WaMu: An Empire Built on Bad Loans

At WaMu, getting the job done meant lending money to nearly anyone who asked for it — the force behind the bank's meteoric rise and its precipitous collapse this year in the biggest bank failure in American history.

On a financial landscape littered with wreckage, WaMu, a Seattle-based bank that opened branches at a clip worthy of a fast-food chain, stands out as a singularly brazen case of lax lending. By the first half of this year, the value of its bad loans had reached $11.5 billion, nearly tripling from $4.2 billion a year earlier.

--"Saying Yes, WaMu...," NYT (12.29.08)

Just to cover the ground, just to be sure I've alloted a fair share of the blame for the financial crisis to particularly guilty banks, I give you the case of WaMu (Washington Mutual). Yes, I still feel that early blame and outrage was rightly directed at the Investment banking community, first, and then at the federal government, that this was an appropriate ordering of culpability. But with the opportunity afoot, with the doors of accomodation wide open, the mindless, wrecklessly aggressive example of WaMu's massive attempt to exploit the mortgage market stands out as especially deserving of universal contempt.

It's also true that, in September, the federal government quickly and effectively engineered a shotgun wedding between WaMu and acquirer JPMorgan Chase--and a short time later provided $25b of bailout money under the TARP program. And I wish JPMorgan Chase well in managing their way out from under the mess they've accepted. But the WaMu example remains as instructive as it is unbelievable. We need to understand that his kind of management insanity can happen, and did.

This past Sunday's NYT article, "Saying Yes, WaMu Built Empire on Shaky Loans," provides a stunning look into the down-the-rabbit-hole craziness of what passed for business-as-usual at WaMu during that period.

http://www.nytimes.com/2008/12/28/business/28wamu.html?em

Walking with God: Two Poems, a Saying, and Jesus

My Sweet, Crushed Angel1

You have not danced so badly, my dear,
Trying to hold hands with the Beautiful One.

You have waltzed with great style,
My sweet, crushed angel,
To have ever neared God’s Heart at all.

Our Partner is notoriously difficult to follow,
And even His best musicians are not always easy
To hear.

So what if the music has stopped for awhile.

So what
If the price of admission to the Divine
Is out of reach tonight.

So what, my dear,
If you do not have the ante to gamble for Real Love.

The mind and the body are famous
For holding the heart ransom,
But Hafiz knows the Beloved’s eternal habits.

Have patience,

For He will not be able to resist your longing
For long.

You have not danced so badly, my dear,
Trying to kiss the Beautiful One.

You have actually waltzed with tremendous style,
O my sweet,
O my sweet, crushed angel.


Skinning Your Knees on God1

Little by little,
You will turn into stars.

Even then, my dear,
You will only be
A crawling infant,
Still skinning your knees on God.

Little by little,
You will become like
The whole sweet, amorous Universe
In Love
On a wild spring night.

And become so free
In a wonderful, secret
And pure Love
That flows
From a conscious,
One-pointed,
Infinite need for Light.

Even then, my dear,
The Beloved will have fulfilled
Just a fraction,
Just a fraction!
Of a promise
He wrote upon your heart.

When your soul begins
To ever bloom and laugh
And spin in Eternal Ecstacy—

O little by little,
You will lose yourself in God.


Love Is No Game2

[But] Love is no game
For the faint hearted or weak;
It is born of strength and understanding.
[and quoting Hafiz:]
“Only a person with his life up his sleeve
Dares cross the threshold of Love.”


Walking with Jesus

From Jesus:

If anyone would come after Me, let him deny himself, take up his cross and follow me. For whoever wishes to save his life [or soul] shall lose it; but whoever loses his life [or soul] for My sake shall find it. For what shall it profit a man if he gains the whole world and forfeits his soul. (Mat. 16:24)

I do not ask on behalf of these alone, but for those also who believe in Me through their words, that they may all be one; even as you, Father, are in Me, and I in You, that they also may be in Us...(John 17:20)

From 1John 4:16:

And we have come to know and have believed the Love which God has for us.God is Love, and the one who abides in Love abides in God, and God abides in Him.

From the Apostle Paul:

For through the law I died to the law, that I might live to God. I have been crucified with Christ, and it is no longer I who live, but Christ who lives in me. (Gal. 2:19)

Set your mind on the things above, not on the things that are on earth. For you have died and your life is hidden with Christ in God. (Col. 3:2)

1 Renderings in English of Hafiz’ poetry by Daniel Ladinsky, I Heard God Laughing: Poems of Hope and Joy (1996, 2006).
2 Saying of Meher Baba, in part quoting Hafiz.

What Greenspan Thinks: Banks Need More Capital (No Kidding! From Where?)

