Exploring the Connections

Usurious Payday Loans: Myths, Flawed Studies, And Solutions

By Richard (RJ) Eskow
Campaign for America's Future, May 10, 2010

The trade association for payday lenders objected to what they called my "name calling" in their blog yesterday ... then called me a "pig."Why? Because I quoted Aristotle and told a story about Jesus. Well, to be fair, I did suggest their industry might be "evil" according to traditional definitions of the term. But that doesn't explain the payday defender who called me "Doofus Major du Jour."

There are some more civil arguments being used to defend payday lenders, however, and many commenters repeated them in the Huffington Post and in the DailyKos. These arguments are myths. They're being repeated by reasonable, well-intentioned people who have been misled by a wealthy lobby and its flacks.

Here's the truth, for all those well-meaning payday defenders out there: Payday loans weren't created to help underserved populations, but to exploit helpless people. Payday lenders are deeply connected to traditional banks, who freeze out certain customers so they can be preyed on by usurers. And that study you keep citing? It was paid for by industry money and used industry data, and a number of other studies refute it. But there's good news: Congress can fix the problem now.

A population in need? One common argument is that payday loans serve a group of people that can't get needed loans any other way. Shouldn't people be free to enter into contracts with one another, even if the terms seem outrageous to others? There are two problems with this argument. First, as a commenter pointed out, it can also be used to justify moral wrongs like slavery, too - although slavery wasn't a perfect analogy. A better one would be "indentured servitude," where poor people would trade away their freedom for a period of years in return for a cash loan. Civilized countries decided that these agreements, although they were legal and enforceable contracts, were immoral and must be stopped.

This argument also ignores a critical fact: Big banks -- the same parties who have denied people more legitimate sources of credit -- are deeply embedded in the payday loan industry. Wells Fargo has funded more than one-third of all storefront lenders, Bank of America's a major shareholder in payday lender QC Holdings, and banks have been working with payday lenders to evade usury laws.

Banks force people into a financial squeeze where they have no other credit options - by denying them traditional loans and credit cards - then profit from rapacious payday lenders who charge them rates that can approach 400% to 800% in annual interest. Payday loans don't help an "underserved population" - they're part of an exploitative, interconnected system.

In other words, the "payday loan" problem is a problem with the entire banking industry.

People also have argued that it's not fair to quote annual interest rates. They sound high, but these loans only last for two weeks so nobody's really paying that kind of interest. Wrong: Payday loans target lower-income people and charge so much in interest that they're forced to "roll over" these loans again and again. An Indiana study showed that the average borrower took out more than ten loans per year, for example.(1) As cited by Kelly J. Noyes, a number of state studies show that rollovers are frequent. The Center for Responsible Lending found that 91% of loans were given to people who had borrowed five times or more during the course of a year. And Sen. Joe Lieberman's staff found that the typical lower-income borrower did not have enough money to pay back their payday loan without going into debt at the end of the two-week period.(2) That cycle is what nonprofit financial organization CouleeCap accurately describes as "Paycheck Poverty, " and their paper on the topic cites this widely-available statistic: There are one hundred times more payday loan operations today (as of 2007) than there were in the early 1990s.

Here's the significance of that figure: An industry that essentially didn't exist in 1990 had grown to 12-14,000 outlets by 2001 (Consumer Federation of America/PIRG) and continued to grow even before the latest downturn. Again: This is not an example of people serving an unmet need. It is a bank-fueled response to a bank-manufactured crisis.

Somebody is no doubt saying, "Hold on a second there, Mr. Piggy Doofus Major Du Jour. What about the Elliehausen study?" That would be the study that purported to find that payday loans serve a fairly typical population - not exploited minorities and low-income communities - and that was so widely reported and celebrated in certain parts of the press and industry sources. In a typical boast, "Personal Money Store" wrote that it "chastens critics" of the industry.

The flawed study

We were told that this study exonerated the payday loan industry. Here's what we weren't told: We weren't told that the study was funded by the payday loan industry. We weren't told that the data used in the study was provided by the payday loan industry. And we weren't told that its author, professor and Federal Reserve economist Gregory Elliehausen, had been the payday industry's go-to guy for studies of this kind for years.

No doubt Prof. Elliehausen is a dedicated scholar and good person. But there's a reason the industry chose him for this study. His 2001 paper on the topic drew similar conclusions, contradicting numerous other studies. So did 2006 NFI working paper on this topic . "NFI" is the "Networks Financial Institute" at Indiana University, whose advisory council includes the head of Patriot Investments and the retired CEO of Monroe Guaranty, and whose partners include the Indiana Bankers Association. Not a consumer representative in the bunch.

In other words, the industry knew what it was getting ideologically when it chose Elliehausen. But, needless to say, the paper could still be a sound piece of research. Is it? A careful reading of the paper raises more questions that it answers. First, the data was pulled from member companies of the Community Financial Services Association of America (the "pig" folks), which partially funded the study.

Both the funding and the data source represent a conflict that should have been noted in press accounts of its findings. In addition, CFSA companies don't necessarily include the most predatory lenders (maybe they'll be glad I gave them that concession), especially the ones that operate in ghettoes and other minority communities.

