As Congress and the incoming Obama administration prepare to revamp federal financial oversight, the collapse of the thrift industry offers a lesson in how regulation can fail. It happened over several years, a product of the regulator’s overly close identification with its banks, which it referred to as “customers,” and of the agency managers’ appetite for deregulation, new lending products and expanded homeownership sometimes at the expense of traditional oversight. Tough measures, like tighter lending standards, were not employed until after borrowers began defaulting in large numbers.

The agency championed the thrift industry’s growth during the housing boom and called programs that extended mortgages to previously unqualified borrowers as “innovations.” In 2004, the year that risky loans called option adjustable-rate mortgages took off, then-OTS director James Gilleran lauded the banks for their role in providing home loans. “Our goal is to allow thrifts to operate with a wide breadth of freedom from regulatory intrusion,” he said in a speech.

At the same time, the agency allowed the banks to project minimal losses and, as a result, reduce the share of revenue they were setting aside to cover them. By September 2006, when the housing market began declining, the capital reserves held by OTS-regulated firms had declined to their lowest level in two decades, less than a third of their historical average, according to financial records.

Scott M. Polakoff, the agency’s senior deputy director, said OTS had closely monitored allowances for loan losses and considered them sufficient, but added that the actual losses exceeded what reasonably could have been expected.

“Are banks going to fail when events occur well beyond the confines of reasonable expectation or modeling? The answer is yes,” he said in an interview.

But critics said the agency had neglected its obligation to police the thrift industry and instead became more of a consultant.

Read it all.

Check them out.

I went to our diocesan archives to look for materials from a most difficult era in our nation’s financial history, the Great Depression. Very interesting what I found there. The program fund of the diocese was at $68,000 in 1929. It decreased almost two-thirds by 1935, when the fund receipts were in the amount of $27,000. It increased incrementally to about $31,000 in 1938 and remained at that level until the end of the war years.
The two Bishops of that era, Frederick Johnson and William Scarlett, both noted the sharp decrease in programming, as a result of falling revenues. Well, that’s what will happen, in the wake of steeply falling revenues. The Diocesan Journals got progressively thinner over the course of these years, because there were fewer things to report.
But these Bishops noted the drastic shortfall almost in passing, and with no sense of self-pity. They reported at length, however, about responsibilities of the Church to respond to a whole nation in crisis. And more particularly, to their Missouri neighborhoods in crisis.
The internal financial fact of funding shortfalls was noted, and the cuts were deep and painful. Whole programs vanished.
As far as I can tell from the Journals, the work of the Church in that era focused almost entirely beyond itself, which was a matter of mission and not program. And it happened by way of personal and corporate sacrifice.

Read it all.

From 2003 to 2005, Citigroup more than tripled its issuing of CDO’s, to more than $20 billion from $6.28 billion, and Maheras, Barker and others on the CDO team helped transform Citigroup into one of the industry’s biggest players. Firms issuing the CDO’s generated fees of 0.4 percent to 2.5 percent of the amount sold — meaning Citigroup made up to $500 million in fees from the business in 2005 alone.

Even as Citigroup’s CDO stake was expanding, its top executives wanted more profits from that business. Yet they were not running a bank that was up to all the challenges it faced, including properly overseeing billions of dollars’ worth of exotic products, according to Citigroup insiders and regulators who later criticized the bank.

When Prince was put in charge in 2003, he presided over a mess of warring business units and operational holes, particularly in critical areas like risk-management and controls.

“He inherited a gobbledygook of companies that were never integrated, and it was never a priority of the company to invest,” said Meredith Whitney, a banking analyst who was one of the company’s early critics. “The businesses didn’t communicate with each other. There were dozens of technology systems and dozens of financial ledgers.”

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A federal court has ruled that the Arizona License Plate Commission must approve an anti-abortion group’s “Choose Life” specialty license plate.

The Arizona Life Coalition applied for the specialty license plate in 2002, but the Arizona License Plate Commission, which oversees the requests, rejected its application.

Attorneys with the Alliance Defense Fund (ADF) and the Center for Arizona Policy filed a suit in September of 2003.

Read it all.

Federal regulators were considering a new rescue for Citigroup on Sunday, a step that could mark a third leg of the government’s broader efforts to bolster the nation’s financial industry, according to people briefed on the plan.