The passage by Congress of the $700 billion Troubled Assets Relief Programm (TARP) on October 3rd eased, but did not erase, the post-Lehman surge in LIBOR/OIS. The spread apparently stalled in mid-November and remains worryingly high.

How much extra capital, both private and sovereign, will investors require of banks and other intermediaries to conclude that they are not at significant risk in holding financial institutions' deposits or debt, a precondition to solving the crisis?

--Alan Greenspan, The Economist (12.19.08)

There are many who believe that the lax monetary policies of Alan Greenspan in his last term of service contributed significantly to the housing bubble and the financial crisis we now find ourselves in. Some would suggest he was either asleep at the switches (which would be rather extraordinary), doing the bidding of the White House or congress (which would be rather out of character), or too ideologically myopic to recognize the extreme danger and likely outcome of the situation developing. He appeared to be in denial for some time after the scope and threat of the problem became evident. But, in this article for The Economist, he now appears to implicitly accept the realities of the past as he assesses where we are and what is needed to move us forward:

The insertion, last month, of $250 billion of equity into American banks through TARP (a two-percentage-point addition to capital-asset ratios) halved the post-Lehman surge of the LIBOR/OIS spread. Assuming modest further write-offs, simple linear extrapolation would suggest that another $250 billion would bring the spread back to near its pre-crisis norm. This arithmetic would imply that investors now require 14% capital rather than the 10% of mid-2006. Such linear calculations, of course, can only be very rough approximations. But recent data do suggest that, while helpful, the Treasury's $250 billion goes only partway towards the levels required to support renewed lending.

But while recognizing that higher levels of capital will now be required of American Banks (whether it is 14% of assets or higher), and that another $250B of capital is still needed, he looks past the remaining $350B of TARP funds still available and looks to a recovery in the stock market! And his overabundant optimism and ideological faithfulness lead him to assume the market will recover soon enough to be relied upon to do the job.

Eventually, the most credible source is a partial restoration of the $30 trillion of global stockmarket value wiped out this year, which would enable banks to raise the needed equity. Markets are being suppressed by a degree of fear not experienced since the early 20th century (1907 and 1932 come to mind). Human nature being what it is, we can count on a market reversal, hopefully, within six months to a year.

Still, he does appear to recognize that recovery of the stock market will likely require stabilization and recovery of the housing market--something a continually unfolding mortgage crisis makes unlikely in the immediate future. And while he more than once admonishes us to timely remove our public capital support to the private sector, he also acknowledges that the temporary infusion of TARP funds was and is important, and the most efficient means of initially addressing the financial crisis and the capital needs of troubled financial institutions.

Another critical price for the return of global financial stability is that of American homes. Those prices are likely to stabilise next year and with them the levels of home equity—the ultimate collateral for global holdings of American mortgage-backed securities, some toxic. Home-price stabilisation will help clarify the market value of financial institutions' assets and therefore more closely equate the size of their book capital with the realities of market pricing. That should help stabilise their stock prices. The eventual partial recovery of global equities, as fear inevitably dissipates, should do the rest. Temporary public capital injections into banks would facilitate this process and arguably provide far more benefit per dollar than conventional fiscal stimulus.

But for whatever reasons--his general uneasiness with public capital injections, perhaps?-- he again seems to take a pollyannaish view of the scope and depth of the crisis, and the time and means necessary to remedy it. From the facts available, it would seem quite unlikely that the continuing unfolding of the mortgage crisis, its effect on the housing market, and the recovery of the stock market will accomodate his optimism and turn the corner in six months to a year. I'm more comforted than ever to know that the pragmatic, non-ideological Ben Bernanke is at the wheel.

http://www.economist.com/displaystory.cfm?story_id=12813430

Ben Bernanke: The Man Managing the Meltdown

Until the middle of last week, there were signs that the credit crisis was easing: some banks were lending to each other again, the interest rates that they charge each other have come down, and no major financial institution has failed since the passage of the bailout bill. "It was a very important step," Bernanke told me last week, referring to the bailout. "It greatly diminished the threat of a global financial meltdown. But, as Hank Paulson said publicly, 'you don't get much credit for averting a disaster.' "

--"Anatomy of a Meltdown," The New Yorker (12.1.08)

Ben Bernanke is a most unlikely historic figure in the middle of this historic financial crisis. He has a quiet, conservative disposition. He has a pragmatic, resilient orientation to problem solving, and a consultative approach to decision making. And however you may assess what he has done so far--and we are not yet near the other side of this crisis--he may well be the best Federal Reserve leader we could have hoped for during this critical time.