Given the above, Prof. Elliehausen's demographic conclusions (especially about race) should be viewed with great skepticism - especially in the face of numerous other studies which found that payday lenders prey on minorities and other lower-income groups.(3) When a study is an outlier - when its findings contradict those of multiple other studies - that should always raise questions.

This dubiously-selected population was then surveyed by telephone, a method which would have excluded some lower-income loan recipients. (See, for example, "Coverage Bias in Traditional Telephone Surveys of Low-Income and Young Adults.") Prof. Elliehausen's decision to then build a "psychological model" based on these surveys raises even more questions.

Another possible methodological flaw: "This paper uses all consumers and consumers who revolve credit card balances as benchmarks" (Elliehausen, p. 25). But many payday borrowers only "revolve" their loans because of the extraordinarily high interest rates involved. And the assumption that "consumers often use bank credit card debt in the way they might have used unsecured personal loans" is open to debate.

Most tellingly, Elliehausen points out that "participation (in his survey) was voluntary and not random." That can create a "selection bias" that casts doubt on the findings, especially on a topic which involves both public shame and fear of strangers asking questions on the phone (especially in lower-income communities).

I wonder how many people who quote the Elliehausen study have ever actually read it?

Solutions

Fortunately, solutions to the payday loan problem are close at hand. First, the confusion and misinformation surrounding the payday loan industry shows how badly we need a Consumer Financial Protection Agency - ideally one that's distinct from the Federal Reserve and its economist-advisors (including Prof. Elliehausen). Only an independent CFPA can sift through the misinformation to protect consumers. Secondly, it underscores the need for the Senate to pass the Whitehouse/Marquette Amendment which restore the states' ability to set interest rates for lending within their own states. It's not an anti-usury law itself, it just gives states back the right to set interest rates for their citizens. (It would be interesting to see how "states' rights" advocates vote on this amendment.)

Sarah Palin should be a big supporter of these changes, too. After all, she said she thought that "US law should be based on the God of the Bible" -- and we know what He thought about usury.

As for that industry blog that called me a "pig," he also said I was "seeking left-leaning applause." Hmm ... a left-leaning pig? Reminds me of "Animal Farm," which is appropriate for Orwellian statements like "the payday industry helps families."

NOTES:
(1) Indiana Department of Financial Institutions. (n.d.) Summary of payday lender examination, 7/1/99-9/30/99. Indianapolis, IN.
(2) See Noyes; also, Drysdale and Keest, The Two-Tiered Consumer Financial Services Marketplace: The Fringe Banking System and Its Challenge to Current Thinking About the Role of Usury Laws in Today's Society
(3) See, for example, Race Matters: The Concentration of Payday Lenders in African-American Neighborhoods in North Carolina.

Christian co-operative micro-credit initiative reaches 1 billion Euros

by Staff Writers
Ekklesia News Service, March 23, 2010

A Christian microfinance initiative has reported 13 per cent growth in 2009, despite the global economic downturn.

Oikocredit - one of the world's largest private financiers of the microfinance sector - achieved record high inflows last year.

Its total assets grew by 13% to a total of € 537 million at year end.

Oikocredit's board of directors say they will propose to its members to continue paying out the 2% dividend its investors receive.

Tor G. Gull, Managing Director of Oikocredit said: “Another landmark was reaching € 1 billion in cumulative committed loans and investments since Oikocredit began its operations in 1975.

"I am proud that despite the economic downturn still large numbers of individuals and institutions invested in Oikocredit’s mission to empower poor people.”

Oikocredit pays a modest dividend to its members, who put their financial interests after the social benefit that their money can have.

Despite the recession, during 2009 large numbers of individuals and institutions invested in Oikocredit’s mission to empower poor people.

The close-knit network of regional offices and experts enables Oikocredit to work with partners that provide loans to people in the poorest areas, where both the risks and social returns can be high. Oikocredit’s aim is to also work in regions often avoided by other financial institutions.

Oikocredit is a cooperative financial institution that offers loans or investment capital to 790 microfinance institutions, cooperatives and small and medium sized enterprises in over 70 countries.

The project partners that Oikocredit financially supports currently reach out to a total of 17.5 million people.

Oikocredit is privately financed by individuals, organisations and churches.

Archbishop of Canterbury opens Trinity Institute conference

By Lynette Wilson, EpicopalLife Online, January 28, 2010

[Episcopal News Service] Theology's contribution to economic decision-making goes beyond simply raising the question of "common good"; it also offers a framework into what is being assumed – human motivations -- promoted through economic practices, said Archbishop of Canterbury Rowan Williams during a Jan. 28 lecture at the 2010 Trinity Institute.

"If we find, as a good many commentators and researchers have observed in recent years, that working practices regularly reward behavior that is undermining of family life -- driven or obsessional, relentlessly competitive and adversarial -- we have some questions to ask," he said.

