Affluenza hurts

Between teaching a class at George Fox University and kicking off another year of ministry activity at the church, it's been a busy couple weeks for me. Still, this blog needs another post, and since I didn't have a Cal football game today to be embroiled with (the Bears had a bye week after a bad loss last Saturday), today's the day to get the next post up.

In my (precious few) free moments lately I've been doing some thinking about the current economic crisis. Massive government bailouts, wildly swinging stock markets, and even the government takeover of a major insurance company (AIG) have dominated headlines. What's going on? As one might expect both presidential candidates have weighed in with some typically vague explanations. But yesterday John McCain caught my attention when he delivered a speech in which he got more specific, laying the blame for our current economic woes right at the doorstep of mortgage lenders and the investment banking industry. Out of greed, he said, the lenders enabled themselves to offer bad loans to consumers which were then invested in by banks. Now that the bottom is dropping out, we're all paying for their avarice.

While I appreciate hearing something direct and specific from a presidential candidate, I think Sen. McCain missed the real culprit in the current financial crisis: us. He is partially right, in that greed in the financial services industry is part of the problem. But the economy isn't an investment bank or a lender, the economy is you and me. And we're kidding ourselves if we don't think we are largely to blame here.

A lot of the current problem can be traced back to 10-15 years ago when US lenders pressured authorities to relax lending standards so they could do more business. Low documentation and no documentation systems, 100% financing and other "creative financing" options, relaxation of underwriting standards... all of this was designed to allow lenders to make more loans - loans to people they never would have loaned money to a few years before. Now, is this greed? Sure it is. More loans mean more commissions for brokers.

But before we make an easy scapegoat of the entire home lending industry (I'm surprised the press hasn't started popularizing the term "big investing"), let's look in the mirror. After all, mortgages don't just appear out of nowhere - someone has to take out the loan for there be a mortgage in the first place. And just who was it that was entering all those zero-down, double-mortgaged, creatively financed loans? Greedy consumers. Who was taking out 110% of the equity in their houses? Greedy consumers. Who was it that jumped at the chance to buy a house they couldn't have purchased a few years ago, just because a few rules changed? Yep, greedy consumers. Just because some commission-paid broker tells me he can get me into that house I'm lusting after doesn't mean it's a good move on my part. And if I'm foolish enough to do it anyway, can I really put all the blame on the "greedy broker"? It isn't just dastardly Wall Street tycoons or Gollum-like mortgage brokers who are at fault here - there was plenty of greed right in our bathroom mirrors.

The reason I've been bugged about all this is I see a nation screaming for a scapegoat, not facing itself in the mirror. We're pressuring the federal government to fix the problem and "go get the bad guys." Now, the government has a role to play especially where laws were broken. But Nancy Pelosi, George Bush, Barack Obama, and John McCain aren't going to fix the basic moral problem in our nation: we deny absolute values (like the good postmodernists we are) and then things like greed, now unchecked, run amok.

And run amok it has. America has experienced an epidemic outbreak of affluenza. Consider the indicators, which I turned up via some simple web searching of places like the Federal Reserve and US Dept. of Commerce:

  • Consumer debt (doesn't include people's houses) was $2.4 trillion in 2006. That's $19,000 of non-mortgage debt per US household.

  • Mortgage debt increased 84% (from $7 trillion to $12.8 trillion) between 2000 and 2006. That's almost doubling in just 6 years. This statistic is the result of the relaxed lending standards I noted above, and it's the source of our current financial crisis.

  • Credit card debt alone tripled between 1990 and 2000.

  • In 2001, the percentage of Americans who filed for bankruptcy exceeded that of Great Depression. That year more Americans filed for bankruptcy than graduated from college.
Americans have an affluenza problem - we gotta' have it all now, and we'll borrow like crazy to get it. This makes us easy targets for unscrupulous lenders (our greed makes us easy prey for their greed) and it leaves us financially incapable of weathering difficult times. Soon housing prices dip or some other reality hits and we find we have more debt than assets. Consumer confidence wanes, investing markets buckle, and voila: you've got a crisis. Until we the people decide the problem is looking at us from the mirror, and until we determine to live differently, these kids of problems won't go away. We need to train ourselves to borrow less, spend less, and save more. Thankfully, programs like Financial Peace University (which we host at Harvest) and Crown Financial Ministries teach people how to do exactly that.

And we need to stop demanding that Washington remove the symptoms of our affluenza if we're not willing to attack the root of the disease. That only further moves our government toward practical socialism, which is the worst thing we can do to our economy in the long run.

Borrow less, spend less, save more. Too bad that slogan wouldn't win anyone the White House.


Ken said...


A few comments since I've calmed down following the Bills, powered by Cal product Marshawn Lynch, beat the Raiders 24-23.

I agree. The reason for the bailout starts and ends with us - and I'm just as guilty as anyone else. I heard a quote on NPR the other day - "even my 6 year old knows you don't lend money to someone who can't pay you back." However, because it could be done, it was. But there are two dimensions to this.

"We the people" need to take complete responsibility. We put ourselves in this precarious position by buying more than we can afford. We, the people, allowed ourselves to keep things going and got caught in the hype. And we the people elected those responsible for not putting enough regulatory safeguards in place to make sure that greed could not outstrip common sense.

Unfortunately, politicians will not criticize the American people. That doesn't win elections. We need to take more responsibility and act more responsibily.

Anyway, I'm off to continue coming off my high (I also opened a new pound of Arabian Mocha Java this morning - that alone got the day to a great start!) before going out and canvassing this afternoon.


Jason V said...

Gov Palin got close in the VP debate, but still was unwilling to blame the people. (she stopped at the lender level)

But she did challenge us to say "Never Again". But that's what people said after the "Great Depression". :(

Matt Guerino said...

Ken, personal responsibility is definitely the heart of the issue. My point isn't so much to bemoan what politicians don't do, but what WE don't do. I think America needs a wake-up call (hopefully this current crisis is it) to stop living on borrowed money and have it all today. That's not realistic.

Jason, welcome! Thanks for your comment. On another subject...I saw the post on your blog re: teaching the Bible, and I couldn't agree more. Topical sermons are not the problem per se, but for too many churches "topical" is a code word for "let's talk about what concerns us, not what concerns God." I don't think that's a good idea.

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