The mid-August rollercoaster ride that has left many investors clutching their stomachs and canceling their vacations must serve as an urgent reminder of the enormous power of global banks and the need to check that power through the swift and decisive implementation of financial reform.
On the macro level, in the encyclical letter Quadrogesimo Anno in 1931, Pope Pius XI provides a starting point for an engaging conversation from the faith perspective about the current situation:
"Easy returns, which an open market offers to anyone, lead many to interest themselves in trade and exchange, their one aim being to make clear profits with the least labor. By their unchecked speculation, prices are raised and lowered out of mere greed for gain ... directors of business companies, forgetful of their trust, betray the rights of those whose savings they have undertaken to administer" (132).
Some recently released information related to the operations and stability of our financial system caught my attention, including the first ever audit of the Federal Reserve that was completed in response to an amendment in the Dodd Frank legislation of July 2010. From the period between December 2007 and June 2010 some $16 trillion dollars was given out by the Fed to U.S. banks, corporations and a large number of foreign banks. For some perspective on that amount, the GDP of the U.S. is $14.12 trillion. Another piece of research revealed that in the last six quarters seven large U.S. banks spent in excess of $45 million lobbying against the implementation of Dodd Frank.
The combination of the rough week in global markets and the revelations referenced above were a cruel reminder that Main Street, Wall Street and Congress are still in the sick bay and feverishly searching for a path to recovery. Both unemployment rates and the foreclosure crisis remain clear indicators of the trouble on Main Street, while the market turmoil and the cutbacks being announced by numerous financial institutions are signs of Wall Street malaise and Washington's incompetence.
I find it unfortunate that attention has turned so quickly to what governments should be doing to create jobs and reinvigorate the economy. So little time is being devoted to the changes that are still needed to curb the excesses and abuses in the financial sector that first got us into this mess. There appears to be little appetite for an objective analysis of the root causes of the financial meltdown that will bring about systemic change, yet there is a frantic search for the innovations and tools that will keep us perpetually locked in a high risk, "greed for gain" cycle.
Saner voices are calling for an analysis of the basic framework and principles that have been accepted as the best standards and practices in our globally integrated financial system, and religious traditions can contribute to this conversation. Few have denied that greed, loss of integrity and cutting corners at the expense of the public good were at the center of the recent meltdown. Re-establishing a stable and transparent foundation, restoring trust and redirecting the focus of financial institutions to fulfill their social purposes will not happen through the legislative process alone. Religious traditions that consistently remind us of the true path to peace and joy in our lives, and our responsibilities to one another in society, also have a role to play. Practically, this means revisiting cooperative schemes and credit union structures that emerged from faith communities and other schemes like community bonds and local currencies that been developed to stabilize and promote initiatives in local communities.
An accepted and foundational principle about the role of faith institutions in debates about public policy and other issues that surface in societies is that they are in it to promote the common good for the long haul -- for eternity, to be more precise. They rarely desert the field overnight like many campaigns and movements that have a limited horizon and vanish quickly. Would that these same principles were found in our nation's banking system that has abandoned its social purpose.
As the ride ahead promises to be a wild one, I would hope we find the intestinal fortitude to challenge our legislators and leaders in the financial sector to enact and adopt the kind of reforms that will restore faith in the markets and banking system and serve the public good.