FORGET NONE OF HIS BENEFITS, volume 8, number 12, March 19, 2009

Wealth obtained by fraud dwindles, but the one who gathers by labor increases it, Proverbs 13:11.

Greed, Pride, Envy, and Power

Because the Bible is written by God the Holy Spirit through men whom He raised up for that purpose, it does not lie. It is infallible. It speaks truth on every issue. Ill gotten wealth is a good case in point. Solomon says that wealth gained by fraudulent means will dwindle. Could it be that many in the banking industry are suffering loss due to greed that has finally caught up with them? May it be that major lending institutions and those companies that insured them have dwindling stock prices due to improper gain? Could it be that many have lost their retirement fortunes because they could not be satisfied with a reasonable (eight to ten percent) return on their investments, and took significantly more risk to get higher returns? Is it possible that many have lost their homes because they believed they could buy a house with no money down while maintaining two or three car payments and generally living far beyond their means because of their pride and envy of others?  Did individuals and bankers really think housing prices would continually rise at eight to twenty percent rates forever?

Consider that many banks routinely offer new, better, or more financially attractive products and services to attract new customers but fail to tell their old customers. You have to find out for yourself to get the better deals. Some banks collect overdraft charges by recording checking account debits before credits in any given day. So let’s say a debit comes to your account at 9 a.m. putting your account into a negative balance, but four hours later you deposit a check that covers the debit. Too bad! You still pay the overdraft charge. Credit card companies (mainly banks) have significantly increased their fees (three to five times) for late payments and exceeding credit limits in the last several years. They charge extra fees when paying your bill by phone or some even charge for payments made in person. They confuse you with teaser interest rates and then increase them after you've become a customer. Some send out bills late, giving you little time to make a timely payment so that they can charge a higher interest rate and late fees. Some people, especially the poor with low credit scores, due to non-payment or late payment, are being charged thirty percent interest.  Many banks now act like loan companies (loan sharks in yesteryears) and pawn shops that prey on the ill informed and less fortunate consumers (all with no protective intervention by government regulators).

Could it be that many other corporations are facing bankruptcy because they have also been improper in their business practices? Publicly owned companies routinely cater to the stock analysts, putting their desire for higher returns and stock prices before their customers and employees. Steady long term growth is often sacrificed to make the next quarter and the current year's profit look better so that the CEO and top management’s cash bonuses and stock options are inflated. The welfare of middle management, rank and file employees, and their customers is not a priority. That’s why so many CEO’s who are fired leave with millions of dollars while the company suffers, filing for bankruptcy, leaving the employees without jobs and worthless stock options. Some companies have their compensation managers report to the Board of Directors on what other companies in the same industry are paying their top management; arguing that they should be paid the same amount. The result is spiraling compensation for top management when they are paid, not on their performance or worth to the company, but on inflated industry standards.

Greed, envy and pride are not limited to the Board Rooms of Fortune 500 companies. Why was Bernie Madoff able to bilk many people out of billions of dollars? He knew, perhaps better than most Ponzi schemers, how to play on the sense of greed and desire for exclusivity within all of us. Being promised a twelve to fifteen percent annual return on one’s investments from an exclusive upscale money manager who took only select clients and showed no evidence of ever underperforming was just too good to pass up. A more modest eight to ten percent annual gain from a widely used, highly vetted investment manager wasn’t enough.

The lust for votes and power by certain Senators and Congressmen led them to seek political favor by providing home mortgages to people without down payment money or the means to repay housing loans.  They passed laws and caused mortgage lenders through these government mandated programs to offer subprime loans, no money down and low initial interest rates.

So a couple buys a $150,000 house, no money down with three points in upfront fees ($4,500) to buy down the interest rate plus another $9,000 or so in fees and commissions, and now the total cost of the loan is $163,500. Since housing values were increasing at high rates each year, they thought the potential equity gain made a house purchase a no brainer after a year or two of ownership. Since the adjustable rate mortgage at inception was 5% and the couple had their home, no problem. But then the interest rates began to rise, and the couple could not make the higher mortgage payments. When they tried to refinance they found no takers. That’s because the value of the home, at best, had remained the same, and many times the house had fallen in value. So their debt of $163,500 could not be refinanced.  The couple displayed greed, envy and pride by believing they could own a house without an initial down payment and be like the Joneses (all other home owners).

The mortgage broker showed greed by convincing these people that they could own a house, taking his commission by folding it into the loan package. The lender showed greed by facilitating a bad loan even though there was government pressure to do so on the mortgage loan business. Big banks like Citigroup and Lehman Brothers through their investment banking arms bought the subprime loans and then rolled them into packaged securities along with good, solid mortgage loans.  The loans were guaranteed by quasi governmental backed agencies like Fannie Mae and Freddie Mac and when not covered by them they often were insured by the likes of AIG. The investment banks made huge fees for creating and underwriting these asset backed securities. Everyone was fat, dumb and happy.

If you got out of the real estate markets early by selling your house at an inflated price, if you got out of the investment securities markets early, or if you got out early of the Ponzi scheme investments of the likes of  Madoff, then you came out well, but if you were late, or stayed in altogether, then you suffered severely when the house of cards created by greed, envy, pride and power began to fall.

What is the moral of this story? Heed the words of Solomon who said, “Ill-gotten gains do not profit, but righteousness delivers from death,” Proverbs 10:2. “Wealth obtained by fraud dwindles, but the one who gathers by labor increases it,” Proverbs 13:11. Paul told Timothy, “For the love of money is the root of all kinds of evil, and some by longing for it have wandered away from the faith and pierced themselves with many sorrows,” 1 Timothy 6:10. Jesus said, “Beware, and be on your guard against every form of greed; for not even when one has an abundance does his life consist of his possessions,” Luke 12:15. Here’s the bottom line. Work hard, be frugal, at a minimum tithe ten percent to your church, save at least ten percent, live within your means. Invest for the long haul, resisting the temptation to put your confidence in your wealth. All of us have been hurt by the greed on Wall Street and Main Street. At the core of our greed is idolatry. Instead of looking to, trusting in the God of all grace who alone can satisfy, we have believed the lie of the devil who tempts us with the same thing he used on Jesus, “Turn these stones into bread. Your God will not meet your needs. He is against you. He wants to limit you. You must look to creation for comfort. There is no comfort in God.” Those reading this in retirement age are the ones for whom I am most grieved. You have worked and saved and now see your standard of living compromised. The rest of us need to reach out to loved ones, friends, and church members who are suffering. They probably will not tell you they are suffering but we need to be there anyway, seeking to give them a cup of cold water in the name of Jesus, praying for and with them, encouraging them, helping them in practical, tangible, and concrete ways.

Phil Owings, who has been in the financial services industry for forty years, helped me with many of the details in this devotional.

FORGET NONE OF HIS BENEFITS is a weekly devotional by Reverend Al Baker, pastor of Christ Community Presbyterian Church in West Hartford, Connecticut.

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