Williams' lecture "Theology and Economics: Two Different Worlds?" opened day two of the Trinity Institute's 40th National Theological Conference --"Building an Ethical Economy: Theology and the Market Place," exploring the intersection between economics and theology, held at Trinity Wall Street in New York's financial district Jan. 27-29. The conference officially began Jan. 27 in the evening with a Holy Eucharist, where Williams celebrated and Archbishop of Burundi Bernard Ntahoturi preached.

"Economic activity is something people do, one kind of activity among others; and as such it is subject to the same moral considerations as all other activities. It has to be thought about in connection with what we actively want for our humanity," Williams said.

Following his opening remarks, Williams was joined by a panel of theologians and economists: Kathryn Tanner, a theology professor at the University of Chicago Divinity School; Partha Dasgupta, an economics professor at the University of Cambridge; and Susan Lee, an economist and award-winning journalist who has covered economics for the Wall Street Journal and the New York Times.

In exploring the intersection between economics and theology, the conference seeks to explore questions and themes including: "Is capitalism a belief system?"; "What is wealth and how should it be measured?"; "constructive models of economics and consumerism"; and "envision ways to build an economy that is both ethical and just." The conference includes presentations, panel discussions followed by Q&A sessions and theological reflection groups.

Over the past few years, Williams said, he has repeatedly noted that the word "economy" is at its root a term for "housekeeping," which has implications as to where the discourse belongs.

"A household is somewhere where life is lived in common; and housekeeping is guaranteeing that this common life has some stability about it that allows the members of the household to grow and flourish and act in useful ways," he said. "A working household is an environment in which vulnerable people are nurtured and allowed to grow up (children) or wind down (the elderly); it is a background against which active people can go out to labor in various ways to reinforce the security of the household; it is a setting where leisure and creativity can find room in the general business of intensifying and strengthening the relationships that are involved.

"Good housekeeping seeks common well-being so that all these things can happen; and we should note that the one thing required in a background of well-being is stability," he said.

"'Housekeeping theory' is about how we use our intelligence to balance the needs of those involved and to secure trust between them," Williams said. "A theory that wanders too far from these basics is a recipe for damage to the vulnerable, to the regularity and usefulness of labor and to the possibilities human beings have for renewing (and challenging) themselves through leisure and creativity."

The same kind of damage, Williams said, results in an economic climate where everything is reduced to the search for maximized profit and unlimited material growth."

"The effects of trying to structure economic life independently of intelligent choice about long-term goals for human beings have become more than usually visible in the last 18 months, and one reason for holding this conference is the growing force of the question 'what for?' in our global market. What is the long-term well-being we seek? …" he said.

In addition to clergy and lay participants attending in New York, the conference is taking place at partner sites around the United States and the world.

In his sermon Jan. 27, Ntahoturi spoke about the importance of partnerships and proper use of "talents." Using the Gospel reading, Matthew 25:14-30, he said it was possible to expand on the definition of talents to include skills, abilities and resources.

"God has given everyone abilities of various kinds and no one is untalented in the kingdom of God. This story encourages us to use our gifts wisely for the common good. Reminding us about our accountability before God … it's not about how much we invest, but the quality of our investment," he said.

Williams said during his lecture: "It is really to claim that our job as human beings is to imagine ourselves, using all the raw material that science or psychoanalysis or economics can generate for us – in the hope that the images we shape or discover will have resonance and harmony with the rhythms of how things most deeply are, with what Christians and others call the will and purpose of Almighty God."   

During the panel discussion, Williams mentioned having been "moved" the previous day during a visit to St. Ann's Episcopal Church in the South Bronx, particularly when he heard that a high school near Vancouver, British Columbia, Canada, sends volunteers to the church annually.

Prior to the conference, Williams also participated in a panel and gave the address at an event organized by the office of the Anglican Observer at the United Nations Jan. 26 and held at the Desmond Tutu Center on the campus of The General Theological Seminary. He also took part in discussions at the United Nations and, along with Presiding Bishop Katharine Jefferts Schori, met with U.N. Secretary General Ban Ki-moon.

~~ Lynette Wilson is an ENS staff writer and editor.

Why poverty and wealth remain the issue

[Though this is an article on the economic and political landscape of the U.K., it has relevance for us in the United States - MT]

by Simon Barrow, Ekklesia News, January 14, 2010

Some years ago the Latin American theologian, Gustavo Gutierrez, was addressing a large international Christian audience on the subject of biblically-informed responses to poverty. Someone got up from the audience and asked pointedly, ‘But really, professor, who are the poor these days?’

This was a question he was often confronted with, Gutierrez noted. But it was invariably asked by a particular kind of person. Namely, someone who was not in any sense in danger of falling into poverty themselves!

Sit a group of wealthy people down and ask them to identify the poor, suggested the Peruvian “father of liberation theology” (who has spent a good deal of his own time and ministry working among the most vulnerable, oppressed and on-the-edge), and “they will argue about it until the cows come home, or until the kingdom of God comes, whichever is first.”

