Sermon Illustrations

A House of Cards Economy

In fact, our current financial crisis is a direct result of this "entitlement," or "free lunch" kind of thinking. According to Terry Jones of the Investor's Business Daily (posted Wednesday, September 24, 2008), President Carter signed the Community Reinvestment Act in 1977, which pushed Fannie Mae and Freddie Mac to aggressively lend money to low-income communities. It was his contention that every American should own their own home, whether or not they could afford it.

When Clinton got into office, he "supercharged the process." He put in place new rules and regulations, which gave Fannie Mae and Freddie Mac extraordinary leverage, allowing them to hold just 2.5% of capital to back their investments, vs. the 10% required for banks.

With government guarantees and government incentives in place, banks made loans to people that required no money down and no verification of income. People who couldn't afford it, were given extraordinary loans, and by 2007, Fannie and Freddie owned or guaranteed nearly half of the $12 trillion U.S. mortgage market.

When President Bush and others began to warn Congress of an impending crisis, most Congressmen ignored it, because Fannie Mae and Freddie Mac were financing 384 of their campaigns to the tune of $200 million over the last 20 years. (Terry Jones, "How A Clinton-Era Rule Rewrite Made Subprime Crisis Inevitable," Investor's Business Daily, Posted Wednesday, September 24, 2008, 4:30 PM PT)

"Free money" was available for the taking. All went well as long as housing prices kept going up. If a person couldn't pay their mortgage, which many couldn't, no problem! Just foreclose on the property and sell it for more than what was owed. Banks were making money hand over fist with these subprime loans, and it worked as long as the housing prices kept going up.

But when the housing market began to drop, the whole system came crashing down like a house of cards. Banks couldn't sell foreclosed properties at a high enough price to cover their losses, and now everybody is hurting.

It's all because of an "entitlement" philosophy and greed. It's all because people wanted a "free lunch" without the work. It's all because people wanted to take, instead of working to give. They were ignoring the 8th commandment: "You shall not steal."

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