GOOD MORNING AND WELCOME TO ETHICAL PERSPECTIVES ON THE NEWS, MY NAME IS MARY DUCEY AND I TEACH PHILOSOPHY AND ETHICS.  TODAY’S TOPIC IS THE ETHICS OF BORROWING AND LENDING.  THE TOPIC WAS SUGGESTED TO US WHEN WE READ THAT THE AVERAGE AMERICAN HOUSEHOLD CREDIT CARD DEBT WAS TWENTY-FIVE THOUSAND DOLLARS.  THIS FIGURE DOES NOT INCLUDE MORTGAGES, AUTO LOANS, OR SCHOOL LOANS AND I’M SURE THAT THIS FIGURE IS CONTESTED.   DIFFERENT SOURCES SUGGEST DIFFERENT AMOUNTS AND I IMAGINE THAT THIS MIGHT BE A HARD THING TO MEASURE, BUT WE WOULD AGREE THAT RISING PERSONAL DEBT IS BECOMING A PROBLEM FOR MORE AND MORE AMERICANS AND A PROBLEM THAT IS DIFFICULT FOR MARRIAGES, FAMILIES, AND LIFE-LONG DREAMS.  SO IS IT TIME TO TALK ABOUT WHETHER INCURRING SUCH CRIPPLING DEBT HAS AN ETHICAL DIMENSION?  IS IT WRONG TO BORROW MONEY THAT IT WILL BE IMPOSSIBLE TO PAY BACK?  IS IT WRONG TO EXTEND CREDIT TO PEOPLE WHOM IT WILL CRIPPLE TO PAY BACK?  AND WHY ARE SO MANY AMERICANS PUTTING THEMSELVES IN THIS POSITION?

TO HELP US ANALYZE THIS PROBLEM WE HAVE THREE THOUGHTFUL GUESTS FOR OUR DISCUSSION THIS MORNING; TO MY LEFT HERE IS MY COLLEAGUE, DR. AYMAN AMER WHO IS A NEWLY MINTED PHD IN ECONOMICS AT MOUNT MERCY COLLEGE, CONGRATULATIONS AND WELCOME BACK TO THE SHOW.  TO HIS LEFT IS PASTOR KATHLEEN MOORE, OF THE FAITH AND NEW CREATION UNITED METHODIST CHURCHES.  YOU’RE PASTOR OF TWO CHURCHES?

 

KATHLEEN:  THAT’S RIGHT

 

MARY: WELCOME, THANKS FOR BEING WITH US AND LAST, BUT NOT LEAST IS JOE PEIFFER, WHO IS A BANKRUPTCY ATTORNEY AT DAY, RETTIG, PEIFFER FIRM AND JOE IS ALSO ON THE IOWA ATTORNEY GENERAL’S MORTGAGE TASK FORCE.  RIGHT?

 

JOE:  I’VE SERVED WITH THAT, YES.

 

MARY:  AND SO, AN EXPERT IN PEOPLE’S REAL LIVES WHO ARE WORKING ON THIS PROBLEM SO WELCOME.  THIS IS A DIFFICULT ISSUE AND THE REALITY OF THESE PROBLEMS IS REALLY DIFFICULT.  WE WOULDN’T WANT TO SORT OF  REDUCE A COMPLEX PROBLEM TO SOMETHING TOO SIMPLE, BUT WE LIKE TO SORT OF IDENTIFY SOME OF THE FACTORS OF IT, TOO, SO I’M LOOKING FORWARD TO THIS DISCUSSION.  JOE, HOW BIG IS THE PROBLEM.  WE’RE READING MORE AND MORE ABOUT IT….

 

JOE: WE’RE READING A LOT MORE ABOUT IT WE’RE LEARNING THAT PERSONAL BANKRUPTCIES ARE COMING BACK AND SETTING NEW RECORDS AGAIN.  THERE WAS SOMETHING IN THE ST. LOUIS DISPATCH THAT CAME OUT YESTERDAY QUOTING THE FIGURES.  PERSONAL BANKRUPTCIES HAVE RISEN I BELIEVE IN THE NEIGHBORHOOD OF 30 PER CENT THE FIRST QUARTER OVER WHERE THEY WERE IN THE FOURTH QUARTER OF LAST YEAR.  AND THAT’S SOMETHING WE’RE SEEING ACROSS THE COUNTRY AND IT HAS A LOT TO DO WITH CHANGE IN THE ECONOMY.  THE RISE IN THE CREDIT CARD DEBT WE’RE TALKING ABOUT, THE INCREASE IN FOOD PRICES, THE INCREASE IN ENERGY PRICES AND THE GENERAL TIGHTENING OF CREDIT THAT WE’VE SEEN.  AFTER THE HOME MORTGAGE CRISIS THAT WE’VE BEEN HEARING ABOUT.  FOR MANY PEOPLE THE ADJUSTABLE RATE MORTGAGES ARE GETTING THE RECESS.  THE RECESS MAY DRAMATICALLY INCREASE THE AMOUNT OF PAYMENTS SO PEOPLE THAT THOUGHT THEY HAD THINGS IN A POSITION WHERE THEY COULD WORK ARE NOW FINDING THAT I’M SORRY IT ISN’T WORKING AND NOW WHAT DO I DO?  AND SO MANY OF THEM ARE NOT COMING BACK AND LOOKING AT BANKRUPTCY AS AN OPTION.  CANDIDLY, I BELIEVE IT SHOULD BE THE LAST OPTION NOT THE FIRST OPTION FOR THE CONSUMER TO CONSIDER.

