The General Synod of the Church of England discussed the financial crisis and recession this afternoon.
They voted to accept the report that may be found here. Written by Andreas Whittam Smith. Whittam Smth is the First Church Estates Commissioner, essentially in charge of watching over the financial holdings of the Church of England. Here is an excerpt of his explanation of where the global financial crisis came from:
The idea got about that, paradoxically, risk was nothing to worry about. It could be split up, passed on, sold off. Rather than being placed at the centre of financial transactions, where it ought to be, risk was banished to the sidelines. It was a detail that could easily be handled. At the same time, banks became careless about the standing of the counterparties to whom they were handing off risk. The USA’s biggest insurance company, AIG, had to be bailed out by American taxpayers after it had defaulted on $14 billion worth of credit default swaps it had made to investment banks, insurance companies and scores of financial entities.
Consider then where we had got to by 2003. The excess savings of vigorous Asian economies, oil producers and other developing countries that had flowed into Western banks had pushed interest rates to very low levels. Globalisation had removed bargaining power from workers in the West with the result that inflation was only a percentage point or two per annum. In real terms interest rates were more or less zero. For banks, in other words, money was free. Furthermore now that loans could be securitised and removed from banks’ books so that they no longer needed the backing of their capital, lending activity had begun to appear costless. In addition, lending had acquired the extra virtue of appearing riskless because credit insurance would ensure that others would bear the cost of defaults. The upshot was clear. When money is free, and lending is costless and riskless, the rational lender will keep on lending until there is no one left to lend to.
To reach this Eldorado, the means were at hand. Automated credit scoring speeded up the processing of applications for loans. Trimming back on documentation brought more borrowers into the fold. A proliferation of products offering credit on easy terms was devised. Moreover it didn’t seem to matter if such hastily written business wasn’t always of a high quality. After all the loans were to be packaged up and sold on. In other words, the banks originating the loans would have no stake in the borrower’s continued solvency. At the same time, pay levels in the financial services industry were topped up with bonus schemes that gave very high rewards to those managers who could ‘shift product’. New borrowing was piled on old borrowing, risk on risk.
“We have all worshipped at the temple of money,” he said. “We have been guilty of idolatry: the worship of God falsely conceived – which is deadlier than either heresy or sin, for it is the prolific source of each. It is this idolatrous love of money, pursuing profit without regard for ethic, risk or consequence, which has led us from orientation to dis-orientation.”
Building on Walter Bruggermann’s notion that there psalms of orientation, dis-orientation and re-orientation, Archbishop Sentamu suggested that the church serves best by articulating a vision or re-orientation:
Of course this is not just economics. We need a deeper vision. A political vision alone won’t do it. It is not about what governments can do for us but what we can all do.
It is here that the Church of England and all religious communities will make a special contribution. We start with a great advantage – a moral framework and a big vision. We must act prophetically, proclaiming the big vision, living it out in practice and decrying any injustices which desecrate it.
The Christlike vision we hold to will have a threefold base: respect for the person, care for one another, and selfless service. Speaking prophetically is not just about condemning failures, it is about helping everyone to accept common goals which uplift the heart. Moving together in the same direction and thereby enriching and supporting each other as fully as we can. Pilgrims together on the Way.
These common goals and this shared vision must not end at our national borders. Love for my neighbour is not limited to the person next door.
We must ensure that the Millennium Development Goals are not abandoned in the current crisis.
England, you think you’ve got problems? It’s time to get real.
We live in a world where:
a child dies every three seconds due to extreme poverty, almost 10 million children a year.
· One person dies from HIV/Aids every 11 seconds.
· Approximately 1 in 7 children in the world – 270 million children – have no access to healthcare.
· Every single day unsafe water coupled with a lack of basic sanitation kills 5,000 children.
· Poor Governance, in countries such as Zimbabwe, has led to malnutrition, a crumbling health system and the outbreak of avoidable diseases, like cholera, claiming thousands of lives in Zimbabwe.
Read Thinking Anglicans coverage here.