The financial crisis and the bible
This year, you could barely read the news without a mention of the financial crisis. Some of the jokes summed it up well: With the current market turmoil, what’s the easiest way to make a small fortune? Start off with a large one. How do you define optimism? A banker who irons five shirts on a Sunday. I was a funds manager for three years in a former stage of life, so I understand the financial world a little. So I’m hoping I can help us to understand how the financial crisis relates to the bible.
Let me start with a short summary of what’s happened. Years of good times led to lots of companies and individuals borrowing heavily, throughout the world. They were expecting good times to continue, so they kept borrowing, and kept spending and kept investing. In America, many borrowers took out home loans which they could not afford. They assumed they could sell or refinance their homes after their home went up in value. But when the boom finished, and house prices went down, the borrowers could not refinance. As a result, many borrowers could not make their payments. They defaulted.
These widespread defaults caused many banks to get into trouble or to fail. Finally, when really big banks such as Bear Stearns and Lehmann Brothers failed, the US government was forced to step in, to make sure the banking system itself did not fall apart.
For everyone else, these events in America had an impact. Banks everywhere became much less willing to lend, and they leant at much higher interest rates. As a result, many firms throughout the world were in trouble, especially those that heavily relied on borrowings. This in turn led to what we call recession in many parts of the world.
Now what does the bible have to say about all this? Is there any wisdom we can gain, either wisdom for the nation or for us as individuals? Yes, I think there’s a lot. However, as you were reading some of what the bible says, you might have been thinking - this is crazy stuff; no charging interest to your countrymen, Deuteronomy 23! Cancelling countrymen’s debts at the end of every seven years, Deuteronomy 15? No permanent land sales outside the city - you get your land back every 50 years, even if you’ve sold it, Leviticus 25! Up to six years of servitude instead of bankruptcy - not slavery, but complusory work nonetheless Deuteronomy 15:12-18! This is so radical, some will say it’s stupid. Are we really going to gain anything from the bible with ideas like these, you might think?
Well let me start with a few comments about applying the Old Testament, and then we’ll see what we gain. See, God gave many laws to his Old Testament people. The laws were of different kinds with different purposes. Some laws pointed the Jews towards Jesus. They got the Jews ready to accept the Messiah when he came. Examples of such laws were the ones about sacrificing animals in the temple - these are laws which we needn’t follow today. Second, there were laws like ’Do not murder’ - laws which should be applied to everyone and can be applied directly to us today. Finally, there were laws related to the running of the nation Israel. For example, they had laws about how many horses the king should have, or the importance of city walls in land sales. These laws need not and can not be applied by a modern country - for example, we don’t have city walls. But they will have wisdom from which modern countries can learn.
So what do we make of the financial laws in the Old Testament? I want to take up two of the key Old Testament laws, and show how ignoring them has led to our recent financial crisis. You can find a whole lot more than I’ll be able to say in this book, "Jubilee Manifesto", edited by Michael Schluter. What I’m saying is in large part taken from this book.
First, notice that the Old Testament pushes us to take repayment of loans very seriously. If you borrow money, you need to pay it back. It’s quite simple. So, a borrower could be forced to work for someone up to six years to repay his debts. Let me read from Deuteronomy 15 verse 12: 12 If a fellow Hebrew, a man or a woman, sells himself to you and serves you six years, in the seventh year you must let him go free. 13 And when you release him, do not send him away empty-handed. Now be clear on what this means. The reason they might sell themselves to you is to pay back their debt to you. The modern alternative to this is bankruptcy. But 6 years service is clearly more demanding. The Old Testament takes repayment of loans very seriously.
This has much to commend it. It means people must take responsibility. There’s no way you can get around your debts with a good lawyer. You can’t forget the people to whom you owe money. You can’t hide behind bankruptcy laws. You have to take responsibility. This means people will be more careful taking on debt. I mean think about it: If you know you might have to work six years at someone else’s pleasure, to pay off your debts, you’ll be more careful borrowing. Risk taking will be reduced. The kind of risk taking that caused this financial crisis will be reduced.
Another advantage of this Old Testament law is that finance becomes much relational. Those in debt have to work for the ones to whom they owe the money. So it forces the lender and the borrower to face each other and work out the matter together. It’s a much more relational solution than a lawyer being hired to divide up the assets.
Now do be clear about what says here: The Old Testament distinguishes this six year service from slavery. They are not to be worked like slaves. But they have to work. A bit like people have to work for the military for six years in some cases and some countries - you’re not treated like a slave, but you’re bonded to do the work. And it’s maximum six years, of course. If you pay off your debt before then, well things are back to normal.
Now America’s laws have moved a long way from this biblical wisdom. See in America, when a home-buyer stops paying his repayments to the bank, the only way the bank can get their money back is by selling the house. The borrower just hands back the keys, often in fact they strip the house of anything valuable, and the bank then sells it for whatever they can get. The bank can’t also ask for the car, or the investment portfolio, or anything else that the borrower owns; only the house. That’s quite different from Australia. In Australia, after the bank has sold the house, they can then legally come and take any other assets from the borrower until the bank has received all their money back, or until the person declares bankruptcy. This is much better, because it is closer to the bible’s wisdom. It’s closer to taking repayment of loans seriously.