 

AYMAN:  I THINK A LOT OF IT HAS TO DO WITH HEALTH CARE COSTS AS WELL.  A LOT OF PEOPLE MAY HAVE INSURANCE, BUT EVEN WITH THE INSURANCE THEY CAN’T AFFORD IT WHEN THEY HAVE A TERMINAL ILLNESS OR DISEASE.  AND I THINK A LARGER PERCENT OF THOSE WHO WANT TO DECLARE BANKRUPTCY IS A RESULT OF HEALTH CARE COST.

 

JOE:  HEALTH CARE IS A SIGNIFICANT FACTOR AND HAS BEEN IDENTIFIED AS SUCH FOR A NUMBER OF YEARS AND WITH THE HIGHER COST OF INSURANCE AND THEN THE CHANGES IN THE INSURANCE PLANS THEMSELVES SO THEY MAY NOT COVER WHAT THEY USED TO COVER THEN PEOPLE THAT ARE STRETCHED HERE END OF NEEDING TREATMENTS OR GETTING TREATMENTS THAT THEY CAN’T POSSIBLY PAY.

 

MARY:  AND YOU QUOTED JUST QUOTED TO ME BEFORE WE WENT ON THE AIR 80 PERCENT OF PEOPLE WHO DECLARE PERSONAL BANKRUPTCY CITE A HEALTH CARE CATASTROPHE AS THE PRINCIPAL CAUSE.

 

RIGHT, SO IT’S A … I MEAN A LOT OF PEOPLE ON THE FACE OF IT THINK THAT IT IS OR PARTLY PEOPLE THINK THAT THEY ARE NOT CAPABLE OF PAYING IT OFF BUT I THINK A LOT OF IT IS UNFORESEEN CIRCUMSTANCES SUCH AS HEALTH CARE PROBLEMS OR PEOPLE LOSING THEIR JOBS AND OF COURSE, THAT BECOMES MORE FREQUENT AS THE ECONOMY GOES INTO A RECESSION.

 

MARY:  SO THIS ISN’T JUST PEOPLE WHO ARE BUYING ON A WHIM?

 

LUXURY CARS

 

OR GO SHOPPING TOO MUCH?

 

THERE ARE SOME THAT IS A PART OF THE PROBLEM BUT THE MAJORITY OF PEOPLE WHO COME TO OUR OFFICE AND SEEK HELP IN FILING A BANKRUPTCY AND NEGOTIATING WITH CREDITORS AREN’T THERE BECAUSE THEY HAD CHOSEN TO DO LOTS OF SPENDING.  THERE ARE A FEW, BUT THE MAJORITY OF THEM PERHAPS A BUSINESS DIDN’T WORK, IT FAILED.  PERHAPS, IT WAS A LOST JOB AND IN ADDITION TO THE LOST JOB OR PERHAPS THERE WAS AN UNEXPECTED PREGNANCY AND NOW WE’VE LOST ONE BREADWINNER BECAUSE WE CAN’T SEND BOTH BREADWINNERS OF THE FAMILY BACK OUT TO THE WORK AT THE LEVEL THEY NEEDED TO WORK TO SUPPORT THE DEBT THEY ONCE THAT THEY HAVE SO THEN ALL OF A SUDDEN THE NET DISPOSABLE INCOME THAT ‘S AVAILABLE TO SATISFY DEBT GOES DOWN.  ONCE THAT’S GONE DOWN THERE MAY NOT BE AN ADEQUATE CUSHION TO SERVICE THE DAY TO DAY LIVING EXPENSES.  AND SO WE HEAR A LOT ABOUT JOB LOSSES OR SOMEBODY GETTING HURT THAT CAUSES IT.  I WOULD SAY IN LESS THAN FIVE PERCENT OF THE CASES IS IT MERELY RAMPANT SPENDING.

 

I’D SAY WE MAY HAVE….. IT WOULD BE WORTHWHILE TO FIND OUT THERE ARE UNDOUBTEDLY SOME PEOPLE WHO ARE COMPULSIVE SPENDERS THERE ARE PEOPLE IN TROUBLE BECAUSE OF COMPULSIVE GAMBLING.  THE OTHER HEALTH ISSUES THAT IS MENTAL HEALTH.

 

PEOPLE ARE TALKING ABOUT SPENDING SHOPPING AS AN ADDICTION NOW.

 

AND JUST JUDGMENT, I DON’T KNOW JUST WHERE THE PSYCHOLOGISTS COME DOWN ON THAT BUT THAT’S A DIFFERENT ISSUE THAN JUST THE TYPICAL CONSUMER WHO IS OVERSPENDING ON CREDIT CARDS.