They will split opinions over ‘relative’ and ‘absolute’ poverty. They will earnestly ask whether someone living in a shack who has a small TV can really be classed as poor. They will debate measurements, guidelines, axes and thresholds for arriving at an adequate definition of 'the poor'… before deciding, in all probability, that it is too complicated, that no-one really knows the solution, and perhaps that “poverty isn’t the only or even the most important issue” when confronting human need today.

Then they will most likely retire back to their own comfortable lives and put some money into a charity box dedicated to “those less fortunate” than themselves (ourselves).

By contrast, remarked Gutierrez, if you were to get together a group of people who know themselves to be poor – who struggle for daily survival, who are left out, who are made dependent because of their lack of resources – it will usually take them only a matter of seconds to answer the parallel question, “Who are the rich?” They will take one look at you, in comparison to themselves, and point their fingers of recognition.

This anecdote has come back to me on a number of occasions recently. I thought of it particularly when I listened to Conservative leader David Cameron telling struggling parents who have to live on low incomes in immensely difficult circumstances that money does not matter that much when you are bringing up children. It is “warmth” that counts and the amount of time you can devote to them. To those who are “competent and committed”, he suggested, financial circumstances made no “significant” difference to family prospects.

I am sure that Mr Cameron is a loving father and that he wants the best for the country’s children. But he is also a multimillionaire, I'm told, and in some of the remarks he made to a Demos think-tank event in South London, it showed. Poverty doesn’t really register with him, not at a gut level – just as it doesn’t with those earnest ‘debaters’ Gutierrez parodied.

Kathleen Kiernan, Professor of social policy and demography at the University of York, has considered Mr Cameron’s smooth assurances about the unimportance of money to parenting opportunities in the light of a little forensic inquiry, using data from the Millennium Cohort Study, which is monitoring over 10,000 children born in 2000/2001.

“Our analysis,” she said, writing in the Guardian (Thursday 14 January 2010), “compared the impact of poverty, parental resources and parenting on children's early educational attainment. 60 per cent of children who had never experienced poverty achieved a good level of achievement. Only 26 per cent of children in persistent poverty reached this level. When we looked at the impact of positive parenting, we found that it did, indeed, reduce this gap – but only by about half.” And only, of course, for those with the time and resources to transcend the other severe limitations of their circumstances.

Meanwhile, Imran Hussain of Child Poverty Action declared, on the basis of CPAG’s considerable practical and campaigning experience: “Poverty is a key factor in making the job for parents more difficult. The best thing Mr Cameron can do to safeguard all children is to put money in the pockets of the poorest families who need it most.” This is not the only thing that needs to occur, for sure. But it is a vital one.

However, it is not going to happen without massive countervailing pressure, for several reasons. First, the Conservatives, in particular, want to shrink government (that is, publicly funded) commitment to social welfare in order to protect the pockets of the better off who vote for them in large numbers. This will make consistent and even provision more and more difficult to achieve.

Second, all three ‘main’ (that is, best-financed) political parties are now embarked on a frenzied strategy of trying to out-do each other with promises of cuts – not for global investment bankers, who are about to trouser another £50 billion in ‘the bonus season’ (as the BBC’s business editor put it on Newsnight), but for those least able to support themselves.

For example, the Liberal Democrats’ leader Nick Clegg, congratulating himself publicly for his ‘realism’ (that is, for his electorally-charged rapid response accommodation to ‘the powers that be’) has just ditched the party’s key policies to help students, pensioners and, yes, parents. These are now ‘aspirations’ rather than foreseeable commitments, he says, because we all have to buckle down to tackle the recession. Well, yes, but I’m guessing that the Clegg household will probably not bear the severest burden of this.

Meanwhile, notwithstanding its massive promised reductions in funding for tertiary education, which will damage the social fabric in other ways, the Labour Party appears least willing to engage in this ‘downtrading welfare’ war. But in following the essential neo-liberal economic narrative established in the 1980s (the same one that ended in the terrible debt and credit wreckage all governments are now trying to claw their way out of) New Labour has presided over a deepening of economic inequality since 1997 and has failed to meet targets on child poverty, among others.

On that latter point, the Rev Paul Nicholson of the Zaccheus 2000 trust (named after a biblical character who repented of wealth built on corruption), recently hit the nail on the head. “The [current] child poverty bill is deficient,” he declared, “because it requires government to identify the numbers of children who live in households that cannot afford a range of basic activities or goods, but has no requirement on government to have regard to research which will show the minimum weekly income for a variety of households which will provide the items of which they are deprived, and so end their income poverty”– before adding: “Baroness Finlay of Llandaff has tabled an amendment which will require government to take this essential information into account.”

Some political players, like the SNP, Plaid Cymru and the Greens are, whatever their own shortcomings, trying to pull the public debate about wealth and poverty in different, more socially and ecologically sustainable directions. But the values of the dominant political party system remain deeply warped by non-recognition of the real distortions that massive gaps between the rich and the poor, those with much power and those with little power, make in the real, workaday world. There is an air of profound unreality about our prevailing ‘realisms’, as there was about the ones that got us into a massive economic and environmental hole in the first place.

