary. Yet the idea is doomed to failure because it does not address the fundamental problem.

The subprime mortgage debt is the fundamental problem. It was created by Wall Street. Until we recognize that the Wall Street created debt instruments are toxic, no proposal that does not detoxify these instruments will succeed. These instruments have no value because there is no market for them. The bailout solution is to purchase all of these toxic instruments thus creating value. The reality is that because only the government will purchase these toxic instruments, the purchase by the government does not change the fundamental reality that no one else will purchase them.

The very provisions initially designed to provide security and safety for investors made the instruments toxic and worthless when Wall Street included a few subprime mortgages and continued to create more packages each one of which included a few more subprime mortgages. It would seem to be a simple solution to separate the subprimes from the non-subprimes to create a market for these instruments. This can not be done because the trust instruments contain clauses that effectively preclude any modification of the package. These “thou shalt not modify” provisions contained in all of the packages is problem one.

Strangely there has been no public discussion of this problem. The first step is to provide legislative and judicial authority to un-bundle these packages. Furthermore, no relief should be provided to any entity holding a toxic package unless the entity and the trustees of the instruments agree to allow the package to be unbundled. Once these packages have been dis-assembled, there will be a ready market for a large portion of these mortgages. This one change will substantially reduce the cost of the bailout.

We need to provide relief for the homeowners who are under water because their outstanding mortgage balances exceeds the fair market value of their residences. The bankruptcy courts traditionally have had the power to modify mortgages. The bankruptcy reforms acts have removed this power from the courts with respect to residential mortgages only.

Wall Street would like us to modify their debt but not modify the debt of the homeowners whose residential mortgages were used to create the toxic instruments Wall Street peddled. As the bankruptcy bar has noted, a slight modification of these mortgages would provide the economic incentives for homeowners not to walk away from their properties. This modification would reduce their mortgage indebtedness to the amount equal to the fair market value of the residence and would stabilize the housing market.

All economic studies have shown that the way out of a debt crisis is forgive some of the indebtedness. In our greed, we have forgotten Economics 101 and more importantly, we have forgotten that the prayer we used to say that included these words: “forgive us our debts, as we forgive our debtors.”

Copyrighted 2008

Thursday, September 25, 2008

Meltdown, subprime and other stories from our youth

Our grandparents told us stories and we said thank God we will never have another depression. We said that because our teachers taught us that the New Deal legislation was designed with one goal in mind: to prevent another depression. Today, we discuss New Deal legislation individually forgetting the one overriding concern that compelled enactment of the entire package. After discussing the faults of each piece of the package, we modified and repealed New Deal Legislation until we created an economic mess. Have we heard anyone say that the repeal of The Glass-Steagall Act of 1933 was a mistake? It was designed in part to control ruinous speculation and to ensure no entity would become too big by mergers and other questionable means to fail.

The Savings and Loan crisis happened as we sought ways to make more money than mere passbook savings. We have not learned any lessons about how our appetite for more unearned income has created subprimes to satisfy our greed. Is that not the real meaning of the crafty steward? He wanted more unearned interest, more than what he needed or deserved.

Bailouts without reforms designed to provide transparency and control ruinous speculation are not solutions. They merely buy time.

Copyrighted 2008

Wednesday, September 24, 2008

Unlikely Role Model

In bad economic times, the populace creates a hero for their distraction. During the Great Depression, Seabiscuit became a national hero. Sarah Palin has replaced Seabiscuit as the hero of the day. Robert Willumstad gained his 15 minutes of fame when he declined to accept his $22 million dollar severance parachute package when he terminated by AIG. I doubt that Willumstad will ever a hero of the populace but hopefully he will become the role for the CEO and for politicians.

Copyrighted 2008

Tuesday, September 23, 2008

A Modern Day Reading of the Parable

The reading last Sunday of the Parable of the Laborers in the Vineyard was from the Gospel of Matthew. The Master goes out into the town squares and hires people to work in his vineyard. He does this in morning and returns three to square and hires more people each time. At the end of the day, he pays a day’s wages to the people he hired late in the afternoon and the same amount to each of the other groups he had hired. While the preacher was explaining this parable, I was thinking about Lehman Brothers and AIG and why one was bailed out by the government and not the other. Was it like the preacher, suggesting as to the laborers, a matter of God’s grace?

Copyrighted 2008

Sunday, September 07, 2008

Short notes

Why did Josephus use 1 Esdras rather than Ezra-Nehemiah?

Did Josephus include in his Antiquities any recitals of history such as Nehemiah 9?

Did any 1st century writings condemn intermarriage between priests and lay people?

Can a parable include a prophecy? Any examples?

Is there something about Sapphira or her name that is significant to this story in Acts 5? Is she a Samaritan, a harlot? Was her husband a religious figure like the other two Ananias?

Did Luke use Judith, Tobit and/or Pseudo-Philo as a source?

Copyrighted 2008

Monday, September 01, 2008

Luke is the gospel of prayer

This statement is often made. Luke does mention on a number of occasions that Jesus and his disciples observed the customary times of prayer. The fact that there are specific times for prayers indicates there may have been a movement toward institutionalization. The ninth hour, mentioned by Luke, may have been an established or prescribed time. The prayers in Daniel 9, Nehemiah 9, Baruch 1:15-3:8 and 4Q504 are connected to specific prayer times, either festivals or daily times of prayer.

In his dedication speech for the newly finished Temple in Jerusalem, King Solomon announces that this Temple, this central place of the presence of God, is to serve primarily as a place of prayer. In Isaiah 56:7, we read: “for my house shall be called a house of prayer.”

Two years ago I discussed the penitential prayer but did not derive any good ideas on the origin of Luke’s theology of prayer. I thought I would try again.

Judith Newman introduces Praying by the Book, The Scripturalization of Prayer in Second Temple Judaism with her “observation that the literature of the exile and post-exilic period reflects a great interest in prayer.” “Long prayers appear in Ezra-Nehemiah, the books of Daniel, Judith, and Tobit, as well as pseudepigraphical works like Jubilees and Pseudo-Philo.” Luke has clearly made use of Ezra, Nehemiah, Daniel and Jubilees.

Copyrighted 2008