 

I THINK IT WILL REMAIN A BIG ISSUE UNTIL IT BECOMES A BECAUSE I THINK PEOPLE ARE KIND OF ENCOURAGED TO GO BEYOND THEIR MEANS.  AND WHATEVER IT THAT IS THE RECENT TECHNOLOGY OR TV OR SOMETHING LIKE THAT, A CAR OR ANYTHING LIKE THAT I THINK THAT PEOPLE … OUR CULTURE KIND OF ENTICES PEOPLE TO….

 

I THINK THIS IS TRUE CONFESSION HERE YOU KNOW ….I’M CATHOLIC SO I’LL GO TO CONFESSION.  I FIGHT THAT PERSONALLY YOU KNOW REIGNING IN MY DESIRE TO BUY THINGS AND BEING REALISTIC ABOUT THE BUDGET AND I HAVE A LOT OF RESOURCES TO HELP ME DO THAT. 

 

ONE OF THE ADS THAT WE SEE OFTEN ON THIS STATION THAT WE’RE APPEARING ON RIGHT NOW IS…IT HAS THIS THEME RUNNING THROUGH IT I WANT IT ALL AND I WANT IT NOW AND THIS GUY GOES OUT AND GETS THIS BIG TV.  AND WHAT’S THE QUESTION NOT DO YOU NEED THIS BIG TV DO YOU HAVE THE MONEY FOR IT BUT THE QUESTION IS CAN YOU CHECK AND SEE HOW MUCH YOU HAVE REMAINING ON YOUR CREDIT CARD TO GET IT?  THAT’S A SERIOUS SICK MESSAGE WE’RE PUTTING OUT.

 

THE CIRCUMSTANCES MAY YOU KNOW THAT THIS COINCIDED WITH DE-REGULATION OF BANKING AT SOME POINT IN THE 1980’S AND SO YOU’VE GOT

 

WHAT DOES THAT MEAN DE-REGULATION OF BANKING?

 

IT LIFTS A LOT OF RESTRICTIONS ON BANKS IN A WAY THAT THEY LEND MONEY.

 

OKAY

 

AND SO AT SOME POINT OF TIME FOR EXAMPLE THE CREDIT CARD INDUSTRY HAS A CEILING A MAXIMUM OF FIFTEEN PERCENT AND OF COURSE BY THE PRESSURE OF THE INDUSTRY CONGRESS REMOVED THAT CAP SO NOW WE HAVE CREDIT CARDS THAT CHARGE TWENTY-FIVE OR TWENTY-SIX OR TWENTY-SEVEN.

 

SO THERE’S NO CAP AT ALL?

 

NO CAP, BUT THERE USED TO BE ONE AND I THINK THAT IS THE ORIGIN OF HISTORICALLY WHAT USED TO BE USUARY OR CALLED USUARY…….

REMEMBER USUARY LAWS?

 

YES, I HAVE SEEN CREDIT CARDS WITH INTEREST BEFORE A DEFAULT OF THIRTY-NINE PERCENT..

 

INCREDIBLE!!!

 

THEN THERE’LL BE A DEFAULT RATE IF YOU SLIP AT ALL AND IT WILL GO TO A MUCH HIGHER RATE.

 

HOW MUCH HIGHER?

 

WELL, I’VE SEEN IT GET OVER FIFTY PERCENT. 

 

I MEAN THAT IS USUARY, RIGHT. 

 

IT SHOCKS THE CONSCIENCE AND WHEN WE GOT TO THE DEREGULATION THEN WE GOT IN THE SPOT WHERE THE UNDERWRITING STANDARDS WERE LEFT UP TO THE BANKS AND SO THEN WE SEE CREDIT CARDS BEING ISSUED TO OUR YOUTH WHETHER OR NOT THEY CAN AFFORD TO PAY FOR IT, WHETHER OR NOT THEY’VE GOT A CO-SIGNER.  FIRST THING THAT HAPPENS WHEN THEY ARRIVE ON THE COLLEGE CAMPUS OR YOU’RE ADMITTED TO COLLEGE IS YOU GET AN ONSLAUGHT OF CREDIT CARD OFFERS.  SO I THINK THAT MEANS OUR COLLEGES MUST BE SELLING THEIR ADMISSION LISTS………..SO THE ADMISSION LIST GOES OUT ………LAUGHTER…..AND IF THAT’S HAPPENING I THINK THAT IS INAPPROPRIATE.  ALL OF A SUDDEN THERE’S A SOLICITATION OUT THERE IT ISN’T JUST FROM ONE BANK IT IS FROM MANY BANKS THAT COMES AND WE’RE SEEING THEM.  I’VE GOT ONE SON IN COLLEGE AND ONE APPROACHING COLLEGE AND WE ROUTINELY GET CREDIT CARD APPLICATIONS FOR THEM.

 

PLUS THE STUDENT LOANS SO IMAGINE THAT WHEN SOMEBODY GRADUATES WHEN THEY HAVE THIS AND A LOT OF CREDIT CARD DEBTS IN ADDITION, TOO, SO THEY START THEIR PROFESSIONAL LIVES IN HUGE DEBT ALREADY.

