tMichaelB is the web site for Tom Bengtson, who writes about business, religion, family and politics.

Friday, September 28, 2007

Pope Benedict XVI’s book is insightful look at the life of Christ

I have been meaning to write for quite some time about “Jesus of Nazareth,” the book by Pope Benedict XVI, which was published last May. I read the book in early summer and found it to be wonderful. A second reading is in my plans.

The book is a series of reflections on the Gospel stories presented in 10 chapters. The chronology of the book takes us from the Baptism of Jesus through the Transfiguration. A second volume is set to be published which will include, among other things, commentary on the infancy narratives.

Pope Benedict gave me several “Ah hah!” moments with is explanation of many Gospel stories. Chapter 2, for example, which deals with the temptations of Christ, foreshadows the Passion with a reference to Barabbas. When Pilate offers the crowd a choice between freeing Jesus or Barabbas, they choose Barabbas. Pope Benedict notes that Jesus offers the people spiritual freedom, whereas Barabbas, imprisoned for insurrection, offers political freedom. The people chose the political solution; it is the same choice people always make.

Chapter 5 is devoted to The Lord’s Prayer. This chapter has changed forever the way I will think as I recite this familiar prayer. He looks at each line. Reflecting on the phrase: “Hallowed be thy name,” Pope Benedict notes the importance of names. He notes that knowing someone’s name is the first step for entering into a relationship with them. By authorizing us to call him Father, “God established a relationship between himself and us…He enters into relationship with us and enables us to be in relationship with him.” Pope Benedict notes that the Incarnation began with the giving of the divine name to Moses. “What began in the Sinai desert comes to fulfillment at the burning bush of the Cross.”

I also like the reflection on the line: “Give us this day our daily bread.” Jesus acknowledges our earthly needs. He “invites us to pray for our food and thus to turn our care over to God.” It is so easy to think that we provide for ourselves, but this is a reminder about who really provides for us. Nonetheless, “we have the right and the duty to ask for what we need. We know that if even earthly fathers give their children good things when they ask for them, God will not refuse us the good things that he alone can give.”

Chapter 7 deals with parables. Pope Benedict writes about the older brother as he discusses the parable of the prodigal son. The older brother gives into the temptation of self-righteousness, triggering jealously toward the younger brother. Pope Benedict notes that for the older brother and others like him, “more than anything else, God is Law; they see themselves in a juridical relationship with God and in that relationship they are at rights with him. But God is greater: They need to convert from the Law-God to the greater God, the God of love.” Pope Benedict writes that the bitterness of the older son indicates the limitations of his own obedience. He would have liked the “freedom” that the younger brother enjoyed. “There is an unspoken envy of what others have been able to get away with,” Pope Benedict writes. Folks living in a manner pleasing to the father have real freedom, yet bitterness turns that freedom into slavery.

It is pretty easy for us folks who take our faith seriously to feel as if we are living by the rules. Perhaps we get a little jealous when we look at those flaunting the rules, especially if we see no earthly consequences. Pope Benedict gives us a reminder to check our heart and reconsider whether we really love God, or merely the idea of self-righteousness. Of course we should rejoice whenever someone makes a commitment to their faith, no matter what their stage in life.

Sections of this book will impact readers differently depending on where each individual reader is in their own faith journey. If you are interested in advancing on that journey, however, you can get a real boost by reading “Jesus of Nazareth.” I suspect I will be giving copies of this book at Christmas time.

Friday, September 07, 2007

A gracious host passes away

In June of 2005, I got to spend an afternoon with Edward M. Gramlich, the eminent policy analyst who died of leukemia on Wednesday at the age of 68.

Gramlich was a governor on the Federal Reserve Board from November 1997 to August 2005. He hosted a group of students from the Stonier Graduate School of Banking at Georgetown University in the board room at the Federal Reserve Building in Washington, D.C., two months before he left the Fed; I was among the students. Hanging on my wall at my office is a picture of the group – Gramlich front and center, me in the back.

We talked about housing, which was his specialty. He warned of the impact of the subprime lending craze before other members of the Fed Board saw it as a problem.

Gramlich was an economics professor at the University of Michigan, where he returned after leaving the Fed.

Saturday, September 01, 2007

A look at the subprime mortgage picture

Foreclosures are up as the subprime mortgage market bottoms out. Politicians are weighing in, expressing concern. President Bush issued a statement yesterday about the importance of housing. Here’s what’s going on, from my perspective as a journalist who covers the banking industry.

The subprime mortgage phenomenon was supply driven. Investment firms like Merrill Lynch figured out how to sell questionable credit from high risk borrowers to pension fund managers and other typical bond buyers. Investment bankers figured out they could create a bond out of very good, or “A,” credits, mixed with questionable, or “C,” credits, to produce a bond with an overall quality of a pretty good, or “B,” credit. Pension fund managers, who typically buy B-rated bonds, showed interest after independent rating agencies blessed the new recipe. This created a new market for C credits in the form of subprime mortgages.

The investment bankers went to the mortgage brokers with the new product and the brokers sold the product like mad. You remember hearing all those ads on the radio and on television, where mortgages were promised to anyone, regardless of credit history. People with marred credit, who otherwise could not get mortgages, responded and bought homes with the easy credit. In many cases, they didn’t even have to put money down.

In the third or fourth year of this game, those C credit borrowers are beginning to show why they were C credits in the first place. They aren’t keeping up with payments and the mortgage holders are foreclosing. That’s the phenomenon that is making so much news lately. But remember, a good number of people losing their homes weren’t in homes prior to the availability of subprime mortgages, and they also aren’t losing much, if any, equity.

The people who are losing money are the people who bought the bonds made up of these mortgages. They are not likely to get all of their investment back, let alone any kind of a market rate on their principal. I feel bad for these guys, but not too bad. Investments, especially those including C credit components, are risky.

Decades ago, when someone wanted to buy a house, they went to the bank or savings and loan to borrowed money for the house. The lender held onto the loan for the life of the mortgage. The lender and borrow stayed closed to one another. If the borrower got in trouble – lost a job or incurred substantial medical expenses – the lender was there to consider the situation. They usually tried to work something out. In the absolute worst cases, the lender might foreclose, but in most cases, the borrower and lender worked something out to keep everything on track.

Today, there are many more players between the borrower and the lender. An investment banker finds a funding source. They then work with a mortgage broker, who finds borrowers. Brokers also find mortgage servicers, who handle the paperwork. The mortgage ends up being a complicated legal document which binds the borrower to the servicer, who is tied to the funder. The broker, who initially works with the borrower, is out of the picture. Consider what incentive the broker has to get the right product for the borrower when they disappear the minute the final papers are signed. The servicer rarely knows the borrower and if the borrower falls behind, the servicer usually has no option than to initiate foreclosure as prescribed by the legal agreement it has with the funder. It’s a much tougher arrangement for the borrower than the mortgage arrangement of decades ago.

But there’s no going back. Access to equity markets for mortgages has a substantial upside as well. Many more people have access to mortgage credit than did under the old direct lending system. But the downside is that over-eager players come up with shaky ideas and sell them to others who don’t look close enough at the product. In the end, it’s the way the market has worked for centuries, and overall, the market always self corrects. That is what is happening now with the subprime mortgages. The politicians really don’t have much of a role in all this.