08730
October 6, 2008
PC(USA) weighs in on national financial crisis
Leaders send letters to church, Congress; Washington Office publishes background, analysis
LOUISVILLE — As the U.S. Congress grappled with a financial services industry bail-out package late last week, leaders in the Presbyterian Church (U.S.A.) took part in the national debate, sending letters to Presbyterians and to Congress. The Presbyterian Washington Office today (Oct. 6) published background and analysis of the crisis, including General Assembly policy germane to the crisis and its fallout.
The full text of the Presbyterian Washington Office background paper, written by Leslie Woods, associate for domestic poverty and environmental issues:
In response to ailing financial markets and the collapse of a number of large investment banks and AIG, the American International Group, Secretary of the Treasury Henry Paulson arrived on Capitol Hill on Saturday, Sept. 20 with the Administration’s proposal to stabilize the tottering financial market. The proposal requested $700 billion to buy up troubled assets from a broad range of financial institutions. In the original proposal, the authority to administer the funds lay with the Secretary of the Treasury. The idea was that the injection of so much new capital into the financial market would begin to stem their current scramble of banks to rid themselves of investments that were falling in value.
Members of Congress on both sides of the aisle balked at the plan, calling it a blank check for bailing out the irresponsible investments that large banks had made during the housing bubble, which has now burst, resulting in record home foreclosures. Of course, the situation is much more complicated than this explanation, but the primary concern of far-reaching impact — that is, beyond Wall Street — has been a threat to the liquidity of assets and banks being unwilling to extend credit to each other or to the market, meaning that it is becoming increasingly difficult for individuals and businesses to access credit and loans, e.g. car loans, student loans, mortgages, or business loans. In addition, the uncertainty in the market has also brought great instability to the stock market, which has brought fears for 401(k)s and other retirement savings.
A series of heated negotiations and hearings ensued the week of Sept. 22, in which members of Congress proposed their own alternative bills, or suggested amendments, limitations, and additions to the Paulson plan. Members worked through that weekend to reach a deal among themselves and the Administration, inserting some oversight and provisions designed to provide some accountability for the massive amount of money being allocated to this new program. The House brought the compromise to the floor on Monday, Sept. 29. In a vote that shocked Wall Street and sent the Dow Jones Industrial Average plummeting nearly 778 points that day, the House defeated the measure in a vote of 228-205.
So, with the Jewish New Year approaching, members adjourned for business but were sent scrambling back to the drawing board for some solution to the pending crisis. In the meantime, with members vowing that they would try again, the Dow Jones gained back 485 of its lost points the following day. The stock market was in a yo-yo pattern all week.
On Oct. 1, the Presbyterian Washington Office sent a letter to Congress urging them, in whatever bill they pass, to find a solution that will move our economy closer to a vision of a just economy, where human worth and the common good are valued above economic self-interest, personal wealth and greed.
Also on Oct. 1, the Senate passed their version of the financial bailout — or rescue — bill, the Emergency Economic Stabilization Act of 2008, H.R. 1424, the centerpiece of which is still the defeated House bill with some modifications. In addition, the Senate packaged the financial-crisis-fix with several other pieces of legislation that Congress considered ― must-pass.
Among the provisions in the newly announced bill are:
- Financial Sector Rescue – the bill provides the requested $700 billion: $250 billion to the Treasury right away, $100 billion upon approval of the President and the remaining $350 billion upon the approval of Congress.
- FDIC Deposit Insurance Limit was increased from $100,000 to $250,000, which is primarily targeted at small banks and businesses.
- Senate-passed tax package, which includes the tax incentives for renewable energy production, the improvement in the Child Tax Credit, and a ― patch for the Alternative Minimum Tax.
- Mental Health Parity legislation that will require insurance companies to cover mental health care at the same rate as general health care.
- Disaster relief for communities affected by Hurricane Ike and tax relief for areas damaged by 2008 mid-western severe storms, tornadoes and flooding.
During Senate debate, and again as the House wrestled with the measure, members on both sides of the aisle lamented that the deal is not perfect, but urged that something had to be done to address the weakness in the economic system.
