Barry's Blog

As we approach the upcoming holiday season, the unprecedented economic tsunami that has engulfed the world sits front and center, right beside the Thanksgiving turkeys and the cardboard Santas, as retailers even now are trying to stave off a terrible season. Daniel Henninger, deputy editor of The Wall Street Journal's editorial page, and a Pulitzer Prize winner, has written what i consider to be one of the best articles on how to account for this economic meltdown, it's origin, and this amidst an increasingly secular culture.

Henninger writes: "This year we celebrate the desacralized 'holidays' amid what is for many unprecedented economic ruin -- fortunes halved, jobs lost, homes foreclosed. People wonder, What happened? One man's theory: A nation whose people can't say 'Merry Christmas' is a nation capable of ruining its own economy. One had better explain that."

As he suggests, clearly the way the financial markets fell so fast, along with 50% wealth reductions, and the demise of Wall Street, was paved with good intentions, no doubt, as he observes: "notably the notion that all should own a home, even if that required giving away the house to untutored borrowers with low-to-no-interest loans." This good intention, Henninger observes, set off history's largest chain of moral hazard, which began sometime between 2005 an 2007, when borrowers, lenders, and securitizer shamans all found themselves operating in what he calls a "zero-gravity" environment, aloft a moral hazard.

Henninger mentions how the technical details have been been recounted with frightening precision by Robert Stowe England in "Anatomy of a Meltdown," for Mortgage Banker magazine. As England recounts, "The underwater earthquake that first rattled the foundations of the mortgage industry came in the form of sharply higher deliquencies and defaults from a book of poorly underwritten subprime loans from the fourth quarter of 2005 through the first quarter of 2007. This narrative runs through borrowers making misrepresentations on loan applications (fraud), the collapse of Bear Stearn's hedge funds, and revised ratings-agency methodologies that led to "unprecedented" mass downgrades.

Henninger also alludes to a widely emailed article for Portfolio.com by Michael Lewis of "Liar's Poker" fame, who describes a skeptical hedge-fund manager and his associates walking through the wild world of mortgage-backed securities like stunned characters in "Mad Max," asking bankers, borrowers, and ratings-agency executives one question: Why? Why do you think all of you can get rich, all at the same time, forever?

While Henninger argues that nothing really occurred through this crisis to discredit the system of free-market capitalism, "what really went missing through the subprime mortgage years were the three Rs: responsibility, restraint and remorse. They are the ballast that stabilizes two better known Rs from the world of free markets: risk and reward. Responsibility and restraint are moral sentiments. Remorse is a product of conscience. None of these grow on trees. Each must be learned, taught, passed down. And so we come back to the disappearance of "Merry Christmas."

While secular naysayers have constantly expressed their disdain for religion in the public square (and this is where Mr. Henninger's article is so to the point) he observes a direct correlation between this economic crisis, and the failure of society to allow for the appropriate expression of religious faith and moral values. He writes, brilliantly, that:

"It has been my view that the steady secularizing, and insistent effort at dereligioning America has been dangerous. That danger flashed red in the fall into subprime personal behavior by borrowers and bankers, who after all are just people. Northerners and atheists who vilify Southern evangelicals are throwing out nurturers of useful virtue with the bathwater of obnoxious political opinions. The point for a healthy society of commerce and politics is not that religion saves, but that it keeps most of the players inside the chalk lines. We are erasing the chalk lines....Feel free to Banish Merry Christmas. Get Ready for Mad Max...."

Maybe Dostoevsky was right, "If there is no God, then all things are permitted."