Under the proposal, the government would shoulder losses at Citigroup if those losses exceeded certain levels, according to these people, who spoke on the condition that they not be identified because the plan was still under discussion.

If the government should have to take on the bigger losses, it would receive a stake in Citigroup. The banking giant has been brought to its knees by gaping losses on mortgage-related investments.

Read it all.

City officials have ordered 22 New York churches to stop providing beds to homeless people.

With temperatures well below freezing early Saturday, the churches must obey a city rule requiring faith-based shelters to be open at least five days a week — or not at all.

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A native of Galloway, N.J., [Myron] Rolle arrived at Florida State from the Hun School in Princeton as the country’s No. 1 football recruit. He has had an all-American-caliber junior season, but Rolle’s list of off-field accomplishments is as lengthy as it is daunting.

He graduated from Florida State in two and a half years with a degree in pre-med and a grade point average of 3.75. He is so studious that the Seminoles’ defensive coordinator, Mickey Andrews, publicly criticized him for studying too much last year, saying it affected Rolle’s preparation for football. Rolle said the criticism was a “little unfair.”

“I gave him the benefit of the doubt,” Rolle said of Andrews. “I don’t think he’s ever sat through an organic chemistry lecture and seen just how difficult it is. He’s been through a couple ballgames, but that’s a different arena right there.”

Outside of class, Rolle was awarded a $4,000 grant for cancer research over the summer, and also started a program to help educate Seminole Indian children in Okeechobee, Fla., about the importance of health and physical fitness. He belongs to a fraternity, helps tutor his teammates, has studied in London and has written for The New York Times.

As he has been deluged by interview requests this week ”” including three reporters traveling with him on the plane to College Park ”” Rolle said he welcomed carrying the brand of the university.

“I have no problem holding the weight of that on my shoulders,” he said. “I think it’s more of a privilege and an honor than a burden.”

Read it all–what a remarkable young man. Later in the week, you guessed it, he won the Rhodes scholarship. His story was used in this morning’s sermon by yours truly–KSH.

So watch your step. Use your head. Make the most of every chance you get. These are desperate times!

–Ephesians 5:15, 16 from Eugene Peterson’s The Message, quoted in this morning’s sermon

No, really, how bad could it be? How seriously should we take the state’s latest budget crisis if a clutch of lawmakers, including the chairwoman of the Senate Budget Committee, is spending the emergency session in India?….

But far from India, Georgia and wherever else elected officials are spending the waning days of the special session, back in Sacramento, in the governor’s Department of Finance, at the Legislative Analyst’s Office, among those who watch unemployment figures and cash flow, there is a palpable anxiety. In some offices, it borders on panic. Past meltdowns have been disguised by a healthy economy. This time it is different.

Read it all.

Thanksgiving came early this year for residents of Johns and Wadmalaw islands.

Nineteen churches pulled together Saturday to host “Feeding the Multitude,” which included a free Thanksgiving meal, entertainment and Christian fellowship.

Although Sunday mornings have been called one of the most segregated times in America, black, white and Hispanic volunteers contributed food, time and talent to serve their neighbors Saturday afternoon.

The event was held at St. John’s Episcopal Church on Johns Island, and organizers hope it will become an annual event.

Hooray for Saint John’s! Read it all.

“I treasure the splendid diversity and tolerance of the Episcopal Church and how marvelously our liturgical life knits us together,” said Prescott, an attorney with the Securities and Exchange Commission in Fort Worth. “And I love the way we manage to combine our rich catholic heritage with an understanding that God’s revelation to us continues.”

The group, made up of worshippers formerly from St. Francis of Assisi, Willow Park; All Saints, Weatherford and Holy Apostles Church, chose the McCall Elementary School because “it is located in one of the fastest-growing areas of Texas and we do intend to reach out to the community,” said Prescott.

The Rev. John Keene, a retired priest who led the congregation’s worship, invited the congregation truly to engage all of the Bible. “When you regard the Bible, don’t ignore your queasiness or uncertainty if you run across something that puzzles you or bothers you. God has given you a mind and I ask you to use it. It’s when you start to get fundamentalist about it, that you have a problem.”

The quote from Father Keene says so much about TEC right now–define yourself negatively, say what you are not (without, of course, ever really defining the buzzword used). Read the whole thing.