The one thing that can be guaranteed is that the most vulnerable are always in danger of being asked to bear the heaviest burden proportionately – in the same way that those at the bottom of a ladder engulfed in water will always have the most to lose from ‘everyone needing to step down a rung’. The impact of an appeal for ‘the same sacrifice from everyone' is not equivalent, fair or just when the starting points and levels of exposure are so at variance.

This is most starkly evident in the horrific scenes we are witnessing from the Haitian earthquake zone right now. For the unspeakable catastrophe unfolding in one of the poorest places on the planet is not, pace the headlines, “a natural disaster” alone, and certainly not “an act of God.” On the contrary, while many would die in a 7.3 scale ’quake anywhere in the world, it is in a city built for and by the poor that the most people are destined to suffer beyond all measure. So, long after the initial horror, people are languishing and dying needlessly in Port au Prince simply because there is no infrastructure (social or otherwise) to speak of, there are virtually no foundations (literally), there is no insurance, there are no ambulances, no emergency supplies and no reserve resources to fall back on. Just misery and dependence on outside charitable assistance, in the short term at least. It is scandalous as well as humanly (and spiritually) harrowing to behold.

Back in the 1970s, I recall, the radical charity War on Want got into hot water for describing the seismic impacts in the Ancash region (Peru), in North Pakistan and in other poor regions as “class quakes” compared to those in developed countries, because economic vulnerability made such a huge difference to the size and extent of the resultant human suffering and death. They were quite right, however.

This is why, in so many areas of life, the rich-poor divide matters deeply, unfashionable though it is to say this in a world where many politicians consider themselves ‘post ideological’ -- and by that mean that they see such 'divisive' talk as ‘rabble rousing’. Which brings us, by a circumlocutory route, to the Bible.

The biblical texts of Christians and Jews have more to say about the iniquity of wealth and the oppression of poverty than they do on any other ethical issue. When liberation theologians like Gustavo Gutierrez first spoke of God’s corrective ‘bias to the poor’ and the corresponding ‘option for the poor’ required of the church, it was not Marx they were referencing but the deep wells of scripture.

Yet today, when it comes to the Bible, many Christians choose to argue about a handful of texts allegedly concerning sexuality (a concept that was actually unknown in the ancient world from which they derive), rather than focusing on a multitude of verses describing and condemning the lesions of those who suffer injustice and deprivation – sometimes on a scale, as in Haiti, which modern secular vernacular still ironically refers to as being “of biblical proportions.”

The American evangelical social activist, Jim Wallis, sometimes still tells the tale of how, upon realising the scale of biblical concern for the gap between rich and poor, he decided, as a student, to try removing with scissors every single scriptural phrase about wealth and poverty. What he ended up with was a ‘hole-y Bible’, one shredded of both content and meaning.

Faced with deprivation, marginalisation, inequality, injustice and the shrinking of life circumstances wherever they may occur (‘poverty’ is a word that points to a host of these symptoms of exclusion, all with a root in economic life), Christians today should recognise a clarion call to action, to the building of alternatives, to the holding of power to account, and to the development of different viewpoints and practices from 'the norm'.

For as Leo Tolstoy once put it (and here again, I paraphrase): “food purely for my own contentment is a material concern; but food for my hungry neighbour – that’s a spiritual issue.” The same aphorism may be applied in many different situations, wherever deprivation and disadvantage reigns: in absolute poverty, and in the relative kind too. In Africa and Asia, and in an American ghetto or a European sink estate as well. Dividing the poor from one another is wrong. What we need to do instead is to share the wealth around.

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© Simon Barrow is co-director of Ekklesia. www.simonbarrow.net

Civil society groups hear call for anti-usury laws and major finance reform

by Staff Writers, Ekklesia News Service, Nov 29, 2009

Some 2,000 people from 150 civil society groups, churches, mosques and synagogues heard a call last week for the UK to introduce a ceiling on interest rates. The move follows evidence gathered over months of listening to the impact of the financial crisis on ordinary people.

Among those responding to the five-point proposal by London Citizens - the city's community alliance of faith congregations, charities and trade union branches - were politicians from the three largest political parties (Labour's Stephen Timms, the Tories' Greg Hands, and Lib Dems' Vince Cable), leading financiers (the Corporation of London, the British Bankers' Association, Barclays, KPMG and others), the Mayor of London and bodies such as Fair Finance.

"Despite historically low interest rates and a massive taxpayer bailout of the banks, ordinary people across London have been forced into the hands of legal loan sharks in order to gain access to credit," said Paul Regan, a London Citizens trustee and Methodist minister and a pioneer with the Newham Community Renewal Programme.

"It's time to restore responsibility," Regan added.

The London Citizens Autumn Assembly also saw the launch of a new economics foundation (NEF) report, 'Doorstep Robbery - Why the UK needs a fair lending law', which argues for a cap on the cost of credit as well as new rules which would oblige banks to make more loans available to the less well-off.

The study by Veronika Thiel reveals that three million UK households pay hundreds of thousands to "legal loan sharks" because of lack of access to credit from banks. London Citizens and NEF argue that the UK should follow the example of major European countries and introduce a cap on the cost of lending by financial institutions, thus making borrowing at interest rates of 50 or 500 per cent illegal.