I certainly felt we had no choice but to trust him in managing the meltdown of some our most important financial institutions and the financial network essential to the functioning of our market economy. And I felt reasonably comfortable doing so--based on those characterisitics noted, to be sure, but also on his first-rate intellect, his extensive, expert background in the economics of financial markets and market failures, and his prior experience as a governor of the Federal Reserve Board. He also benefited from the extensive practical experience and support of Treasury Secretary Henry Paulson. (Although Paulson--Goldman, Sach's prior CEO--had arguably once been a responsible, complicit party in managing the culture and climate that spawned and developed the mortgage crisis and resulting financial failures. He certainly understood the background of the problem.)

A The New Yorker article, "Anatomy of a Meltdown," by John Cassidy, provides a succinct but useful biography of Bernanke, and then a comprehensive and balanced chronology of Bernanke's and the Fed's thinking and decisions during this singularly challenging crisis played out in unchartered territory. If he wasn't first to the line in recognizing the threat and scope of the problem, if his first instincts and choices for bold, creative solutions may not have been the best or the ones he would ultimately decide on and pursue, he was open minded, resilient and strong in pursuit of the best answers. And he showed resolve in carrying them out. That is, he showed strong leadership in the most challenging of circumstances. That, at least, is my view, my take on it.

Looking back on this period, Bernanke told me, "I and others were mistaken early on in saying that the subprime crisis would be contained. The causal relationship between the housing problem and the broad financial system was very complex and difficult to predict."

...Paul Krugman, the Times columnist, a former colleague of Bernanke's at Princeton, and the winner of this year's Nobel Prize in Economics, said, "I don't think any other central banker in the world would have done as much by way of expanding credit, putting the Fed into unconventional assets, and so on. Now, you might say that it all hasn't been enough. But I guess I think that's more a reflection of the limits to the Fed's power than of Bernanke getting it wrong. And things could have been much worse."

Of course, there are many among his critics who would also assert that the right course was to let these financial institutions fail, and that somehow the financial system would muddle through, then right itself in time, without serious risk of a 1930's-era depression. Others were narrowly concerned with the example being set and "moral hazard." I don't subscribe to those opinions; I think there was far more risk in failing to act. I find common ground with Bernanke's explanation of his thinking at the time:

There is now wide agreement that Bernanke and his colleagues made the correct decision about Bear Stearns. If they had allowed the firm to file for bankruptcy, the financial panic that developed this fall would almost certainly have begun six months earlier. Instead, the markets settled for a while. "I think we did the right thing to try to preserve financial stability," Bernanke said. "That's our job. Yes, it's moral-hazard-inducing, but the right way to address this question is not to let institutions fail and have a financial meltdown. When the economy has recovered, or is on the way to recovery, that's the time to say, 'How can we fix the system so it doesn't happen again?' You want to put the fire out first and then worry about the fire code."

But Bernanke understands that these are times of great danger, great risk in whatever choices are made, and of highly charged emotions. Many critical and hurtful things have been said and will be said. But Bernanke, undaunted, continues to pursue bold solutions: recently cutting the Fed funds rate to zero (actually, 0-25 basis points), setting out plans to make large purchases of agency debt and mortgage-backed securities, and considering the potential benefits to the mortgage markets of buying long-term Treasury securities. As I quoted Henry Paulson earlier, even if he is successful, "you don't get much credit for averting a disaster." To provide an assuring, strengthening reference point and inspiration, Bernanke keeps this Civil-War era quotation from Abraham Lincoln on his desk:

If I were to try to read, much less answer, all the attacks made on me, this shop might as well be closed for any other business. I do the very best I know how—the very best I can; and I mean to keep doing so until the end. If the end brings me out all right, what is said against me won't amount to anything. If the end brings me out wrong, ten angels swearing I was right will make no difference."

http://www.newyorker.com/reporting/2008/12/01/081201fa_fact_cassidy?currentPage=all

60-Minutes: A Second Mortgage Crisis; Paulson: No More Failed Financials

The trouble now is that the insanity didn't end with sub-primes. There were two other kinds of exotic mortgages that became popular, called "Alt-A" and "option ARM." The option ARMs, in particular, lured borrowers in with low initial interest rates - so-called teaser rates - sometimes as low as one percent. But after two, three or five years those rates "reset." They went up. And so did the monthly payment. A mortgage of $800 dollars a month could easily jump to $1,500.

--60-Minutes (12/14/08)

Treasury Secretary Henry Paulson said Tuesday that he does not expect any more major financial institutions to fail during the current credit crisis.

--AP/MSNBC (12/16/08)

60-Minutes has again scooped the nightly news. Again they are first to present us the bad news, this time about a second wave of mortgage failures and foreclosures coming at us. Resetting now and in the near future are rates for two other groups of risky mortgages called "Alt-A" and "option ARMs." Why didn't someone tell us? The financial institutions knew, of course, and so did the government financial team of Paulson and Bernanke.

