This is a very complex topic. To put it into context there is a story about Boris Yeltsin at a chaotic time in the Russian economy. At a press conference he was asked how he would describe the Russian economy in one word. He answered “Good.” The reporters were surprised since no one else thought the economy was good. So they asked how he would describe it in more than one word. He replied, “Not good.” What is going on today in terms of the economy is “not good.”
Clearly, there is no answer to the questions –certainly not rationally– and there will never be an adequate answer
1-. The foundation: a basic understanding of what this crisis is about
The origins are found in the United States, but all the dynamics that caused the crisis are present in the entire industrialized world. There was a proliferation of derivatives. A derivative is a financial obligation which is treated as an asset, which represents an asset or assets, but is not the asset(s) itself. An example is the bundling together of mortgages, which is then sold to another institution.
Structured Investment Vehicles
are another instrument which appeared; they are based on derivatives and are also more distant than derivatives from the real assets. There was a proliferation of easy money and credit was extended, even to those who could not afford the debt. There was too much money created (derived) and given out, that could not be paid back.
If you owe the bank 100 thousand euros and cannot pay it back, you have a problem;
but if you owe the bank 100 million euros and cannot pay it back, the bank has a problem, and in this case we are talking about billions that cannot be repaid.
One of the results of this situation is fear and pessimism. Confidence and trust are necessary but unethical and fraudulent schemes on the part of [government] banks and financial institutions eroded trust. Charitable organizations were victims, but even banks were victims, that is, even the professionals were victims.
It is possible to talk about a “turn-around” and people will argue that the markets are cyclic: after a bad period there is a good period and it is possible to see these trends. This is true, but, no one knows when this “turn-around” may come: in weeks, in months, in years?
This is a problem which has touched the entire industrialized world. It is not everywhere that derivatives or other questionable practices, which have caused problems, were allowed or practiced, but all the industrialized nations are affected by the current economic situation and have been affected.
There will be the loss of work and jobs; of pensions and retirement funds. There will be more tension, more hunger, and more poverty, while at the same time government funding and charitable funding will be constrained. In other words there will be more and greater needs and less ability to respond.
Religious will find it more difficult to support their old and retired members, and to support their emerging members; they will find it more difficult to provide services. It will be impossible to make up the deficiencies on the part of the government and charitable institutions.
We need to take up the challenge to find a new understanding between faith and finance for the new Millennium; otherwise peace and justice will not be possible.
2-. The understanding of the crisis for the Church – another complex issue
This is a very complex issue for the Church. There is a need to see this financial crisis also as a religious crisis and for the Church to experience a metanoia and to transform the relation of faith and finance.
In a book by Toni Morrison, “Beloved”, there is a slave who is preaching Christianity to other slaves. She says that the only grace you will have is the grace you can imagine, if you do not see it you will not have it. We too need to have new imagination to create within our theology, social action programs, etc. Benedict XVI in his statement for January 1, 2009 at the Mass of the Solemnity of Mary noted that poverty is not bad when it is spiritual but an involuntary poverty which results in a real lack of basic human needs is not good at all.
“God became man and chose to be poor, but there is a poverty that prevents persons and families from living their dignity: a poverty that offends justice and equality and that, as such, threatens peaceful living together”.
Benedict XVI also asked [if], “we are prepared to read the current economic crisis in its complexity as a challenge for the future and not just as an emergency to which [to] give short term answers?”
The Pope also said in an address after that mass to look for long term answers: “This crisis requires intervention at its roots. Putting the poor in the first place means decidedly moving toward the global solidarity that John Paul II pointed out as necessary coordinating the potentialities of the market with those of civil society in constant respect of the law and tending always to the common good.”
We, the leadership, need to make it happen. To have justice and peace it will be necessary to coordinate the potentialities of the market. The prophet is not one who necessarily sees the future, but one who sees what is happening now, who interprets the present.
3-. What needs to be transformed in the Church?
Share in faith in our communities, promoting this new paradigm, which is mystical. Faith/finance separately are world molding. We need to bring them together, and not with 50% of each; but 100% faith and 100% finances. We need to show how to put them together.
Don’t be afraid to talk about finances. Before, finance was relegated to discussions among treasurers; it is the role of everyone in the congregation, leadership and members, as well as expertise. When we consider the events of 9.11.2001, the Madrid train bombing, and other examples of terrorist activity and look at this financial crisis, is this the setting for the end of terrorism? We add the religious fundamentalists who talk in the name of God about “killing” and bombing. Everything says that these problems will increase in this crisis.
People who cannot live in dignity will not live in degradation and they will fight to the death, theirs and ours. How will others see this if we do not?
4-. How to transform?
Do we want more of what we have had? We need to do creative, imaginative things and it is everyone’s business. Find ways to do this that are so creative that God will say, “Why didn’t I think of that?”
One example is what we did with Christian Brothers Investment Services, Inc. In 1981 we established CBIS to pool our investments (and later added others’) and to find ways of being constructively active in pressuring businesses to do business in ways that expressed good values. This is not done as comprehensibly by other investment advisors. It also researches companies to determine in which companies to invest, and actively participates in shareholder meetings and other kinds of encounters to promote Catholic values. All the profits go to the good works of the Brothers and other congregations through a foundation. A socially responsible approach is utilized and it does not hurt the performance of the investment funds results.
Most often discussions of this topic tend to become very technical in dealing with the complexities and intricacies of finance, but this is a broader issue, and the JPIC group is not involved in or concerned about only the technical issues. At the question “how to imagine”, the answer is “dialogue”. The more dialog on this issue the more likely it is that more will be seen of ways companies are trying to do good things and this will give some direction to the ways of investing. Talk about finance will help change. Business only hears the language of money. Business responds to pressure, especially money. It is not bad to use the power of money and finance to do good; it takes money and power to get people out of poverty.
In doing this CBIS looks to Catholic values and avoids companies that promote militarism, tobacco, abortions, etc. And then makes judicious judgments as active owners. There are ways other than investments, for example, look at our way we treat our employees, to see if we are discriminatory? Or look at the way we purchase, e.g., Fair Trade products. You will think of others as well.
Brother Louis De Thomasis, FSC
January 27 2009, Rome.
Notes by: Timothy Phillips, SM. Rome