 

I HAVE A LITTLE STORY TO TELL THAT OUR COLLEGE USED TO DO THAT…. YOU KNOW IN THE FALL YOU WOULD HAVE IN THE STUDENT CAFETERIA TABLES OF PEOPLE REPRESENTING CREDIT CARD COMPANIES AND THEY WOULD GIVE OUT PRIZES TO PEOPLE FOR SIGNING UP AND YOU COULD SIGN UP FOR MORE THAN ONE CREDIT CARD AND SO I REMEMBER ONE COMPANY WAS GIVING AWAY POUND BAGS OF M & M’S.  AND SO ONE YOUNG FRESHMAN SIGNED UP FOR TWO CREDIT CARDS AND ATE TWO POUNDS OF M & M’S LIKE BEFORE MY CLASS AND HE WAS SO YOU KNOW ……LAUGHTER…….TWITCHING ON SUGAR AND I REMEMBER THINKING HE CAN’T EVEN MANAGE HIS M & M’S HOW IS HE GOING TO MANAGE HIS CREDIT CARD?  AND I DO THINK THERE IS AN ETHICAL ISSUE AND I SHOULD SAY OUR COLLEGE NO LONGER ALLOWS THAT KIND OF RECRUITMENT AT THE BEGINNING OF THE YEAR AND I WAS GLAD ABOUT THAT.

 

AND I’M GLAD THAT WE’RE TALKING ABOUT BOTH SIDES OF THE ETHICS OF LENDING AS WELL AS THE ETHICS ON BORROWING.

 

AND WE TALKED ABOUT THAT WE HAVE TO ALSO RECOGNIZE THAT AS BAD AS THE CREDIT CARD RATES CAN GET THAT’S NOTHING COMPARED TO WHAT PEOPLE AT THE BOTTOM OF THE PILE.  PROBABLY NONE OF US HAVE EVER GONE TO A PAY DAY LOAN OR A CAR TITLE LOAN, BUT WHEN YOU GET THOSE THE COST OF THOSE LOANS CAN GO UP TO THREE TO FOUR HUNDRED PER CENT,

 

EVEN MORE……..MUCH HIGHER…………

 

IN IOWA THERE ARE SOME LIMITS, BUT IT DEPENDS ON WHAT STATE YOU’RE IN.

 

AND I THINK THAT IS THE WORST PART OF IT BECAUSE I THINK THAT IF A PERSON IS NOT ABLE TO PAY FIVE OR TEN PERCENT IT ….IT MAKES SENSE THAT THIS PERSON IS LESS ABLE TO PAY FIVE HUNDRED PERCENT…..

 

SO LET’S START TALKING ABOUT….YOU KNOW, LENDING AS AN ETHICAL ISSUE. UNDER WHAT CONDITIONS DO YOU THINK IT WOULD BE UNETHICAL TO LOAN FOR A BANK OR AN AGENCY LIKE THIS TO LOAN PEOPLE MONEY?

 

I THINK IT’S UNETHICAL TO HAVE PAYDAY LOANS AND CAR TITLE LOANS THAT GO UP TO THAT KIND OF RATE OF INTEREST AND….

 

WHERE SHOULD IOWA…..WHAT SHOULD BE THE HIGHEST RATE OF INTEREST?

 

WELL, THE SUGGESTION HAS BEEN THAT IT BE AT PERHAPS THIRTY-NINE PERCENT OR SO WHICH IS STILL PLENTY HIGH….. THAT’S INCREDIBLY HIGH…..  BUT IN IOWA WE DID GET A LAW PASSED THAT LIMITED THE PAYDAY LOANS BUT WE HAVE NOT LIMITED THE CAR TITLE LOANS SO ALL THE COMPANIES WERE DEALING IN PAYDAY LOANS JUST SWITCHED OVER TO THE CAR TITLES……AND UNTIL WE DECIDE TO REGULATE THOSE THEY WILL JUST CONTINUE TO FIND NEW WAYS TO FIND NEW USURIOUS CHARGES FOR….

 

WE’RE USING A TERM HERE THAT PEOPLE MIGHT NOT KNOW SO LET’S STOP HERE….WHO CAN DEFINE USUARY?

 

USUARY IS A LIMIT; A USUARY LAW IS A LIMIT ON THE AMOUNT OF INTEREST THAT CAN BE CHARGED IN THE INTEREST AND FEES.  USUARY…….