The experts interviewed on 60-minutes see the impact as continuing an unsettled, bottom-seeking housing and mortgage market through 2009, into 2010, and possibly longer. And, according to most experts, the economy will likely not recover until the housing market stabilizes. If you haven't seen the 60-Minutes piece, take a few minutes and view it now. It's not pretty.

The closest thing to good news is that two days after the 60-Minutes story Henry Paulson nonetheless tells CNBC he "does not expect any more major financial institutions to fail during the current credit crisis." I mean, the fear is that things could always get worse again, right? And there have been so many who have second-guessed the government recapitalization of some major financial institutions that in Bernanke's and Paulson's view could and should be saved. And while the discouraging news about new dimensions to the mortgage debacle is dispiriting, and so is the potential impact on the economy, at least there is reason to believe that the financial institutions that are the foundation of our market economy likely will not experience major new failures. Let's hope Paulson is right.

http://www.cbsnews.com/stories/2008/12/12/60minutes/main4666112.shtml

http://www.msnbc.msn.com/id/28269485/

Being Here

If for so many good reasons, I try to extend respect to others, I also want to receive respect in return. But that is not the way of the world, is it? Nor is it the way of many who claim Christianity—not even toward other Christian groups or traditions. To fully entrust that expectation of respect to others—including those who dislike or disagree with you—would be more than innocent or naive, it would be unwise and trust misplaced, wouldn't it?

But if not respect, then what about tolerance? Surely that is a reasonable expectation. As I posed the question in my essay Out of the Box:

So, how about this: I’ll live my life as well as I know how, and others can do the same. We will try, so far as we are able, to respect each other. But failing that, we will politely tolerate each other. Civility. I can live with that. How about you?

But even the guarded hopefulness you might struggle to infer from that question might be misplaced, even naïve, might it not? We are not nearly ready to see each other as one family of humanity, and certainly not as one family of God. It is not the way we’ve evolved genetically or been molded socially, culturally—or at least not most of us. As my pastor is wont to say, it’s not heaven yet.

We are competitive and contentious as a species, and given too much to disagreement and argument. Not only are we contentious and disagreeable among our different nations, races or ethnicities, cultures, religions and ideologies, we are constantly disagreeable within them. We are continually in the process of finding reasons to distinguish or differentiate ourselves from others, lift ourselves above them or remove ourselves from them. This is an observable, predictable process, and we are too often unpleasant and hurtful in doing it. And it all breeds deep prejudice and discrimination, anger, even hate. It’s clearly not heaven yet.

And sadly, being an outwardly religious person too often has little effect on one’s inclination toward contentiousness, prejudice, and discrimination. For as we have lamented, religion too often and regrettably has more to do with distinguishing, defending and strengthening various cultural and political identities than humbly loving and serving God by loving and serving others. It’s not much like heaven in some religious communities either.

(But for those who hear the voice of the One who calls, accept the invitations that lead to new life and changing identity in Him, then more and more, nothing short of respect, compassion, forgiveness—even love—will do.)

So, if loving one another, even respecting one another, is too often just not in the cards, not realistic, don’t we have to reach even more earnestly and insistently for tolerance, at least? Can’t we make an effort to focus on those personal or group characteristics that we can appreciate or accept, and work from there? Can’t we make a better effort to just get along? In the name of mutual safety for ourselves and our families, in the name of peace on shared ground and in common spaces, can’t we agree to patiently and politely abide one another? Can’t we at least get over the lowest bar of tolerance and civility?

We should be able to do this. Flawed creatures that we are, we still should, wouldn’t you think? You’d think we could do it in the name of intellectual understanding, knowledge and wisdom. But not so. You’d think we could do it in the name of civilization or common humanity. But no. You’d think we could do it in the name of God. But still no—and ironically, sadly, it is this very intolerance of other people, and the attendant attacks and warring ventures against them, that have so often been identified with people who claim faith in God.

But eventually, won’t this “flattening” world, this evolving but loosely woven global economy and society force us to abide, if not respect, our different neighbors? Since the world is pushing us more and more together, since we can’t help but encounter each other daily as we more often share the same living places and work places, perhaps we can find ways to be more understanding, more patient with one another. Out of social or economic necessity, through some measure of assimilation, or because of the inevitable laws that have become necessary to protect the public order and welfare—nationally and internationally—we’ll find our way there, won’t we? Perhaps. In its time, if it has an appointed time. And, God willing.

God willing. That’s the rub, isn’t it? Maybe it’s just not part of the deal, not the way it’s all been set up to evolve. Maybe it would even defeat the greater Purpose of it all. If the primary purpose is that we discover and seek relationship with the One who calls us, and then a transcendent and eternal identity in Him, we might next ask, how? We could then recognize that another key purpose of it all might be to make clear, reinforce, and continually reiterate the inherent shortcomings and failings of humanity, the limitations of the temporal human experience. And in this way, the quest might be better understood, redefined and redirected. That is, it’s not heaven yet. Not here. Not now. Our eternal, spiritual citizenship is Elsewhere.

