Character and the Financial Crisis

Why Character Matters
During the fall of 2008 bad character has come to roost. The Unites States (and the world because of the interrelated markets) is in a financial mess. As of last Friday, we increased the financial mess with a so called "$700 billion bailout" of the financial markets. The tax payer and their grandchildren will have to pay for this. I am upset!
How did we get here and how could it have been prevented? About everyone is quick to blame someone and the blame is correct. But, what if everybody blamed everyone and everyone accepted responsibility for the mess? What a different picture it would be!
Let's look at where the problem began (I am not laying the sole blame on these people. Stick with me and you will see my logic.)
Problem 1 Politicians and Human Nature
The original policy of offering low income requirement loans began with the Carter administration. The intent was admirable, but it flew right in the face of human nature. (We could actually go farther back to the creation of Fannie Mae and Freddie Mac, but I won't go that far.) This policy of a low down payment, low income requirements was continued and enhanced by every administration since then. The goal was to make housing affordable to low income people with the Federal government backing the loans.
This sounds great but this policy was a direct slap in the face to basic human nature: "The less responsible I have to be, the less responsible I will be." Thus the problem began. If you offer something to someone who can't afford it, you are tempting them, encouraging them, to think in the short term and not the long term. This practice helped build the present American cultural flaw of "Have it now and don't worry about the consequences." (I will address this issue later.) The political temptation in the short term was to get votes. Every Congress and President saw "easy money" as a way to get votes without really addressing the true consequences. Getting votes was more important than any long term consequences. Thus, the character flaws of "Me first" and "I don't care about the long term consequences and how it will hurt others" plus greed and power are the problems with politicians. They ignored human nature and the consequences of a bad financial position in order to get votes. Both parties are guilty!
These character flaws showed up very profoundly in a recent video of Barney Frank, Chris Dodd, Maxine Waters and others (the current overseers in Congress of the problem) in 2004 denying that there were any problems. But, no politician is free from this problem. It has existed for over 25 years; someone could have addressed this before the mess got out of control, but it was never important enough (i.e. "I will look bad if I say there is a problem and we shouldn't give money to people who can't repay it. I might get negative publicity or hear that I hate the poor. That would hurt me politically.") No politician was willing to go to the mat over this issue. The President claimed he tried to address it in 2004, but I never heard a press conference or any other real "call to arms." (I may be oversimplifying who tried and did not try to fix the problem, but the issue is character not the"I tried once and I was told "No" excuse.) What you don't see is any politician apologizing for their lack of oversight and their own efforts in creating this problem. No politician is repenting of their lack of due diligence. They are claiming they can fix a problem that they helped create without ever admitting that they ARE the problem. Character flaws - pride, arrogance, greed, power hungry.
Problem 2 The Lender
Lenders were required by law to make many of these loans if they wanted access to the Federal Reserve. Many lenders claimed they were forced to make these loans. But, I never once heard them complain about all the fees they received from these loans. I never heard in the news of a major mortgage company or bank complaining that they were lending money to everyone and that the loans would go bad. I never heard anything except how much money the lenders were making from the fees and servicing the loans. Everyone thought they would be "OK" with the rising prices of housing. The lenders were ignoring the basic principle of economics - supply and demand. If the money supply increases (access to money), the price of a limited or fixed supply will adjust to the increase in money supply. Increase demand without significantly increasing the supply and prices will rise. Prices were going up because more money was chasing a fixed quantity of goods, i.e. houses. Because the money was not stable, it was a paper tiger and would eventually fall.
Where were the lenders protesting this problem? They weren't because of short term greed. Character flaw - greed in the short term trumps the long term consequences. Many of the executives took an early retirement benefiting from this greed. (The head of Fannie Mae made $90 million a 10 year period!)
Problem 3 The Homeowner
Another huge problem was the homeowner who bought too much house. (I am not blaming everyone but....) I have heard some say they were duped or tricked by a lender into buying too much house. What a lame excuse! They were playing the "I'm a victim; it's not my fault" card. I want to get sick over that one. No one forced these people to take out the loan. Please, could a person not know what their income was and what they could actually afford? Also, for many, they were gambling with a five year interest only loan and a huge balloon payment, or taking out a loan for 120% of the house's value.. ("Maybe I can win the lottery to pay for all of this.") They were risking other people's money in hope of making a quick buck with the value of their house going up. They never considered, or greatly discounted any negative market factors or just did not care.