But the American system lets people walk away from their responsibility. No wonder so many took the risks they did. They saw they couldn’t lose, so they went ahead. It’s just a stupid law. But both America and Australia should learn from the bible. I think it would be great if the Alan Bonds of the world - Alan Bond’s a famous businessman who lost lots of money - But it would be great if the Alan Bond’s of this world spent six years not in jail, but six years working for the people he owed. That’s relational justice.
Now it’s not just individuals that aren’t taking responsibility. It’s companies as well. It’s not just individuals who have failed to repay loans in the current crisis. It’s companies too. For since about the 1850s, there has been this concept of limited liability in Western countries. It means when companies go broke, those people to whom the company owes money can’t get it from the owners of the business. The shareholders can only lose the price they pay for the shares. Now while I’m not saying that it’s wrong for governments to allow such a law, it does give many problems.
See the result of limited liability laws is that companies can borrow heavily with less worry. After all, if they go broke, the owners are safe. So they do borrow heavily, which increases their profits if things go well. They know that if things go badly, the limited liability means owners don’t stand to lose much. So it’s in the owners’ interest to take risks by borrowing lots. That’s what happened in this last crisis, and in every boom. The reason all the companys could borrow heavily is that no one has to take responsibility. When the company goes insolvent, no one is left to pay the people who are owed money - which may include employees, customers, suppliers, anyone. No one takes responsibility, because they don’t have to. Limited liability is what lets them wash their hands of responsibility.
In banking, this is made much worse by the fact that the government stands behind the banks. People know the government will save the banks if they have to, which means big banks feel free to take more risk than they should, relying on the government to fix things up if it goes wrong. So again the banks take risks, without taking responsibility.
How to apply this then? We need to take responsibility when we borrow. I would suggest avoiding investing in companies which take excessive risks, and avoid those with a high risk of bankruptcy. In that way, we’ll avoid those are companies which are likely to break their commitments to pay their debts. Further, be determined to take responsibility yourself. If you borrow money, make very sure you can pay it back.
The second point I want to make is that the bible is against charging interest to one’s countrymen. Now this may seem very strange given how widespread interest is these days. But again, there is wisdom here if we will listen. Deuteronomy 23:19 Do not charge your brother interest, whether on money or food or anything else that may earn interest. 20 You may charge a foreigner interest, but not a brother Israelite, so that the LORD your God may bless you in everything you put your hand to in the land you are entering to possess.
Now you might say, Mike, both parties agree to enter the transaction, what’s so wrong with it? Well, hear me right I’m not saying charging interest is wrong. After all, foreigners may be charged interest. Nevertheless I want to point out how charging interest can be unwise, and has led to big problems.
The reason I think the bible is down on charging interest is that charging interest is bad for relationships. When you charge interest, you usually become unconcerned with how the person uses the money you are lending them. You become interested in the profit, not in the person.
There are many weaknesses in our banking system that come from the fact that charging interest breaks down relationships. See, banks guarantee to pay us interest on our deposits. The way they guarantee this interest is by lending our money to lots of different borrowers, and assuming that not too many of those borrowers will default. That means that when we put money in the bank, we do not know how it will be used. That is, there is no relationship between us as lender and them as borrower. All we know is that the money is used in many different ways. For example, the banks use our money to lend to those who will speculate on the stock market, or to those buying a chain of houses all on debt, hoping to profit, or to those borrowing more heavily than they need to for their business. Or to those borrowing to set up a brothel or an abortion clinic. It’s a big problem then that we don’t know how our money is being used. Because in fact it’s not used in the way we would have it used if we could choose.
Further, the banks act differently to the way you and I would act when a business defaults. If you leant to a business that couldn’t pay you back, you might force them into bankruptcy, and force their workers to be laid off. But you wouldn’t do that as often as the banks do, nor in such an unrelational fashion. You’d show much more compassion.
So our banking system, and the way it charges interest - it leads to a very unrelational system. Our money on deposit is used in ways we wouldn’t want it used. Many of these ways our money is used leads to a boom bust cycle, as we lend to speculators, and to high debt companies and as banks force bankruptcies on companies which would be OK without the debt.
My point is, if lending were relational, the boom bust cycle would be reduced. If lending were relational, more of the lending would go to those in the third world who will use it for much more important purposes. That would alleviate world poverty. If lending were relational, we wouldn’t have had this financial crisis.
But no, lending is not relational. And the main reason is that relationships are broken down when interest is charged. The way our banking system charges and pays interest was a big cause of the financial crisis.
The application for us here is to take responsibility for where we put our money. We won’t be able to do it perfectly. But if we can think more relationally with our money, it will be a big step forward. It’s much better to invest money where we know how it will be used, and we’re happy with how it will be used.
Further, I’m all for loans among our congregation here. But I never want to see anyone charging interest on loans within our church. Above all the message is that relationships are what matter. They matter far more than profit.
To conclude, we need to remember that financial wealth is a bad long term investment. In the long term, relationships are the good investment. The Day is coming when Jesus Christ will return. And all the money is going to burn in the final judgment. All that will be left will be our relationships - the way we treated people. So we need to get our financial relationships right. Above all, we need to make sure our relationship with God is right. We need to repent of our sins - including our financial sins. We need to turn to Jesus in this area and every area. His death on the cross paid the punishment we deserve for all our sins. Trusting in him is the best long term investment we can make. For all the money will burn at the final judgment. But Christians will rejoice with Jesus in the new heavens and the new earth, where the streets are lined with gold. So are you investing in finance, or in relationships?
