Pope Francis And Wall Street by Jim Lardner, Americans for Financial Reform
With Pope Francis’s visit, millions of Americans will get to hear a passionate message of concern for the poor and the natural environment. What may come as more of a surprise to some are Francis’s strong convictions about the need for new rules to govern the world of banking and finance.
Two years ago, in the first major statement of his papacy, he declared that “no solution will be found for the world’s problems” until we reject “the absolute autonomy of markets and financial speculation,” and say “no to a financial system which rules rather than serves.”
This year, in his Encyclical on the environment, he condemned the way governments responded to the 2008 financial crisis. “Saving banks at any cost, making the public pay the price, foregoing a firm commitment to reviewing and reforming the entire system,” the Pope said, “only reaffirms the absolute power of a financial system, a power which has no future and will only give rise to new crises after a slow, costly and only apparent recovery.” The crisis, he added, should have been treated as “an opportunity to develop a new economy, more attentive to ethical principles, and new ways of regulating speculative financial practices and virtual wealth.”
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When Francis addresses Congress Thursday morning, he will be speaking to a body in which many members are trying to roll back the reforms of the Dodd-Frank Act, while some have even talked about attaching Wall Street giveaways to “must-pass” funding bills, hoping to get them passed with little or no debate, under the threat of a government shutdown.
Usury could be another uncomfortable topic for some lawmakers. Catholicism, like most of the world’s great religions, regards it as a sin. But in the deregulatory fervor of the 1980s, the U.S. largely jettisoned its usury laws, setting the stage for the rise of an industry of payday and other triple-digit-interest consumer lenders, who now operate with little legal restraint in more than half the 50 states.
Within the next six months, the Consumer Financial Protection Bureau is expected to come out with a proposal to regulate these lenders, requiring them, for example, to verify a borrower’s ability to repay a loan before the loan is issued. Here, once again, many members of Congress are actively working to block the Bureau’s efforts and give this kind of lending a new lease on life.
But on Thursday, they will listen to a Pope who, during one of his general audiences in St. Peter’s Square last year, described usury as a “dramatic social wound” that “offends the inviolable dignity of the person… When a family has nothing to eat because it has to make payments to usurers,” he added, “this isn’t Christian, it is not human!”
Here is a sampling of Pope Francis’s statements about banking and lending:
From the Apostolic Exhortation Evangelii Gaudium of November 24, 2013
Just as the commandment “Thou shalt not kill” sets a clear limit in order to safeguard the value of human life, today we also have to say “thou shalt not” to an economy of exclusion and inequality. Such an economy kills. How can it be that it is not a news item when an elderly homeless person dies of exposure, but it is news when the stock market loses two points? This is a case of exclusion. Can we continue to stand by when food is thrown away while people are starving? This is a case of inequality. Today everything comes under the laws of competition and the survival of the fittest, where the powerful feed upon the powerless. As a consequence, masses of people find themselves excluded and marginalized: without work, without possibilities, without any means of escape. [Paragraph 53]
Human beings are themselves considered consumer goods to be used and then discarded. We have created a “throw away” culture which is now spreading. It is no longer simply about exploitation and oppression, but something new. Exclusion ultimately has to do with what it means to be a part of the society in which we live; those excluded are no longer society’s underside or its fringes or its disenfranchised – they are no longer even a part of it. The excluded are not the “exploited” but the outcast, the “leftovers”. [Paragraph 53]
In this context, some people continue to defend trickle-down theories which assume that economic growth, encouraged by a free market, will inevitably succeed in bringing about greater justice and inclusiveness in the world. This opinion, which has never been confirmed by the facts, expresses a crude and naïve trust in the goodness of those wielding economic power and in the sacralized workings of the prevailing economic system. Meanwhile, the excluded are still waiting. To sustain a lifestyle which excludes others, or to sustain enthusiasm for that selfish ideal, a globalization of indifference has developed. Almost without being aware of it, we end up being incapable of feeling compassion at the outcry of the poor, weeping for other people’s pain, and feeling a need to help them, as though all this were someone else’s responsibility and not our own. The culture of prosperity deadens us; we are thrilled if the market offers us something new to purchase. In the meantime all those lives stunted for lack of opportunity seem a mere spectacle; they fail to move us. [Paragraph 54]