The new NEF publication shows that in Germany and France poor people have greater access to mainstream credit than in the UK - disproving the Government's stated objection that such curbs reduce the flow of credit.

As well as a cap on interest rates, the assembly called for an expansion of local, mutual banking such as credit unions, to ensure the low-paid have access to mainstream credit; a financial literacy programme for schools; a statutory code of responsible lending and the expansion of the living wage, a basic family minimum which is the best insurance against debt.

The agenda has been drawn up through six months of listening campaigns, surveys, and democratic assemblies, attended by leaders from London Citizens members in south, east and west London. Members are mostly churches, mosques, synagogues, charities, trade union branches and ethnic associations.

The event heard powerful testimonies from ordinary people whose lives have been destroyed by legal loan sharks, and readings by faith leaders - including Rabbi Jonathan Wittenberg, Mgr John Armitage, Dr Abdul Bari (Muslim Council of Britain) and the Rev Ermal Kirby, a leading black church ecumenist and activist.

The readings recalled the prohibitions on exorbitant lending in the Jewish, Christian and Muslim traditions.

Frontline (PBS): Close to Home

Channel 8 PBS Houston: 9:00-10:00 PM, Tuesday, Sept 27, 2009

I've just watched this episode of Frontline—Close to Home—and was greatly moved by it. If you missed it, you can watch it online by clicking here.

The show tells the story of ordinary people in the Upper East Side of New York whose lives have been turned upside-down by the economic disasters of this past year. They are all customers of a neighborhood hair salon where they share their misfortunes with Deborah Boles—the salon's owner and sole hairdresser—and with award-winning FRONTLINE producer Ofra Bikel who chronicles the recession's impact on one unlikely American neighborhood.

The web page description follows:

In "Close to Home" Bikel sets up her cameras in the hair salon she's patronized for 20 years. It's an intimate space where she has come to know well the surprisingly diverse clientele -- from athletic trainers and housewives to high-end bankers, actors and opera singers. Despite expectations that this neighborhood is a secure bastion of privilege, these days, when clients get in the chair, they offer a window into the country in recession: Some are broke, others don't have a plan, and they're all looking to commiserate.

Deborah Boles, the owner and sole hairdresser at Deborah Hair Designs, started the business in 1985. "I wanted a place where people can go and they can feel comfortable," she says. "They know they belong here." But it's all on the line with the current downturn -- clients come less often; some skip coloring or skip the trim -- and as Deborah watches neighboring businesses go under, she wonders how long she can survive.

Barbara, Deborah's sister, helps out at the salon, but she has been struggling with her own economic crisis. After buying a home in Florida at the height of the market, she now has a subprime mortgage that she can no longer afford. Unable to pay the exorbitant interest, she has had to take in four tenants, each with their own stories of foreclosure and unemployment.

American Pie

Editor's Desk
The Christian Century, November 18, 2008

In the course of discussing tax policy with an unlicensed Ohio plumber, Barack Obama suggested that "spreading the wealth around" a bit more would be good for the country. Obama was trying to explain why he wants to impose a modest tax increase on people who make more than $250,000 a year while reducing taxes on those making less than that amount. John McCain and his supporters immediately seized on Obama's remark as a sign that Obama favors a socialist form of income redistribution.

The notion that a progressive income tax is a form of socialism is ludicrous. Since the time of Teddy Roosevelt, Americans have recognized that those who are flourishing most in society should pay a proportionately higher share of tax. After all, they are the ones benefiting most from the social stability and infrastructure that government provides.

Talk of socialism would be laughable except that it is part of a larger, disturbing reality in American politics: it has become almost impossible to talk about the disparities in wealth that have arisen over the past three decades and about how this stratification undermines democracy and fosters unequal outcomes in other areas of life, including educational opportunity and access to health care.

Since the late 1970s the share of national income going to the top 1 percent of Americans has doubled and the share for the top 0.1 percent has tripled. More than 40 percent of total income goes to the wealthiest 10 percent—their biggest share of the nation's pie in at least 65 years. The very wealthy have become enormously wealthy, while middle-class workers have seen their wages stagnate—barely keeping pace with inflation—and at the same time have had to deal with sharp increases in the costs of health care and education.

In light of this trend, the dispute between McCain and Obama on taxes is minor: Obama wants to return the top marginal tax rate to 39 percent, where it was under Clinton, while McCain wants to keep it at 35 percent. Both men, in other words, would maintain the mildly progressive tax system that currently exists. The current system is actually much less progressive than it was in earlier decades—under Eisenhower the top tax rate was 91 percent, and under Nixon it was 70 percent. Those were hardly socialist administrations.

Though tax rates are not the only factor shaping economic conditions, they are an important measure of how the burdens of common life are being distributed. The warnings about socialism should be seen for what they are: a blunt effort to block any discussion of the ominous fact that the U.S. has become a nation of increasing inequality and, for many, of declining opportunity.

by the Century editors 

We need a better butterfly

by Sr. Joan Chittester, OSB
From Where I Stand, Vol 6, no. 10
October 20, 2008

Sometimes it isn't just one thing, sometimes it takes a confluence of things to make the invisible visible and the dark light. Things like butterflies and somebody else's mortgage and Irish bookies and attitudes all coming together, at once, and apparently independent of one another. But, underneath, not really isolated or unconnected at all. In fact, together, they say something very important to us all.