 

IT IS A MAXIMUM,

 

IT WAS A MAXIMUM INTEREST THAT IS ALLOWED BY STATUTE.  …..BACK TO THE PAY DAY LOAN SCENARIO, AT ONE POINT IN TIME, ABOUT SEVEN YEARS AGO I HAD A CLIENT COME INTO MY OFFICE.  THE CLIENT GOT PAID EVERY OTHER WEEK AND HIS SPOUSE GOT PAID EVERY OTHER WEEK, BUT ON OPPOSITE FRIDAYS.  SO EVERY FRIDAY HE HAD TO MAKE THE MAD DASH FROM PAYDAY LOAN COMPANY TO PAYDAY LOAN COMPANY AND HE WAS RUNNING EIGHT OF THEM – FOUR ON ONE SET OF FRIDAYS AND FOUR ON THE NEXT SET OF FRIDAYS.  THE BREAKING POINT CAME WHEN ON ONE OF THE FRIDAYS HE’S GOING FROM ONE TO THE OTHER AND HE BLOWS A STOP LIGHT AT SIXTY MILES AN HOUR TO MAKE IT SO HE CAN GET BACK TO HIS JOB ON TIME OVER HIS LUNCH HOUR.  COP PULLS HIM OVER AND COULD SEE HE WAS JUST SHAKING AND ASKED HIM WHAT WAS UP.  HE TOLD THE COP WHAT WAS GOING ON AND THE COP SAID GO GET HELP.  HE DIDN’T WRITE HIM A TICKET.  HE CAME TO MY OFFICE AND WE ULTIMATELY DID FILE A BANKRUPTCY PUT HIM IN A CHAPTER THIRTEEN WHICH IS A WAGE EARNER’S PLAN AND IN LESS THAN TWO YEARS HE PAID EVERYBODY BACK IN FULL AND HE GOT ON A BUDGET.  SO BACK TO THE QUESTION AS TO WHEN IS IT UNETHICAL TO LOAN MONEY.  I THINK…….FROM THE STANDPOINT OF BEING UNETHICAL IF YOU KNOW THE PERSON CAN’T PAY IT BACK AND THEY’RE GOING TO HAVE TO SURRENDER THE ASSET THAT MAY BE A TIME WHEN IT IS UNETHICAL.  AND THE QUESTION IS OF CHOICE IN FREE WILL.   IF THE BORROWER KNOWS UP FRONT THAT IF THEY DON’T MAKE THE PAYMENT EVEN THOUGH IT LOOKS DIFFICULT THAT THEY WILL LOSE THEIR HOUSE OR WILL LOSE THEIR CAR, IS IT THE ROLE OF SOCIETY TO LIMIT THAT CHOICE?  AND TO ELIMINATE THE ABILITY OF THE WILLING LENDER WHO’S WILLING TO TAKE WHATEVER THAT ASSET IS FROM MAKING THAT LOAN?

 

THAT’S A GREAT QUESTION….GO AHEAD AYMAN…..

 

I THINK I AGREE WITH THAT POINT OF VIEW THERE WILL BE A TIME OR A PLACE FOR SOCIETY TO STEP IN AND SAY THAT AT THIS POINT IT IS EXPLOITATION OR THIS IS USUARY.

 

I DON’T THINK THERE’S A MAGIC POINT

 

WHAT ABOUT THE PERSON WHO’S NOT ABLE TO PAY, ISN’T THAT THE GOOD CRITERIA ?

 

IT’S AN IRRATIONAL THING FOR THE PERSON TO DO.

 

EVEN CONGRESS TOOK THAT VIEW WHEN THEY PUT A FIFTY PERCENT CAP BUT THAT’S CONSIDERED AN INTERVENTION FROM SOCIETY.  SAY THE MAXIMUM YOU CAN PAY IS FIFTY PERCENT.  NOW THE LENDERS MAY BE WILLING TO GIVE….TO LEND FOR HIGHER THAN THAT AND THE BORROWER MAY BE WILLING TO BORROW AND PAY HIGHER THAN THAT, BUT CONGRESS SAID NO.  BEYOND THAT IS NOT CONSIDERED A GOOD THING.

 

WE STEP IN TO PROTECT OTHER PEOPLE FROM THEMSELVES.  RIGHT?  PROSTITUTION.

 

THE……AN ARTICLE I WAS JUST READING TODAY ABOUT A YOUNG MILITARY WIFE IN OREGON.  SHE HAD GOTTEN A THREE HUNDRED DOLLAR PAYDAY LOAN THAT WAS GOING TO COST HER FIFTEEN DOLLARS TWO WEEKS FROM THEN.  YEP, I CAN HANDLE THAT.  WELL, TWO WEEKS FROM THEN SHE DIDN’T HAVE THE THREE HUNDRED DOLLARS AND SHE WENT TO TALK TO THEM AND IT TURNED OUT IF SHE PAID THEM THE FIFTEEN DOLLARS THEY WOULD JUST ROLL OVER THE LOAN.  OKAY.  AND PRETTY SOON SHE WAS IN A MATTER OF ROLLING OVER AND ROLLING OVER AND JUST LIMPING FROM ONE PAY DAY TO THE NEXT UNTIL SHE ENDED UP IN OVER THREE THOUSAND DOLLARS IN DEBT.  NOW ONE THING I LEARNED FROM THIS ARTICLE IS THAT TOWNS ARE AROUND MILITARY BASES HAVE A HUGE NUMBER OF PAYDAY LOANS

 

REALLY?