On Friday afternoon, October 3, the House passed the bill and the President signed it about an hour later.
For more than 60 years, the Presbyterian Church (U.S.A.) and its predecessor bodies have been bearing witness to its concern for just federal economic policies that benefit everyone in a society, not just a wealthy few. In the letter to Congress, the Washington Office reminded our elected officials that it is low- and middle- income people who will first and foremost feel the burden of a crash in our financial markets. The solution must ensure a safety net for those most at risk.
General Assembly Guidance
In 1934, in the midst of the Great Depression, the Presbyterian Church in the U.S.A. recommended a set of guidelines outlining a vision for true justice in economic relationships. Among these principles, it included setting aside the motives of money-making and self-interest, reexamining competition as a major controlling principle in our economic life, and valuing human worth above material riches as the primary asset of a community.
In addition, the 1934 General Assembly urged that our natural resources and economic institutions be considered as existing for the public good and such plans for ownership and control be developed as will lead to the best use in the interests of all.
In 1995, the 207th General Assembly expressed its support for the Community Reinvestment Act, which requires lenders that receive deposits to meet the credit needs of the communities in which they operate. In other words, the commissioners expressed a wish that banks and communities would place in each other mutual trust to build the common good and financial health of the community.
Presbyterian General Assemblies in recent years have focused on the very relevant topics of usury, or the charging of exorbitant interest, and just housing policy. Both issues are integrally linked to a financial crisis that was precipitated by the bursting of a housing bubble created in part by unwise subprime mortgages. The 217th General Assembly approved “A Reformed Understanding of Usury in the 21st Century” and the 218th General Assembly approved “From Homelessness to Hope: Constructing Just, Sustainable Communities for all God’s People.”
The full text of the letter to Presbyterians, dated Oct. 4, from General Assembly Moderator Bruce Reyes-Chow, General Assembly Council Executive Director Linda Valentine, and General Assembly Stated Clerk Gradye Parsons:
We write out of concern for those in your congregations who are suffering loss of their homes, their jobs, their ability to meet other financial obligations or conduct their normal business activities. Indeed, we recognize that even for those who may not be in immediate jeopardy, the current “credit crisis” has spread fear throughout the nation regarding the stability of our whole economic system.
Even as our legislators and financial advisors struggle to find solutions that address the disastrously complex problems exposed by this crisis, blame for the “melt-down” is being cast in all directions: from government failures to provide adequate regulatory safeguards, to investors intent on exploiting bizarre mortgage schemes, to ordinary citizens whose penchant for incurring disastrous levels of debt, there is blame enough to go around. Our Washington Office has witnessed to legislators on principles expressed by the General Assembly over time that relate to government's service to the common good.
As followers of Jesus Christ, let us join in a call to our own people and to our fearful nation to hear God's word that “perfect love casts out fear”; and let us look anew at our economic system — one which has been immensely productive in many respects, but which has tended to favor the strong and aggressive, often at great cost to the weak.
Let us all repent of our own decisions, both personal and corporate, regarding our use of the earth's resources and of the financial resources of which we have been made stewards. And let us make clear to our legislators and to those whose are charged with the management of this nation's financial resources that any recovery of fiscal accountability must be accompanied with moral accountability for the unfortunate, so that the burdens and blessings of the future are fairly shared.
As you provide pastoral and prophetic leadership to your own people in the face of the ongoing crisis, we would like to offer some resources that reflect efforts by recent General Assemblies to address many of the economic and moral issues facing our nation and the world at this juncture. As Reformed Christians, we are neither individuals nor congregations alone in times of crisis. With this social vision it will still be up to our communities — with our strong participation — to deal with these problems for the long term.
The full text of the letter to members of the U.S. Congress, dated Oct. 1 and signed by Sara Pottschmitt Lisherness, Director of Compassion, Peace and Justice Ministries for the denomination:
As the nation struggles with the current financial crisis, I write to urge you to find a solution that will move our economy closer to a vision of a just economy, where human worth and the common good are valued above economic self-interest, personal wealth and greed.