If you were wondering what "globalization" really means, for instance -- before, that is, you found yourself living in the middle of it -- the answer lies in all of the above. A piece at a time. All leading to more of the fullness of the definition of that reality than any one of them alone might suggest.

"The Butterfly Effect," according to the work of physicist Edward Lorenz in 1961, is the awareness that a slight change in one part of a system can cause cataclysmic effects in another. Depending on other conditions in the atmosphere, "One flap of a seagull's wings," he said, "could change the course of the weather forever." Bird wings on one side of the globe, he went on, can cause or avert a hurricane on the opposite side of the globe. That's an interesting concept at best when considered in a science lab. It's a potentially devastating one when practiced in politics.

The point is clear: One false systemic step on one side of the globe can bring down systems a world away. And it has. And that is globalization.

The lab exercise is only too clear now. Even here.

A default on a home mortgage by the neighbor who was never vetted for the loan seems to have little to do with me until it becomes clear that every fourth house on the block, as one man told me on a return flight from Newfoundland last week, is repossessed as a result of it. Now the corner store and two industries in that town are on the brink of closing for lack of business and his own house value and business plans are also now in jeopardy in the process.

On top of all that, Irish bookies this week simply declared the U.S. election over and paid off their debts with congratulations to the winners. The world clearly thinks it has as much a stake in the U.S election as we do, enough to risk money on it -- as they have on our banks, our stock market and our economic policies.

Finally, when I tried to have a conversation several years ago with two young men, one in finance, the other in insurance, about the rising U.S. debt and the financial bubble in which we had staked our common future, one explained to me patiently that nothing could happen because "we have the strongest economy in the world," and the other one told me with gusto that what I didn't understand was that "debt was good!" Debt, he instructed me, "makes money."

Well, for some, maybe. But not for all. Debt does not make money for the worker whose jobs will be lost as companies close because of it. It does not make money for nations around the world whose economies are tied to ours and whose own infrastructure will suffer as a result of it. It does not even make money for banking systems everywhere built on debt and now drowning in it. Most of all, it will not make money for families who will have to choose between food and education for their children as their jobs dry up and costs rise and their wages disappear.

The butterfly in this system is the next president of the United States who, no matter who he is or what he promises these next three weeks, will be faced with the reality of what can be done and must be done two months after that.

No matter what he's saying now.

The advantage is that the country wants change -- and they are going to get it. How much change is yet to be seen.

The problem is that the country expects change -- big change and fast. How little change it will abide is yet unclear.

But one thing is sure: Heaven help the president who does not or cannot produce it in necessary measure. Not simply for our sake but for the sake of those on the other side of the world who also had nothing to do with the collapse.

There is one other butterfly in the ointment, however, more worrisome than the first. This one is in Korea where a financial researcher in Seoul was fired for saying that "people made unwise financial decisions because they were too greedy." His company called that an "individual view out of line with our institute's original purpose." Indeed. Isn't that where the problem started in the first place and haven't we all had enough of that already?

Yahoo filed that story under a category called "odd" news. Not any more.

If the explanation of the present economic meltdown is true, institutional greed isn't odd anymore, it's standard. And those who saved rather than spent without collateral, are about to pay for it.

From where I stand, a new president is going to have to change more than the system. He's going to have to change the very attitudes that are at the foundation of economic institutions around the globe. It might be a good idea to start with greed and debt and over confidence. And when he's done with that one, he might want to do something about changing a legacy of war and torture and American imperialism-and the notion of a monarchial presidency, as well. At least for starters.

Reflections on poverty and climate change

by Bishop Katharine Jefferts Schori
San Francisco Chronicle , May 20, 2007

Before I became a priest, I was a professor of oceanography. One of the things I learned was that oceanographers couldn't just study squid or fish in isolation. We had to study interconnected systems. We had to understand not only the animals' environment, such as the water, but its chemistry and circulation, the atmosphere above the ocean and the geology below it. And that, I believe, is how we must understand our world: We must see everything, and everyone, as interconnected and intended by God to live in relationship.

Two of the most significant crises facing our world -- climate change and deadly poverty -- offer an example of such interconnectedness. By under- standing how the two crises, and the people they affect, are connected, we can begin to understand how humanity can triumph over both. Extreme poverty -- that is, poverty that kills -- afflicts more than a billion of God's people around the world. Nearly 30,000 of these people will die today. That's 1 every 3 seconds. The factors that propel this kind of deadly poverty include hunger, diseases like AIDS and malaria, conflict, lack of access to education and basic inequality. Climate change threatens to make the picture even more deadly. As temperature changes increase the frequency and intensity of severe-weather events around the world, poor countries -- which often lack infrastructural needs like storm walls and water-storage facilities -- will divert previous resources away from fighting poverty in order to respond to disaster. Warmer climates will also increase the spread of diseases like malaria and tax the ability of poor countries to respond adequately. Perhaps most severely, changed rain patterns will increase the prevalence of drought in places like Africa, where only 4 percent of cropped land is irrigated, leaving populations without food and hamstrung in their ability to trade internationally to generate income.