I know that this understanding could be for many a troubling explanation of things. But I only report what history reports, what I see observing the world and its people, what appears reasonably evident to me given my experience and sense of identity—and also what the Bible and reverenced writings of other faith traditions also seem clearly to affirm.

These sources and research science, too, continually remind us that the world is constantly passing, with its cycles of birth and death, beginnings and endings. And our lives and identities are passing along with it—the people, places and experiences, and who we used to be. On a larger scale, cultures and nations pass, too, and with the longer cycles of cosmic events, so do most all species of all life forms.

And one day, eventually, the Earth as we know it will also pass away—rendered deep-frozen lifelessness, exploded into scattered cosmic debris, or imploded into nonexistence. Only faith and hope sustain me, and only humility and love usher me into a transcendent, timeless relationship with the One who calls us. And my mysterious, abiding-in relationship with Jesus increasingly opens the door to a sense of shared identity and spiritual existence with God that endures—now and, in some real sense, forever.

First written: November 2006 and updated January 2007 in my Identity's Complaint essays.
© Gregory E. Hudson 2007

Social Networks & Happiness

But might emotions spread more widely than this in social networks—from person to person to person, and beyond? Might an individual's location within a social network influence their future happiness? And might social network processes—by a diverse set of mechanisms—influence happiness not just fleetingly, but also over longer periods of time?

--Profs. N.A Christakis & J. Fowler

The answer to all these questions is, yes. Those are the conclusions reported by the good Professors Christakis and Folwler in this article in Edge magazine, "Social Networks and Hapiness." It is based on their research published in a paper in the British Medical Journal . In summary, the authors conclude as follows:

We found that social networks have clusters of happy and unhappy people within them that reach out to three degrees of separation. A person's happiness is related to the happiness of their friends, their friends' friends, and their friends' friends' friends—that is, to people well beyond their social horizon. We found that happy people tend to be located in the center of their social networks and to be located in large clusters of other happy people. And we found that each additional happy friend increases a person's probability of being happy by about 9%. For comparison, having an extra $5,000 in income (in 1984 dollars) increased the probability of being happy by about 2%.

Happiness, in short, is not merely a function of personal experience, but also is a property of groups. Emotions are a collective phenomenon.

So, if you want to feel happier and develop a happier disposition, it would seem you are well advised to find more happy people and spend more time with them. I don't know that this is a profound revelation, or even news to most people. Most of us sense that this is the case, don't we? But don't we also understand that our life experience and understandings are notably incomplete, and our opportunities to meaningfully serve people and society are significantly limited, if we fail to include in our lives some of those unhappy people and understand the reasons for their unhappiness?

http://www.edge.org/3rd_culture/christakis_fowler08/christakis_fowler08_index.html

The Limits of Merit & Choice: See Me, Help Me

The Limits of Merit & Choice

It’s not a fabrication, a lie. It’s just not the whole truth. And the part that’s been omitted—or is it just ignored?—could provide the basis for us to consider providing better for those most in need. I’m speaking of our unwarranted overemphasis on personal merit and, as we’ve discussed elsewhere, freedom of choice.

It really does appeal to us, all of us. It panders to our self-esteem, our sense of self-determination and self-sufficiency, our self-congratulatory tendencies. We want to believe that we earned what we have—that we pulled ourselves up by our bootstraps, mapped out our plans, prepared ourselves, then worked hard, harder than the next guy, earning our way to our definition of success. And in a very real, experiential sense, it is true. (Most of us feel that’s exactly what we've done!)

We also want to believe that it’s not our fault if the next guy wasn’t as ambitious, didn’t prepare himself as well, didn’t work as hard, wasn’t as able. It’s not our fault if he was too lazy or irresponsible, lacked discipline, character or interpersonal capability. It’s not our fault if he wasn’t intelligent, talented or savvy enough. It’s not our fault if he was too different, unstable or disabled. We each get what we earn, what we deserve. (Isn't that right?)

And what of the poor, the competitive failures of whatever stripe? Why, they just suffer the natural consequences of their own failings and failure. And it’s not our fault. How could it be? (So, why should it be our responsibility?)

Of course it’s not your fault or mine—at least not most of the time. But most often, neither is it theirs. Notably, in a most real sense, we are no more the author of our successes than they are of their failures. Heresy, indeed! But let me briefly explain why, in more empirical terms, this is also true.