 

YES, THE ARTICLE WAS SUGGESTING THAT THE DEPARTMENT OF DEFENSE MAY BE STEPPING INTO THIS AND EVEN DECLARING THOSE OFF LIMITS BECAUSE SO MANY OF THE MILITARY FAMILIES HAVE GOTTEN INTO TROUBLE.  I THINK WE DO HAVE A RESPONSIBILITY TO SAY AS A SOCIETY THIS IS EXORBITANT INTEREST AND WE’RE NOT GOING TO ALLOW IT.

 

I AGREE. 

 

WHAT DO YOU THINK, JOE?  ANSWER YOUR OWN QUESTION.

 

WELL, LET’S PLAY IT AROUND IN THE STANDPOINT THAT THE BORROWER MAY KNOW THAT HE CAN’T PAY IT AND HE’S WILLING TO TAKE THE RISK.

 

WHY WOULD HE DO THAT?

 

WELL, IN SOME INSTANCES THE BORROWER MAY KNOW THAT HE HAS TO SELL THE ASSET IN ORDER TO PAY THE LOAN.

 

AND JUST NEEDS TIME TO DO THAT?

 

HE NEEDS SOME TIME.  SO IF THAT’S THE SITUATION WHERE IN ORDER TO CLEAR UP A DEBT THAT HAS TO BE CLEARED BUT HE KNOWS HE CAN’T PAY IT IN THE NORMAL MONTHLY PAYMENTS. IF THE PLAN OR THE EXIT STRATEGY IS TO SELL THE ASSET, THAT MAY BE A TIME WHEN THAT TYPE OF LOAN WOULD BE APPROPRIATE.  BUT IF IT’S NOT A SITUATION WHERE THERE’S AN EXIT STRATEGY THAT CONTEMPLATES A SALE OF THE ASSET AND THE BORROWER IS CLEARLY NOT GOING TO BE ABLE TO MAKE THE PAYMENTS.  WHY SHOULD THAT LOAN BE MADE?  SOMETIMES YOU’VE GOT THE SITUATION WHERE YOU’VE GOT THE GREEDY LENDER AND THE UNREALISTIC BORROWER…. A FOOL’S PARADISE              AND EVERYBODY LOSES.

 

EXCEPT THE GREEDY……

 

THIS IS TRUE.  THE GREEDY LENDER MAY LOSE, TOO.  FOR EXAMPLE, TAKE THE SITUATION WHERE MANY OF THE MORTGAGES THAT WERE TAKEN OUT IN THE HOUSING MARKET HAS DROPPED.  GOOD MORNING AMERICA HAD A PIECE ON THIS MORNING THEY TALKED ABOUT THIS COUPLE THAT HAD BORROWED THE MONEY ON THIS HOUSE OUT IN CALIFORNIA AND NOW ON THIS HOUSE THEY OWE A MILLION FIVE.  THEY TOOK HER INHERITANCE AND PUT IT AS A DOWN STROKE TO BUY THIS HOUSE ON A VARIABLE RATE MORTGAGE.  THE VARIABLE RATE PAYMENTS WERE STARTED OUT AT INTEREST ONLY AT SIXTEEN HUNDRED.  ……DATE CAME, IT’S TIME FOR THE ADJUSTMENT, THE PAYMENTS WERE GOING TO NOW START REQUIRING INTEREST AND PRINCIPLE TO BE AMORTIZED OVER A PERIOD OF TIME.  THEY WERE GOING TO JUMP TO EIGHT THOUSAND DOLLARS A MONTH.  THEY NEGOTIATED WITH A CREDITOR AND FINALLY GOT THEM DOWN TO SIX THOUSAND A MONTH.  THEY CANNOT MAKE THOSE PAYMENTS AND THE HOUSE HAS DROPPED IN VALUE SO THAT IT IS NOW WORTH A MILLION DOLLARS.  THEY OWE A MILLION FIVE.  SO THE GREEDY BORROWER/LENDER IN THAT INSTANCE THAT SET THEM UP AND MADE THE LOAN WAS AN INAPPROPRIATE LOAN UPFRONT WILL ALSO LOSE IN THIS SCENARIO.

 