Conversely, just as climate change will exacerbate poverty, poverty also is hastening climate change. Most poor people around the world lack access to a reliable-energy source, an imbalance that must be addressed in any attempt to lift a community out of poverty. Unfortunately, financial necessity often forces the choice of energy sources such as oil and coal that threaten to expand significantly the world's greenhouse emissions and thus accelerate the effects of climate change. This cycle -- poverty that begets climate change, and vice versa -- threatens the future of all people, rich and poor alike, and of all things in the world that God so loves.

This relationship between deadly poverty and the health of creation was not lost on the world's leaders when, at the turn of the 21st century, they committed to an ambitious yet attainable plan to cut global poverty in half by 2015. This plan, which established the eight Millennium Development Goals, included a specific pledge to create environmental sustainability. 2007 marks the halfway point in the world's effort to achieve these goals, and while progress has been impressive in some places, we're nowhere close to halfway there. President Bush and other world leaders have made bold commitments, but many of them have yet to be realized. How can the United States help put the world back on track?

First, our nation should make good on the promises it has made to expand foreign aid targeted at fighting poverty, cancel the debts of poor countries and seek fairer international-trade rules that allow people living in poverty to empower themselves in the fight against poverty.

Second, our nation's leaders should recognize the emerging consensus that we can no longer ignore our role in safeguarding the health and balance of God's creation. We must take seriously our share in the global responsibility for reducing carbon emissions, and work with other nations to provide the resources and technology transfers that will allow poor countries to address their energy needs through clean-energy sources that will not hasten the rate of climate change.

Of course, it is not the United States alone that needs to deliver. When the leaders of the G8 meet in early June in Germany, climate change will be at the top of their agenda. The health and well-being of Africa is also on the agenda, but much further down. Now is an ideal time for Americans to write, call, or e-mail President Bush and urge him to work with other leaders in the G8 to consider climate change and deadly poverty side-by-side as facets of the same problem. The good news is that Americans are getting involved like never before. Faith communities such as the Episcopal Church, from which I come, are organizing in communities all over the country, as are citizens from many other walks of life. Millions of Americans have joined the call for comprehensive solutions to poverty through efforts like ONE: The Campaign to Make Poverty History, and groups like the U.N. Millennium Campaign are working with citizens in all parts of the world. To be successful, though, the effort needs even more voices. It needs all of us.

At the very beginning of the Judeo-Christian Scriptures, we hear of God's creation of the universe and his proclamation that the whole of it is very good. Ultimately, this story is an account of relationships: the bond of love between God and the world, and the interconnectivity of all people and all things in that world. It is only when we take seriously those relationships -- when we realize that all people have a stake in the health and well-being of all others and of the Earth itself -- that creation can truly begin to realize the abundant life that God intends for every one of us.

Katharine Jefferts Schori is presiding bishop of the Episcopal Church.

Presiding Bishop joins call for federal budget to address poverty and disease

May 17, 2007

[Episcopal Church Office of Government Relations] Presiding Bishop Katharine Jefferts Schori and four leaders of Protestant denominations wrote to the U. S. Congress May 10 to urge budget negotiators to preserve important investments in federal domestic and international programs that fight poverty and disease at home and around the globe.

On May 16, House and Senate negotiators announced that it they had reached agreement on the Fiscal Year 2008 federal budget that funds the government and programs that touch the lives of nearly every American.

The letter was signed by Jefferts Schori and the Rev. Mark S. Hanson, Presiding Bishop of the Evangelical Lutheran Church in America; the Rev. Dr. Clifton Kirkpatrick, Stated Clerk of the General Assembly, Presbyterian Church (U.S.A.); Bishop Beverly Shamana, President of the United Methodist General Board of Church & Society and the Rev. John H. Thomas, General Minister and President, United Church of Christ.

The letter was part of an effort begun in 2005 by the leaders of these five denominations out of concern for how and where federal resources are spent. Previous letters have addressed Hurricane Katrina and its aftermath, funding for Food Stamps and housing, as well as Millennium Development Goals-related programs such as international family planning.

In this year's letter, the leaders wrote, "We are reminded in the Gospel of Luke that 'from everyone to whom much has been given, much will be required; and from the one to whom much has been entrusted, even more will be demanded.' (Luke 12:48)"

"The United States is a nation of great wealth and resources and, indeed, much is expected of us individually, as communities of faith and as a nation," their letter notes. "Our denominations continue to do ministry in the areas of our historic Christian calling -- working for reconciliation and serving those most vulnerable in our world."

The denominational leaders urged Congress to restore funds to human-needs programs and continue a national commitment to fight against deadly poverty and disease abroad.

At press time, complete details of the conference committee's agreement announced by congressional leaders May 16 were not available.

The full text of the letter can be found here