South Carolina looked like a pretty good choice to computer network engineer Chad Birnbaum. Armed with a degree from Michigan State University and solid industry credentials, he landed a job in the area that paid $60,000 and offered full benefits.

At 25, life was good.

Then, as the financial meltdown began to wind its way through the local economy, Birnbaum was laid off by Welded Tube Berkeley.

“Things are getting ugly. I’m in a world of hurt,” he said this week after filling out forms for jobless benefits at the Employment Security Commission office on Lockwood Boulevard.

Read it all from the front page of yesterday’s local paper.

It was short and sweet, and void of drama, like most thought it would be. After two hours and just two ballots, the Rev. J. Scott Mayer was named Bishop Elect of the Episcopal Diocese of Northwest Texas late Saturday morning.

The election was held inside the sanctuary of St. Paul’s-on-the-Plains Episcopal Church and simulcast on a large projection screen inside the church’s parish hall.

Mayer was the only of the four nominees with local roots, and the only nominee in attendance due to his membership in the diocese as current rector of the Church of the Heavenly Rest in Abilene.

Read it all.

President-elect Barack Obama has signaled that he will pursue a far more ambitious plan of spending and tax cuts than anything he outlined on the campaign trail ”” a plan “big enough to deal with the huge problem we face,” a top adviser said Sunday ”” setting the tone for a recovery effort that could absorb and define much of his term.

A member of the Obama economic advisory team, William M. Daley, acknowledged that because of the gravity of the situation, Mr. Obama was leaning toward letting a Bush tax cut for the wealthy expire on schedule in 2011 rather than repealing it sooner.

There were hints Sunday that a stimulus package might be extraordinarily large. Austan Goolsbee, a senior Obama economic adviser, charged that the Bush administration had “dithered” as the economy turned down and suggested that the incoming administration would take dramatic action.

Read it all.

Washington National Cathedral will eliminate 30 jobs, drastically scale back the Cathedral College of Preachers and cut $8 million from its current budget because of the global financial downturn.

In a November 19 news release, the Very Rev. Samuel T. Lloyd III, the cathedral’s dean, said the cuts are “financially prudent” and are “necessary to protect our important work in the city and the nation.

“Like many other institutions around the world, Washington National Cathedral has been affected by the current downturn in the financial market,” said Lloyd. “And this is having a serious impact on invested funds that we have used to support our mission.”

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IN 2007 the small city of Mesquite, a suburb of Dallas, was trying to overhaul its ageing infrastructure and faded industrial zones. City officials launched a renewal programme, but found their efforts marred by payday lenders. These are shops that offer small, short-term loans (in advance of payday) on unfavourable terms, and their neon signs hardly suggest a thriving and vital place. “They project an opposite kind of image,” says one city official. So Mesquite passed a strict zoning ordinance that will make it difficult for any new payday lenders to set up shop. The city cannot bar the practice, but it can try to elbow it out.

The payday lending industry has taken several hits this month. On November 6th the Arkansas Supreme Court ruled that large fees for small loans violate the state constitution. In Arizona, voters rejected an industry-sponsored “reform” initiative that would have done away with a sunset provision on payday lending in the current law. In Ohio, voters decided not to repeal a law capping annual interest rates. This could mean the end of payday lending in those three states.

Read it all.

Just how far and how fast will the economy drop this quarter? There’s lately been a race to the bottom among forecasters, with the economists at Goldman Sachs leading the way. Early in the week, they put out a report saying that -3.5% annualized GDP growth was their baseline forecast for the quarter, but they also went so far as to outline a “just awful” scenario of -6.0% and a “worst case” of -7.8%. Today they updated their baseline forecast to -5%.

That puts Goldman well ahead, for the moment at least, of even Nouriel Roubini, the New York University professor known as Dr. Doom ”” whose current forecast is about -4%. Lots of Wall Street economists less renowned for their gloominess have by now moved past the -3% mark. In fact, one explanation for the stock market’s horrible week could be that the realization of just how bad the quarter will be is finally sinking in among investors.

We haven’t been through anything this bad in a while. The last time the economy shrank faster than 3% was in the first quarter of 1982, when GDP dropped at a 6.4% annual rate. It hasn’t exceeded Goldman’s worst-case forecast of -7.8% since the first quarter of 1958, when it was -10.4%.