Presbyterian General Assemblies, over the past sixty years have expressed concern about federal economic priorities, calling for an economic policy that is humane and sensitive to the needs of all persons; taxes on the basis of equity; and, while supporting private initiative, does not allow private interests to trample the poor, disenfranchised or unemployed. These concerns are equally relevant today as you consider legislation designed to undergird the U.S. economic system.
It is not only corporations and large banks. Livelihoods that are at stake. More important are the lives and livelihoods of the majority of Americans who work hard, save carefully, and yes, rely on the credit industry, which is in such turmoil. Particularly endangered by this crisis are those who already live on the financial edges of society — low-income Americans who have been hit hardest by the recent souring of the economy and upturn in food and gas prices.
Low-income families will feel the impacts of further economic recession even more heavily than those with enough disposable income to be directly affected by a fallout on Wall Street, even though they are the least able to bear the burden. Even now, over fifty percent of our churches already support food pantries and homeless shelter. How many more will they have to serve?
While the details, price tag and even certainty of government action loom large, we nonetheless acknowledge that government action in this crisis is likely. Given such a likelihood, we call on you to reject sending a blank check to Wall Street, but rather ensure appropriate transparency and accountability that will rebuild trust and financial security.
In 1995, the 207th General Assembly of the Presbyterian Church (U.S.A.) expressed its support for the Community Reinvestment Act, which requires lenders that receive deposits to meet the credit needs of the communities in which they operate. In other words, the 207th General Assembly expressed a wish that banks and communities would place in each other mutual trust to build the common good and financial health of the community. In view of the current crisis in the financial markets, it is clear that there has been a breakdown of that mutual trust between the bankers on Wall Street and the national community.
In crafting the solution, it is incumbent on Congress to ensure appropriate safeguards to reestablish that mutual trust. I urge you to incorporate the following provisions into any bailout legislation:
- Protection for homeowners in danger of foreclosure
- Ensure more equitable and just financial practices in our market
- Public oversight to ensure accountability of whatever program is created
- Safeguards on public funds to ensure that future generations will not bear this debt burden
- Eviction protection for renters who are living in properties being foreclosed-upon and new ways to fund affordable housing programs, such as the National Housing Trust Fund, now that Freddie Mac and Fannie Mae revenues will not be contributing significantly to that purpose
- Limitations on executive compensation to ensure that those who have been culpable do not receive undue reward
- Aid for low-income families who will bear the heaviest burden under the downturn in the economy.
The Presbyterian Church (U.S.A.) has long been concerned with the establishment of a just economic order that benefits all, not only the wealthy few. In 1934, in the midst of the Great Depression, the Presbyterian Church in the U.S.A. recommended a set of guidelines outlining a vision for true justice in economic relationships. Among these principles, it included setting aside the motives of money-making and self-interest, reexamining competition as a major controlling principle in our economic life, and valuing human worth above material riches as the primary asset of a community.
In addition, the 1934 General Assembly urged that our natural resources and economic institutions be considered as existing for the public good and such plans for ownership and control be developed as will lead to the best use in the interests of all.
In whatever legislation Congress passes, the Presbyterian Church (U.S.A.) urges you to ensure that it moves our economy closer to these principles of valuing human worth and the common good. As you consider the appropriate response to the financial crisis, you have an historic opportunity to affecting our economy. To establish this program without the proper safeguards would be disastrous, but with appropriate mechanisms to ensure transparency and accountability, we may begin to recover and repent for the greed and inequity of the last several years.
The prophet Isaiah said someday there will be a king who rules with integrity, and national leaders who govern with justice. Each of them will be like a shelter from the wind and a place to hide from storms. They will be like streams flowing in a desert, like the shadow of a giant rock in a barren land. Their eyes and ears will be open to the needs of the people. (32:1-3, TEV) I urge you to be such national leaders in the face of this financial storm.
Additional resources:
1. Homelessness to Hope
2. A Reformed Understanding of Usury
3. The Just Neighbors Toolkit
4. The Power to Change (Energy)
5. The Social Creed
| 