You understand the continuing discussion and research about nature and nurture, of course. We discussed it in Choices. You’re familiar with the debate about how much of the way we are is the result of the genetic legacy of our parents and forbears, and how much is the result of the way we are conditioned and schooled, what we learn in our families, communities and cultures. What is not in doubt is that the combination of our genes, family, culture and education determines who we are, how we act, and the likely limits of our potential and achievements. And if most everyone still has some alternatives, some choices, those afforded the least able of our brethren, the least fortunate, are so many fewer and so much narrower, and their ability to act on them is so much less.

The irony is that we discuss it, make casual affirming observations about it in everyday life, even ponder it with personal satisfaction or dismay, but then go about our lives dealing with each other, making personal and organizational decisions and crafting public policy as though we didn’t know it or didn’t believe it. The truth is that the power and perceived importance of our public, cultural half-myths trump what we instinctively know and what science more resoundingly than ever confirms. The truth is inconvenient and unwelcome to our sense of independence, accomplishment and self worth. It can coexist only uncomfortably with those cultural values.

So, just how right, how defensible, then, is that laissez-faire foundation on which we stand? How fair or egalitarian, how ethical and moral, how humane and intelligent are our assumptions about getting what we earn or deserve? How even is the playing field, how just the result? Is it not true that there, but for the deal of the genetic cards, the spin of the birth-place roulette, go I—dross in the crucible of our competitive society, failed or failing, and much in need of the help and support of my community, my more fortunate brethren?

(My Christian faith informs me that we are each just who God intended us to be based on the dictates of our singular spiritual paths—and the genetic endowment and life circumstances that deliver us there. And more, that we have responsibilities and accountabilities for one another. That is the signal characteristic of faith community, and any real community.)


See Me, Help Me

So, deny it if you feel justified; ignore it if you must. But there is a social responsibility that accrues, a moral obligation that must be continually honored, in recognition of the generous provision made to the successful upper and middle classes by our free, competitive markets. And it is owing to those unable to compete or defeated in the competition: the poor, the infirm, the unable.

True, there is no doubt that market opportunities and competition bring out the best efforts of the able and well prepared—but it is just as true that they defeat those least able and least prepared. And while it’s also true that other economic systems or approaches often result in even greater numbers of poor and unable than our own, does that alone justify our willingness to look with acceptance on the circumstances of our poor? Or do we think that the fact and clear evidence of those less successful or failed are necessary in order to acknowledge and pay tribute to our relative success? A tough, hurtful question, perhaps, but one so often too close to the truth—an unavoidable, if disavowed, aspect of human nature.

And just for the record, there are also economic systems in other nations more friendly and generous to the poor, ill and unable than we are—healthy economies, but more balanced combinations of free markets and helping social programs. But for ideological or selfish reasons, some among us have demonized them by labeling them more “socialist” countries. A more accurate characterization might be more socially advanced, more accountable, more humane—and for those seeking or abiding with God, more in keeping with His heart and His counsel.

Surely by now the pejorative use of the term socialism must be understood as an anachronistic red herring, a purposeful diversion from social responsibility and effective problem solving. At worst, it is merely an excuse for ignoring the needs, the pleas for help, of many of our countrymen and neighbors—and avoiding the cost that goes with it. Why not eschew, dismiss with prejudice, such misleading references and ad hominem attacks for what they are: just bogie man politics, just setting up an ideological straw man, just selfishly trying to avoid accountability? Why not focus on being a more caring, accountable society, on communities seeing to the basic needs of their own?

Questions?

Okay, you have some questions of your own: Aren’t there already sufficient incentives and public assistance programs for the poor and unable? And what about the valuable work of private charities and church ministries? Is there any more we can realistically, practically do? We have so often managed these programs so poorly, aren’t we just pouring good money in after bad? Aren’t we already at the point of diminishing returns? And regardless, won’t the poor always be with us?

Your questions are fair questions, all, and I once embraced the same, seemingly rhetorical questions myself. But they are not rhetorical questions. There are better answers.

Yes, nongovernmental organizations, private charitable trusts, faith-based ministries, and other nonprofit charities, too, are all part of the answer. But a relatively small part. They do complement government assistance programs notably, importantly. Their passion, their roles in identifying need and leading in innovation are unique and irreplaceable. And by all means available, please do your part to support them as generously as you can. But broad-based government assistance programs are still the only way to comprehensively, competently serve all our people in need and at risk. And yes, there is always need for better management, more accountability—and more money. And, it is important that we regard our taxes rendered as an important part of our giving to those in need. (But that is such a reach for so many, isn’t it?)

There are many who might also rethink some of the judgments and labels they’ve so easily come to embrace. And I would like them to reconsider the hasty, incomplete analyses so often done, and the self-serving economic judgments that always seem to follow from operation of our half-myths about merit. I would like them to reconsider whether bottom-line economics might not actually support spending more public money on people at risk in our competitive economic, education, and healthcare systems. But, one might ask, how can that make economic sense—and how is it right or fair?