Read it all.

Took our son Nathaniel on the tour and information learning seminar at Columbia University. Gee, it is an impressive place.

Spent time in the bookstore (say you are surprised). They had a book by Columbia graduates remembering their time at school. I remembered that Alexander Hamilton and Teddy Roosevelt went there, but how did I blank out on Thomas Merton? You learn something new every day–KSH.

I was in the Big Apple this week with my family. We went to see In the Heights on Broadway. My heavens, it is no wonder the play won the Tony for best choreography–KSH.

45 years ago today, John F. Kennedy, C.S. Lewis, and Aldous Huxley died.

President-elect Barack Obama will name former Treasury Secretary Lawrence Summers the director of his National Economic Council, placing the Harvard University economist he passed over for Treasury secretary inside the White House as his closest economic adviser, Democratic officials said Saturday night.

The move came as the president-elect prepares Monday to introduce his new Treasury secretary nominee, Timothy Geithner, and the rest of his economic team at an event in Chicago Monday. Among those on stage will be Mr. Summers, who was central to his campaign’s economic team and is now leading efforts to draft a massive economic stimulus plan the president-elect hopes to sign into law as one of his first acts as the nation’s leader.

Mr. Obama has instructed his economic advisers to draft a stimulus that could dwarf the $175 billion version he campaigned on, stretching it over two years and pushing to create 2.5 million new jobs with it.

Read it all.

Like an unwatched pan of milk, readers of the Church Times have seethed up and boiled over in response to an analysis of the Church of England by the ever-controversial historian Jonathan Clark.

Professor Clark, once the enfant terrible of Peterhouse and All Souls, now wields his scalpel from remote Kansas, but it cuts as sharply. The Church of England, he argues, is “losing command of its history”, thus losing its identity (as if a man had lost his memory, one might say).

In the 20th century, he notes, “Anglicanism was powered by German theology rather than by Anglican historiography”. One result is a loss of authority, which “is ultimately historically grounded”. That’s why, he says, “feminism and gay rights should today occupy so much of the attention of Anglicans”.

Read it all.

Perhaps we are seeing three devel­op­ments, overlapping and reinforcing each other. First, increasing numbers of able ecclesiastical historians in England have for some time been Roman Catholics ”” Aveling, Bossy, Duffy, Gilley, Hastings, Ker, Mayr-Harting, Morrill, Nockles, Questier, Riley-Smith, Scarisbrick, and others ”” and the Church of England has found no adequate reply.

This cannot just be chance. Increasingly, the Anglican history of the years since the 1530s is implicitly emerging as a phase, not a norm.

Second, the Church of England is increasingly indifferent to its his­torical dimension, neglecting the teaching of its history, unconcerned at the fate of ancient libraries, actively resistant to promoting scholarly clergy who might have historical views that would threaten a reigning consensus established on other evidential grounds than the historical.

Third, the few Anglicans who are historically aware now often depict the Church of England as essentially a radical Protestant denomination with a revolutionary foundation in the early 16th century, and revolutionary implications for morals and manners in our own day.

Read it all.

Whatever our personal views on this election might be, the outcome is the same for all of us. All of us, no matter what our political perspective or our hopes for our nation and our world, are in this together.

Part of the deep tradition of the Episcopal Church is to pray for our leaders: rarely if ever have these prayers been more needed. Our nation and our world face vast and staggeringly complex problems; none of which can be solved quickly and easily. The problems are economic but they are aspirational as well. Bluntly put: how do we pay for things, and why do we make the particular choices that we do. As we answer that question we raise the deepest question of all: to what end do we live and move and have our being?

These will be testing times; times that, unless we are careful, will tempt us to pit one part of the population against another. Increasingly it will become clear to all that the journey will be long and it will be difficult. Speaking in economic terms, there will be a price to be paid: no one will be exempt. That being said, it is of fundamental importance that we, as a people, not give in to the temptation to balance budgets at the expense of those who simply lack the power to make their needs heard: the poor and those who serve the poor. However, sad to say, if history is any indicator, this is exactly what will happen.