I THINK THAT IN THE LONG RUN STILL THE GREEDY BORROWER, THE GREEDY LENDER PROBABLY WILL OVERALL BENEFITS NOT LOSERS AND SO IT WILL….. FOR EXAMPLE, IF I TELL YOU NOW IF YOU LOOK AT THE GAP IN INCOME IN THE UNITED STATES TODAY YOU’LL FIND IT TWENTY OR THIRTY TIMES OR FORTY TIMES WHAT IT USED TO BE TWENTY YEARS AGO OR THIRTY YEARS AGO.  SO NOW, WHEN WE SAY THAT ….THAT IS A RESULT OR AN OUTCOME OF A SITUATION IN WHICH THESE PEOPLE BORROW FROM THESE PEOPLE AND THESE PEOPLE ALWAYS TAKE FIVE OR TEN OR FIFTEEN PERCENT FROM THESE PEOPLE THAT ARE NOT ABLE SO THEY ARE THEY’RE RAPIDLY DECLINING IN THE LONG TERM AND THESE PEOPLE’S WEALTH IS INCREASING IN THE LONG TERM.  SO I THINK OVER ALL THE LENDERS WILL GET THE BENEFIT OF THAT, BUT ON THE OTHER HAND I WOULD LIKE TO ADD THAT WE RECOGNIZE THAT IT IS THE SOCIETAL OR COMMUNITY’S RESPONSIBILITY.  EXAMPLE IN THE EXAMPLE OF THE MILITARY FAMILIES SO I THINK THAT WE RECOGNIZE THAT WE STEP IN SOMETIMES AS A COMMUNITY.  I THINK ……..FROM THE DISCUSSION THAT WE ARE NOT ONLY BORROWERS AND LENDERS WE ARE PEOPLE AND WE ARE YOU KNOW FAMILIES AND CHURCHES AND INSTITUTIONS AND NEIGHBORHOODS AND ALL OF THESE HAVE A ROLE AND I THINK PART OF THE DISCUSSION HERE IS THAT WE ARE FOCUSING ON THE BORROWERS AND THE LENDERS AND WE ARE FORGETTING THAT THERE ARE RESPONSIBILITIES BEYOND THE BORROWERS AND THE LENDERS.  THE CHURCH AS AN INSTITUTION AND THE FAMILY…..

 

DO WE AS A FAMILY HAVE AN OBLIGATION TO TEACH OUR CHILDREN ABOUT PROPER MONEY MANAGEMENT?

 

ABSOLUTELY

 

THAT’S NOT HAPPENING

 

AND NOW, LET’S LOOK BACK …….WELL, YOU CAN GO BACK TO DEUTERONOMY IN THE OLD TESTAMENT, DEUTERONOMY 15:1 TALKS ABOUT THE EVERY SEVEN YEARS DEBT FORGIVENESS.  AND HOW THE ISRAELITES SHOULD NOT BORROW FROM FELLOW ISRAELITES, THEY COULD LEND TO OTHER PARTIES AND BY SO DOING THEY WOULD ULTIMATELY DOMINATE THE OTHER PARTIES BECAUSE OF THE COLLECTION IN ESSENCE OF INTEREST.

 

SO IT’S NOT ONLY THE TEACHING OF THE CHILDREN, BUT ALSO THE ROLE OF THE CHURCH AND THE ROLE OF THE NEIGHBORHOOD AND THE ROLE OF THE COMMUNITY IN GIVING PEOPLE LOANS WHO NEED LOANS WITHOUT NTEREST WHATSOEVER ESPECIALLY IF THESE LOANS ARE FOR BASIC FUNDAMENTAL NEEDS OF LIFE SUCH AS FOOD AND …..

 

WE KIND OF TALKED, WE WERE TALKING ABOUT THE INTERSECTION OF RELIGION AND ECONOMICS HERE WHICH I THINK IS AN INTERESTING INTERSECTION.  THE CHRISTIAN CHURCH OF THE MIDDLE AGES TAUGHT THAT USUARY WAS A SIN AND AT THAT TIME USUARY FROM THE BEGINNINGS FROM ACTUALLY 325 USUARY WAS USED IN TERMS SIMPLY OF LOANING MONEY.  THOU SHALT NOT LOAN MONEY.

 

NOT JUST LOANING IT.

 

AT THAT POINT IT DIDN’T HAVE TO DO WITH EXORBITANT INTEREST, BUT THAT THOU SHALT NOT CHARGE INTEREST REALLY TO THE POINT OF LOANING.  YOU COULD LOAN MONEY TO YOUR FRIEND AS LONG AS YOU PAID YOU PAID THEM BACK AND THAT’S FINE..BUT IT’S THE INTEREST, THAT WAS CALLED USUARY.  WITH TIME, PARTLY AS SOCIETY BEGAN TO CHANGE AND BECAME MORE CAPITAL BASED THEN THE IDEA OF LOANING MONEY WITH INTEREST WAS ACCEPTABLE AND USUARY AT THAT POINT TOOK ON OUR CURRENT MEANING FOR OUR EXORBITANT INTEREST.

 

WE ONLY HAVE A FEW MINUTES LEFT AND HASN’T THE TIME FLOWN.  I KNOW THAT MUSLIMS STILL DON’T BORROW AND LEND AT AN INTEREST, RIGHT?

 

WE DO, BUT WE’RE NOT SUPPOSED TO.  BUT THE IDEA THE IDEA IN THIS ISLAM FUNDAMENTALLY IS THAT THERE ARE TWO KINDS OF TRANSACTIONS IN THIS REGARD.  YOU BORROW TO SURVIVE FOR YOUR HOUSING OR TRANSPORTATION OR FOOD OR CLOTHING.  THAT ABSOLUTELY WOULD BE CONSIDERED IN THE SAME PERSPECTIVE AS IN CHRISTIAN FAITH USUARY SO THAT’S NOT THAT YOU CAN’T.  IN FACT THE COMMUNITY HAS OBLIGATION TO GIVE THAT LOAN WITHOUT ANY INTEREST.  AND AGAIN…….

 

THAT’S WHAT IT MEANS TO BE A NEIGHBOR?