It’s just so hard to get past a selfish perspective on the fairness issue—isn’t it?—even when we understand. But understanding should push us further on to questions about the limits of merit—shouldn’t it?—that, and how we define ourselves as community and society, what our standards are for what a competitive, wealthy, often charitable society should provide to it’s least able and least prepared to compete. We’ll return to these issues presently; but first, I know you would rather hear more about how it could be in society’s best economic interest, yours and mine, to spend more money to improve the lot of so many in need.

The Economics of Helping Others

The basic answer, of course, is in turning many more users of public resources (the poor and unable) into providers of public resources (gainfully employed taxpayers). First, consider the social costs of the poor, undereducated and chronically unhealthy. Tally the cost of long-term welfare, prisons (which are the resulting long-term residences of too many of our failed poor), and a broken, misdirected healthcare system that too often provides only the most expensive emergency care to those most in need, those growing more unhealthy day by day.

Then, consider the opportunity cost: the lost productivity, of those same people were they well-fed and clothed, healthy, and sufficiently educated or trained for productive, tax-paying employment. In the longer term, the additional cost of a healthy, better educated, trained and gainfully employed person, a more stable and contributing family and community member, will most likely be less than the social costs of failing to provide the needed aid, health care or education—and it will likely decrease over time. And the upside, the economic benefit to all, is the added economic productivity of the increasing numbers of new taxpayers paying increasing amounts of taxes.

But, no, it will not happen over night. Most likely, it’s a multi-generational investment. We know that parents, first, and then local culture, schools and peer experiences, are the principal determinants of a young person’s aspirations for education and vocation—and of his or her success with both. We also know that successful programs must address all these elements if they are to succeed.

As a first principle, there seems to be overwhelming evidence that we best reduce the numbers of poor by providing them competency and command over the subjects of a comprehensive education. Our experience to date tells us that leaving poor families inadequately supported and education spending limited to the amounts spent in successful suburban schools is not nearly enough, fair or not. It tells us we have to spend more money on more accountable inner city and rural preschools, elementary, middle, and high schools. They must be smaller schools with smaller teacher-to-student ratios, higher expectations, and more personal attention and guidance—whatever the necessary means or cost for a particular community or state may be. And the school-supported involvement of a parent or parents will often make all the difference in the success or failure of the effort.

But, as Abraham Maslow’s “hierarchy of needs” would also suggest, we cannot get to that place unless a subsistence living and basic healthcare are as much a right of all as they are a need of all. Only then might poor children also be healthy children, and in their best state of readiness to learn. Only then might poor children be likely to grow up to be healthy, well-educated and productive citizens. And then it would be reasonable to expect that the number of criminals and prisoners produced by poverty—and the number of prisons to house them—would be significantly reduced in number, as well. It is easy enough to see how it all could unfold, but a lot of work and persuasion must be done before it can become a national reality. (And these are also the policies and programs that will give new groups in our society an easier stake, a greater, earlier sense of productive contribution and identity in the greatest society of immigrants on earth.)

But it will all cost more money now, even though and especially because the break-even point may take a generation or more to reach. But, if we start investing more generously, more intelligently now, then our grandchildren and each of the succeeding generations will likely see a notable reduction in the number of the poor and unable. Successively, each will inherit lower costs of more effective programs, many more productive citizens, and a corresponding lower individual tax burden. Is it a promise? No, but it appears likely. And it has to be the responsible approach, the right approach, doesn’t it?

You still have doubts and concerns, I know.

Defining Fairness?

But if the long-term economic promise does not resonate with you, if you’re not inclined to invest in the deferred benefit inuring in time to your grandchildren and future generations, then please, tell me more of this social or ideological tenet of faith that is so often, so ardently and self-interestedly espoused: the unfairness or inequity of adequately, effectively providing for those in need.

Have I not made a fair case? Aren't there relatively clear, functionally-defined limits to the notion of merit as arbiter of everyone’s basic opportunities, successes, and quality of life? Are we talking about anything less than what a truly civilized, humane society of great opportunity and wealth should in good conscience provide to those who are ill-equipped or not equipped to compete effectively? Now those are rhetorical questions.

But if your notions of fairness are uncomfortable traveling companions with mine, and if you find my economic considerations unwelcome or merely irksome, then how do you feel about the importance of maintaining social and political stability in America? How do you feel about the shrinking middle class and growing chasm between those Americans who have the most and those who have the least? Are you concerned that America’s working middle class are falling further behind economically and losing increasing numbers of jobs with each passing year? Aren’t these also good questions?