I find it more than a little ironic that when the issue of meeting basic human needs is raised: be that education, or healthcare, or housing for the homeless, a common objection is the firm and wise sounding declaration: you know, you can’t just throw money at a problem. And yet, when financial institutions are in crisis, led by the very well paid people, who did so much to bring us this crisis in the first place, when they ask for aid that is exactly what happens. Money has been thrown at the problem. And it has been thrown without a really clear understanding of exactly what it will actually accomplish. As you know so well, we’re not talking here about billions of dollars, or tens of billions, not even hundreds of billions, but, in the end, something in excess of a trillion dollars. In human terms this is more money than the human mind can fathom.

Mind you, I am not saying that this shouldn’t be done, or that it won’t work. What I am saying is that we should keep all these things in perspective and be mindful of just who finally is asked to actually pay the price for the national excess that has brought us to this sad moment.

Read it all.

You have a Treasury Secretary that seems to have left the field before the end of the third quarter.

—Charles Gabriel at Alpha Partners speaking this week about Hank Paulson

He was a career staffer in the international affairs division of the Treasury Department in the early 1990s when then-undersecretary Lawrence H. Summers noticed and promoted him. By the end of the Clinton administration, Summers was Treasury secretary and [Tim] Geithner was an undersecretary. Now, Obama is apparently passing over Summers for his onetime protege, though Summers is also said to be returning to government as a White House adviser.

In congressional testimony following the March rescue of Bear Stearns, Geithner and other officials faced tough questions about their actions. An angry Sen. Jim Bunning (R-Ky.) demanded to know how the financial system became so fragile. The chairman of the Fed, a Treasury undersecretary and the chairman of the Securities and Exchange Commission sat silently.

Geithner responded: “What produced this is a very complicated mix of factors. I don’t think anybody understands it yet. But we have to spend a lot of time and effort trying to figure out how to get a better handle on this sort of stuff . . . because it’s very important that we try to figure out a way to make this system less vulnerable to this in the future.”

Read it all.

Things are looking up for substantive reform of America’s troubled health-care system.

No one who knows the history of such efforts, from Harry Truman’s administration through Bill Clinton’s, needs to be reminded of the difficulties that inevitably confront any plan to overhaul one-seventh of the U.S. economy and bring high-quality medicine to millions of the uninsured.

But developments at both ends of Pennsylvania Avenue last week — and across the country — pointed up both the urgency of the problem and the prospects for seeing significant action.

When Barack Obama’s transition team let out word that former Senate majority leader Tom Daschle would be his choice to run the Department of Health and Human Services and to quarterback his work on health reform, it signaled that Obama is serious about his campaign promise to make that issue a first-term priority.

Read it all.

“The reality is that the cathedral serves as a sacred space for the nation,” says Sam Lloyd, dean of the cathedral. “A place the nation looks to in critical times.”

Washington National Cathedral also transcends politics and even the separation of religions. Though nominally an Episcopal church, it welcomes everyone. It is at once deeply Christian and deeply interfaith. The Episcopal Church has a long history of inclusiveness. The first black bishop of the Episcopal Diocese of Washington, John Walker, presided there. Bishop Katharine Jefferts Schori, the first female presiding bishop in the Episcopal Church, was inducted there. And Episcopal Bishop Gene Robinson of the Diocese of New Hampshire was the first openly gay bishop in Christendom.

“We are a place that welcomes people of all faiths and no faith,” says Lloyd, echoing Barack Obama’s words of two years ago. “Whatever we once were,” Obama said then, “we’re no longer just a Christian nation. At least not just. We are also a Jewish nation, a Muslim nation and a Buddhist nation and a Hindu nation and a nation of nonbelievers.”

Read it all.

President-elect Barack Obama has instructed his economic team to develop a plan to create 2.5 million jobs over the next two years, suggesting that he intends to push a more expensive package to stimulate the economy than he has so far proposed.

Speaking during the Democrats’ weekly radio address, Obama said that his team would work out the details of the package in the coming weeks but that he expects to present it to Congress in January and to sign it into law soon after taking office.

It will be a two-year nationwide effort to jumpstart job creation in America and lay the foundation for a strong and growing economy, Obama said. “We’ll put people back to work rebuilding our crumbling roads and bridges, modernizing schools that are failing our children, and building wind farms and solar panels,” as well as fuel-efficient cars.

Read it all.