 

AND A FRIEND AND THOSE WHO GO TO THE SAME CHURCH OR TO THE SAME MOSQUE.  BUT AGAIN I CANNOT FORGIVE IF YOU TAKE THAT PART OF THE PIECE OF THE PUZZLE BUT THERE ARE OTHER PIECES.  SUCH AS YOU SAY IN THIS LAND, FOR EXAMPLE, YOU HAVE AN OBLIGATION TO THE POOR.  SO IF YOU DO THAT WHICH IS ABOUT …IT RANGES BETWEEN TWO AND A HALF PERCENT OF YOUR INCOME OR YOUR RATE.  TWO AND ONE-HALF TO TWENTY PERCENT IN SOME AREAS THAT WOULD BE SUFFICIENT TO TAKE CARE OF HOUSING NEEDS, TRANSPORTATION NEEDS FOR THOSE WHO CANNOT AFFORD IT.  SO THAT PART IS ABSOLUTELY AS NEGATIVE AS USUARY IS CONSIDERED.  NOW THE OTHER SIDE OF IT IS THE BUSINESS LOAN, AND THE BUSINESS LOAN IS A TOTALLY DIFFERENT VIEW BECAUSE THIS PERSON DOES NOT NEED IT FOR SURVIVAL BUT THEY ARE GOING TO MAKE MONEY ON IT.  IN THAT SENSE MAYBE IF YOU ARE RESPONSIBLE YOU WOULD GIVE BACK A LITTLE BIT MORE BECAUSE IT IS NOT FOR CONSUMPTION OR……..

 

THAT’S A GOOD DISTINCTION BETWEEN WHAT’S NECESSARY AND WHAT IS NOT.  AND I‘VE READ THAT THERE IS SUCH THING AS A CHRISTIAN FINANCIAL COUNSELOR NOW WHO IS ALSO URGING PEOPLE TO GET RID OF THEIR DEBTS AND…..

 

THERE ARE A LOT OF DIFFERENT DIRECTIONS CHRISTIAN FINANCIAL COUNSELORS GO AND I’VE BEEN FINDING LOTS OF THEM ON THE INTERNET.  AND THEY RANGE FROM THOSE WHO SAY YOU SHOULD HAVE NOT DEBT AT ALL.  THERE ARE SOME WHO SAY THEY ONLY DEBT YOU SHOULD CONTRACT WOULD BE THINGS THAT ARE GOING TO GROW SO IT MENTIONED HOUSING WHICH AT THE TIME THAT WAS WRITTEN THAT MADE SENSE OR A BUSINESS OR SO ON.  IN FACT THAT PARTICULAR PERSON EVEN SAID NO SCHOOL LOANS YOU SHOULD NOT GO INTO DEBT FOR SCHOOL LOANS.  WELL,  YOU KNOW….SO THERE ARE A LOT OF DIFFERENT ATTITUDES ON THAT

 

WHAT IS THE REASON FOR IT?

 

PART OF IT IS JUST THAT RECOGNITION THAT SO MANY IF YOU TOOK ALL THE CHRISTIANS IN THE U.S. AND FIGURED OUT WHAT THEY’RE SPENDING ON CREDIT CARDS IN A GIVEN MONTH.  IF THEY COULD PAY DOWN THAT CREDIT CARD DEBT SO THAT THEY WEREN’T PAYING INTEREST AND FEES.  PART OF THE QUESTION IS JUST HOW MUCH MONEY WOULD WE FREE UP TO DO GOOD WORK?

 

CORRECT

 

HOW MUCH MONEY COULD WE GIVE TO GOD AND TO MISSIONS AND SO ON. SO THAT’S ONE PART OF IT.

 

AND I THINK ABOUT THE POOR FELLOW YOU WERE TALKING ABOUT THAT’S DRIVING AROUND TRYING TO PAY ROB PETER TO PAY PAUL.  THAT’S NO WAY FOR A PERSON TO LIVE.

 

NO.  NO, IT’S NO WAY TO LIVE AND WE TALK ABOUT DEALING WITH THE INTEREST AND MANY OF THE OTHER THINGS.  IN MODERATION I DON’T BELIEVE CREDIT IS NECESSARILY A BAD THING.  OUR UNITED STATES ECONOMY COULD NOT HAVE EXPANDED NEARLY AS RAPIDLY AS IT DID AFTER WORLD WAR II IF NOT FOR THE INSTITUTION OF HOME LOANS.  YOU LOOK AT THAT AND PEOPLE WERE ABLE TO BORROW AND GET A HOUSE.  SOME IS GOOD.  YOU KNOW, EXCESS LIKE IN MANY OTHER THINGS BE IT ALCOHOL OR MAYBE FOOD OR MANY OTHER THINGS IS NOT NECESSARILY GOOD.

 

ON THAT NOTE WE HAVE TO END OUR DISCUSSION.  THANK YOU VERY MUCH, WE COULD TALK ABOUT THIS FOR HOURS.  THANK YOU AND WE’LL SEE YOU NEXT WEEKEND ON ETHICAL PERSPECTIVES ON THE NEWS.