For those who have jobs, our corporations and other businesses can no longer be relied upon as adequate providers of health care and retirement incomes. And our political parties and government have been too polarized in recent administrations to deal with reforming social security and Medicare financing—never mind fashioning a workable national healthcare program. The increasing numbers without jobs or underemployed, including many of our young adults, increasingly can only register despair at their situation, and wonder how it has come to this. These are uncomfortable signs and measures, and are there for all who would recognize them. And history informs us that social despair visited upon increasing percentages of middle-class and poor people can easily lead to social and political instability.

Equal, effective education, basic healthcare, unemployment and retirement incomes, and vocational training and retraining are the least we must provide to all Americans if an acceptable, stable social contract and political process is to be protected in America today.

So, I’m naïve, Pollyannaish, you say; I tilt at windmills. And especially with regard to basic healthcare: it’s just a larger, more complex and expensive undertaking than I appreciate, you say. Perhaps. But if that is so, how do Canada, the United Kingdom, France, and most all advanced, industrialized countries in Europe and Asia manage to provide it to their people, longer wait times or not—and at lower cost than ours, as well? Oh, you’ve heard that medical care in those places is less advanced, less effective, less efficient than ours. For whom? Tell that to so many of our poor, working middle class and young adults who have limited health care or none at all—right here in the good old US of A. (In 2005, over 47 million people had none.)

This is merely one more example of how poorly competitive markets provide, allocate and manage public-interest goods and services. Consider our manufacturing, professional and service companies, whose response to competitive pressures has been to continually reduce further their contributions to employee health care coverage, while more and more provide little or none at all. Our “efficient, cost-effective” companies are turning out to be very poor stewards of their employees’ health care, much as they have been of their retirement incomes and our shared environment. It is to them just another cost to be reduced, if not eliminated.

And if you think our U.S. healthcare system is so competent, so accommodating, so efficient—for those covered or who can afford it, that is—then you might come and visit some of the doctors, clinics and other healthcare organizations to which so many Americans have had the misfortune of entrusting their medical care. You might also consider whether you haven’t been too long, too much influenced by the steady drumbeat of self-interested propaganda and lobbying by the American medical establishment: profits-first health insurers and pharmaceutical companies, to be sure, but also the AMA, hospitals and other health services providers. Then I would have to ask you, who is naïve?

And as to cost, consider this: more and more high-tech, pharmaceutical, and other new but very expensive methods continue to be developed that extend the end of life for only short periods of time: days, weeks, or possibly months. And I’ve read that about 30% of health care costs now go to the relatively few in the last year of life. For many, it may seem worth it, regardless of the cost, if the decision involves their life or the life of a loved one—but only if they are among the fortunate ones adequately covered by health insurance, or are people of considerable means.

But how can private and government providers of health care insurance reasonably elect to provide extraordinarily expensive short-term extensions of life for the elderly or terminally ill when those resources could be more equitably, more ethically, more responsibly used to provide basic health care for so many with little or no coverage at all. These are the policy decisions for strong, socially responsible government leaders. They are the critical economic and social trade-offs that must be made by a community or nation that attempts to best provide for and protect all its people. It’s a matter of social economics and responsibility, social and medical ethics, and good government.

So, can we solve all our problems, prepare, heal or rehabilitate every person for the better, more productive life? No, you’re right, that is most unlikely. Some, whose circumstances or disabilities are most daunting, will remain in one sense or another in the care of the state. Some will continue on paths that lead to long-term support and care, some to prison. But we can be more intelligent, timelier in the way we identify and address the problems of people most in need or at risk, from both a humanitarian and economic perspective. And we can also be better neighbors, better countrymen, more compassionate, more charitable—and more accountable.

And so, if you would herald with awe and pride the power of our open, competitive markets—and why wouldn’t you?—and the handsome provision it makes for you and the vast majority of us who thrive under it, then please, likewise acknowledge that those who fare poorly under its winner-loser realities are most often no more the authors of their failures than the rest of us are of our successes. And that it is in our best interest—all or ours, together—to extend the open hand of responsible, accountable community to them, bearing the extra expense to help them, providing for them to the extent necessary, so that a sense of success and a productive life is more likely their legacy as it is ours.

But, the answer is still no, isn’t it?

(In the context of both Christian identity and final judgment, my faith also informs me that we are called to an attentive and generous orientation toward the poor, ill, aged and disabled, and also toward our prisoners and the strangers in our country and community. It is not so much the practicality or potential success of the service that matters spiritually, but rather the spirit and heart that responds compassionately with assistance and resources to help those most in need. That is second in importance only to our love of God, and our gratitude that He first loves us. But this orientation too seldom seems to find its way into the everyday expressions of many Christian lives.)

First written: July 2006, updated February 2008, in my Cassandra's Tears essays.
© Gregory E. Hudson 2007