Integrity and the Economic Crisis

The economic crisis that started last fall and was remembered last week brought to light a lot of things: the vulnerability of our mightiest financial institutions, the value of thrift, and the degree to which the American dream has relied on quality credit.

But, more simply, it reminded us that an economy is made up of people and the relationships between us. An economy is not just transactional. It has moral dimensions. It requires integrity.

Integrity is what got lost in the years running up to the financial crisis. This loss of integrity was evident in the very mortgage loans that triggered the crisis. In the past several decades, the mortgage business changed. Lenders began to make huge sums through refinancing and re-selling mortgages to third-party investors. Bankers and brokers extended loans that they knew households could never pay back. Many deployed misleading and deceptive sales tactics -- a widespread problem noted by Ben Bernanke, Chairman of the Federal Reserve, several months before the crisis hit.

Integrity means being what you claim to be and accomplishing what you set out to do.

The integrity of our economy suffered when millions of mortgage loans no longer served their core purpose: to enable families to buy and live in a home. In fact, they did the reverse, helping to bring about a record number of foreclosures (experts predict home foreclosures will reach 2.4 million by the end of 2009).

Because of this loss of integrity, many people are hurting -- not just families who were sold a predatory mortgage or are struggling through foreclosure, but also those whose home values dropped, who have lost jobs, or who have seen their savings diminish.

It is no coincidence that poverty rates are on the rise and 2.5 million more people became poor this year.

Pope Benedict XVI reminded Christians of the essential link between morality and the economy this summer. "Justice must be applied to every phase of economic activity" he wrote, because every kind of economic activity has moral consequences.

So it is our responsibility to help restore integrity to our economy -- both by making good choices for ourselves and calling for governance that supports the core purpose of banking and lending: enabling people to live and thrive.

Rachel Hope Anderson works at the Center for Responsible Lending. You can follow her writing about faith, debt and lending on twitter and read more on predatory lending and the financial crisis here.