The Very Meaning Of Liberty

“In any society, only two forces can hold the sinful nature in check: the restraint of conscience or the restraint of the sword. The less that citizens have of the former, the more the state must employ the latter.”

Chuck Colson and Nancy Pearcey wrote those words in How Now Shall We Live.

Robert Winthrop (1852) put it this way: "Men, in a word, must necessarily be controlled either by a power within them, or by a power without them; either by the Word of God, or by the strong arm of man, either by the Bible, or by the bayonet."

In early America, the idea of “self-government under God” summarized the very meaning of liberty.

But today, the American concept of liberty boasts “self-government" while the "under God” part is gone.

As we move increasingly away from recognition of Higher Law, and away from the idea of accountability to a Higher Judge, the less real liberty we have.

Applying this to our economy, the more people participating in our economic system who lack internal control under God, the more need we have for external control under man. Thus the Dodd-Frank Act of 2010.

But what will steer the law-givers? What Higher Law will guide their minds and hands? [This is the bigger mess we're now in, and a topic for another day.]

While more external controls are necessary, no amount of legislation can solve the root problem of our economy. That's because the root problem of our economy is not economic. It's spiritual.

To bring ethical behavior into the marketplace, it must be carried into it by individuals who are "controlled by a power within.” Flatly put: we need bankers, lawyers, investment managers and loan officers who bring their love for Christ and voluntary submission to His Word to work with them every day.

This cannot be legislated.

Ken Eldred sums it up in his excellent book, God Is At Work:

“Transformation of culture really starts with the individual…Cultural change is not something that can be imposed at the macro level from the top...Person by person, hearts and minds must be transformed...In short, it is the Holy Spirit working a cultural transformation from the pattern of this world to the pattern of God. The process starts with...a personal relationship with God.”

Things Laws Cannot Fix

Last July, while I was enjoying my blog hiatus, the long-awaited government response to the economic meltdown of 2008 was passed into law by the President. It was a 2,300 page bill, called, the Dodd-Frank Act.

This legislation calls for the establishment of a new federal agency: the Consumer Financial Protection Bureau. The Seattle Times wrote: "This new agency is intended to protect the interests of the average Joe. Housed in the Federal Reserve, it is designed to protect consumers from predatory lending, hidden credit-card fees and the like."

The Dodd-Frank Act has been called, "the most sweeping financial reform since the Great Depression." It not only addresses the $615 trillion-dollar over-the-counter "dark market" of derivatives, but other financial concerns, such as mortgage practices, credit-card fees and car loans. For a brief summary of the law's main points, see http://www.politifact.com/truth-o-meter/promises/promise/422/create-new-financial-regulations/.

Some people feel the new law does not go far enough, while others feel it goes too far. That's what debate is all about.

In principle, I am not opposed to government oversight in areas that affect the health and well-being of the general public. As mentioned last week, one of God's purposes for civil government, according to Romans 13, is to reward those who do good and punish those who do evil. This is necessary in a fallen world.

But will the 2010 financial reform act keep us from experiencing future meltdowns?

Senator Christopher Dodd, co-sponsor of the bill, proclaimed: "I regret I can't give you your job back, restore that foreclosed home, put retirement monies back in your account. What I can do is to see to it that we never, ever again go through what this nation has been through."

Never, ever again? No doubt the shapers of post-Depression financial reform had similar thoughts.

Yes, I think the new laws may help solve some problems. They may cause others. But there are things laws cannot fix.

Not even God's laws can change the human heart.

To be continued...

The Fatal Flaw

A decade before the financial meltdown of 2008, Brooksley Born (Chair of the Commodity Futures Trading Commission) and Alan Greenspan (Chairman of the Federal Reserve Board) were at loggerheads about whether the multi-trillion dollar market of "derivatives" should be subject to governmental oversight.

Sometimes the State oversteps its bounds. And when it does, things get ugly. But the Bible makes it clear that civil government is appointed by God for a purpose. According to Romans 13, the purpose of civil government is to reward those who do good and to punish those who do evil. Paul tells us civil servants are "God's ministers."

When Alan Greenspan testified before Congress in October of 2008, just after the economic meltdown, he said he "found a flaw" in the way he had previously thought the economic world worked.

In his testimony, Greenspan did not elaborate on the "flaw." But I would like to do so.

The fatal flaw can be boiled down to one word: sin.

A big problem with derivatives is that few people understand how they work. Some derivatives are so complex that the financial institutions using them don't even understand how they work.

When something is that complex, and those who create the instruments don't want to "show their math," you have a disaster in the making.

One reason Brooksley Born smelled a rat is because she was a specialist in derivatives law. She had practiced in that field for 20 years before her clash with Greenspan. She knew what humans are capable of, when given a long enough leash. Worse yet, when there is no leash at all.

When a business that affects the hard-earned dollars of millions of trusting Americans operates in secret, with no accountability whatsoever, it is just too easy for sin to have its sway. The love of money is too powerful for many to resist.

This flaw is greatly magnified in a society that seeks to exclude God from the workplace, limiting Him to private, personal affairs, or to an hour of "spirituality" on Sunday morning.

When people lack the kind of internal control that restrains them from caving in to the love of money, there is a greater need for external control. That's the way life in a fallen world works.

But will external accountability fix the fatal flaw?

More to come...

The Warning

It is good to be back in the saddle again, after a six-week hiatus from blogging about the intersection of biblical worldview and work.

I look forward to herding the cattle of ideas with you once more! Thanks for riding along side.

Let's start with Brooksley Born's controversial idea that when it comes to large financial institutions handling billions of dollars belonging to millions of trusting, hard-working Americans, doing so with open books and accountability to a governmental agency is a necessity.

Brooksley Born was the Chair of the Commodity Futures Trading Commission from 1996-99. At that time, a decade before the economic meltdown of 2008, Born testified before Congress four times, warning of the dangers of allowing complex financial instruments known as "derivatives" to be bought and sold with absolutely no accountability. It was a multi-trillion dollar "dark market." Very few people even understood how derivatives worked.

Born went up against Alan Greenspan, Chairman of the Federal Reserve Board, and other powerful voices in Washington who were vehemently opposed to her call for open books. She got pounded.

A decade later, the derivatives that Born and Greenspan were arguing about formed a lion’s share of toxic assets that poisoned our economy, brought us to the brink of financial ruin, and produced the greatest recession since the Great Depression, which may get far worse before it gets better.

Brooksley Born’s story is chronicled in Frontline’s 2009 production, The Warning. It is must viewing. I have posted the trailer as the video of the month (http://www.youtube.com/watch?v=ACkiKVtF3nU). I urge you to view the full story at http://video.pbs.org/video/1302794657/.

I do not believe Greenspan had fraudulent motives. He was opposed to the regulation of financial markets on ideological grounds. He sincerely believed markets totally regulate themselves. That is, those who do well prosper, and those who do poorly fail. The market itself would “clear the transactions.”

After eighteen years leading the Federal Reserve, Greenspan retired in 2006. (Amazing timing.) But he appeared once again before Congress in October of 2008, after the house of cards came tumbling down on all of our heads. At the hearing, the world was stunned to hear Greenspan say he “found a flaw.”

“…I was shocked,” Greenspan said, “because I’ve been going for 40 years or more with very considerable evidence that it was working exceptionally well.”

What was the "flaw," and why did "it" stop working exceptionally well?

Stay tuned...