Others bought a house that stretched their income but hoped to work it out. They had no flexibility or.....they could not control themselves in where they spent their other money (credit card debt, new car, fancy vacation, etc.)
The problem was greed, focus on me, no responsibility and giving little consideration to the results of their actions and how it could hurt another. Few were willing to say "I am a responsible person and I will make decisions based upon the long run, not the short term."
What was lacking is basic ethics... put others first. Deny yourself; practice self control.
Missed Opportunity
The problem could have been stopped at any level: politician, lender and even the consumer. No one was willing to take responsibility and practice self control. No one was willing to say "This is bad and I won't participate."
The Other Character Flaw - No Patience, No Self Denial
In America, we have lost the strength of waiting until tomorrow and denying ourselves today. We have lost patience and self control. We want instant happiness in marriage, otherwise we divorce. We want things now, (can't wait and save for this) so we use credit cards. We can't wait for two minutes at a stop light so we run the stop light. (I am guilty of this too. "He who is without guilt cast the first stone" so I can't cast a stone.)
We have become an impatient society and most of our decisions are based upon convenience and how long we have to wait. These are serious character flaws. Even the terrorists are playing to our lack of patience in fighting a war. We want victory immediately or we will quit.
So, if the politicians, lenders and consumers had practiced self-control while thinking about others over themselves, we would not be in the mess we are in. Gee, that sounds like a good recipe for living out our daily life.
Where Do We Go From Here?
Last Friday, I heard reports of 70-80% of Americans were not for the bailout. Why? The same people who brought us the problem were trying to blame someone else, abuse our money and have no culpability in the process. I never once heard any politician apologize for not practicing greater oversight to regulating the mortgage industry. No one took the blame. All three levels blamed someone else.
Many say "America needs to change. America needs to be responsible." Well, you and I are America. We do need to change but "we" is always someone else, not ourself. We are the problem and "we" (me and you) are going to have to change our character for our problems to be rectified. We are going to have to practice several things:
1) Practice personal responsibility, personal character - say 'No" to instant gratification. Practice patience and self-discipline in money and other areas of your life.
2) Teach your children ethics - self control, love your neighbor as yourself, your actions have consequences (good and bad)
3) Hold others accountable - That means your family members, your neighbor as well as your local, state and federal politician. Get involved in other people's lives. That is the only way you can hold someone accountable, being involved in their life.
The problem could have been prevented if only 1 of the 3 groups said "No, this is wrong. I will practice personal or corporate responsibility."
Character does matter. Who we associate with tells our character. How we live our lives tells our character. For many, what they say about character is never heard for their actions are screaming about their lack of character.
To change America, change yourself.
1 Corinthians 15:33
Do not be misled: "Bad company corrupts good character."
Are you hanging out with bad characters? Look at who you hang out with, not only the people, but also the TV shows you watch, the songs you listen to, and the books you read. Look at how much negative or unethical things you put into your mind. Does the positive things you put in your mind outweigh the negative (this is quantity, not a quality issue)? For most, they are allowing 2 times more negative to go into their mind versus positive. (Look at all the negative on TV, news, movies, etc. Even our movie heroes are "bad boys" with poor ethics.)
Examine yourself; do you judge someone's wrong behavior but justify your own wrong behavior? Do you judge someone for putting you down then you talk bad about them behind their back?
Many of us are living our lives thinking our character is fine and other people have bad character. In reality, the real bad character is you (or me). What we do each day corrupts our good character. Do you consciously and constantly put good things into your mind? Or, do you just watch TV, the nightly sitcoms, the news, etc.? (I can't name a single sitcom that runs on the main stations that does not promote bad character.) Do put down your neighbor; do you gossip? Do you use bad language? Do you get a laugh at another's expense?
We (me included) need to repent of our complacency and change what we do. I need to start asking more often "Is what I am doing promoting good character or bad? Is what I am saying or doing going to hurt another or even hurt me (putting garbage in my mind)? I how I spend my money or how I borrow money something that will leave a positive legacy?
Character begins with me and you. I need to admit I need changing ask God to change me and feed upon His good word to be changed. I need to replace the bad ethics (what I see, hear and say) with God inspired ethics (do to others as they want you to treat them).
We all can begin today but it is your choice. If you are not part of the solution, then you are a part of the problem.

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