One cause of this situation is found in our relationship with money, since we calmly accept its dominion over ourselves and our societies. The current financial crisis can make us overlook the fact that it originated in a profound human crisis: the denial of the primacy of the human person! We have created new idols. The worship of the ancient golden calf (cf. Ex 32:1-35) has returned in a new and ruthless guise in the idolatry of money and the dictatorship of an impersonal economy lacking a truly human purpose. The worldwide crisis affecting finance and the economy lays bare their imbalances and, above all, their lack of real concern for human beings; man is reduced to one of his needs alone: consumption. [Paragraph 55]
While the earnings of a minority are growing exponentially, so too is the gap separating the majority from the prosperity enjoyed by those happy few. This imbalance is the result of ideologies which defend the absolute autonomy of the marketplace and financial speculation. Consequently, they reject the right of states, charged with vigilance for the common good, to exercise any form of control. A new tyranny is thus born, invisible and often virtual, which unilaterally and relentlessly imposes its own laws and rules. Debt and the accumulation of interest also make it difficult for countries to realize the potential of their own economies and keep citizens from enjoying their real purchasing power. To all this we can add widespread corruption and self-serving tax evasion, which have taken on worldwide dimensions. The thirst for power and possessions knows no limits. In this system, which tends to devour everything which stands in the way of increased profits, whatever is fragile, like the environment, is defenseless before the interests of a deified market, which become the only rule. [Paragraph 56]
No to a financial system which rules rather than serves. [Paragraph 56]
Behind this attitude lurks a rejection of ethics and a rejection of God. Ethics has come to be viewed with a certain scornful derision. It is seen as counterproductive, too human, because it makes money and power relative. It is felt to be a threat, since it condemns the manipulation and debasement of the person. In effect, ethics leads to a God who calls for a committed response which is outside the categories of the marketplace. When these latter are absolutized, God can only be seen as uncontrollable, unmanageable, even dangerous, since he calls human beings to their full realization and to freedom from all forms of enslavement. Ethics – a non-ideological ethics – would make it possible to bring about balance and a more humane social order. With this in mind, I encourage financial experts and political leaders to ponder the words of one of the sages of antiquity: “Not to share one’s wealth with the poor is to steal from them and to take away their livelihood. It is not our own goods which we hold, but theirs.” [Paragraph 57]
A financial reform open to such ethical considerations would require a vigorous change of approach on the part of political leaders. I urge them to face this challenge with determination and an eye to the future, while not ignoring, of course, the specifics of each case. Money must serve, not rule! The Pope loves everyone, rich and poor alike, but he is obliged in the name of Christ to remind all that the rich must help, respect and promote the poor. I exhort you to generous solidarity and to the return of economics and finance to an ethical approach which favours human beings. [Paragraph 57]
As long as the problems of the poor are not radically resolved by rejecting the absolute autonomy of markets and financial speculation and by attacking the structural causes of inequality, no solution will be found for the world’s problems or, for that matter, to any problems.” [Paragraph 202]
From the Pope’s Encyclical on the environment, Sept. 2015:
“The economy accepts every advance in technology with a view to profit, without concern for its potentially negative impact on human beings. Finance overwhelms the real economy. The lessons of the global financial crisis have not been assimilated.” [Paragraph 109]
Saving banks at any cost, making the public pay the price, foregoing a firm commitment to reviewing and reforming the entire system, only reaffirms the absolute power of a financial system, a power which has no future and will only give rise to new crises after a slow, costly and only apparent recovery. The financial crisis of 2007-08 provided an opportunity to develop a new economy, more attentive to ethical principles, and new ways of regulating speculative financial practices and virtual wealth. But the response to the crisis did not include rethinking the outdated criteria which continue to rule the world. Production is not always rational, and is usually tied to economic variables which assign to products a value that does not necessarily correspond to their real worth. This frequently leads to an overproduction of some commodities, with unnecessary impact on the environment and with negative results on regional economies. The financial bubble also tends to be a productive bubble. The problem of the real economy is not confronted with vigour, yet it is the real economy which makes diversification and improvement in production possible, helps companies to function well, and enables small and medium businesses to develop and create employment. [Paragraph 189]