I used to dream about the great things I would set up someday when I had the money. I had ambitions of expanding Casper College into Wyoming’s second university. I had aspirations of setting up a scholarship fund that would help worthy students attending college. I built businesses in my mind, crafted scenarios where, once I had the money, I could start doing things that would make a difference.
To an extent, those dreams remain, even though reality is slowly draining my hopes that I’ll ever have millions of dollars lying around to fund these projects. Still, in my spare time, I think of smaller ways to make a mark on the world. I think of soup kitchens or adopt a family or something that would help some poor family get back on their feet, or at least endure another day.
It doesn’t take a Catholic conscience to want to help those less fortunate, and it doesn’t take supernatural charity to want to give a hand up to those coming after us. That much decency, I believe, exists in most, if not all of us.
To that extent, I am willing to give the benefit of a doubt to our members of Congress who passed legislation to encourage lenders to offer high-risk loans to people who could not really afford them. The desire to do something that will benefit a large group of people often leads legislators to push for bills that will ostensibly provide those benefits. People need food, water, and shelter to survive, and these are the essentials that government needs to ensure when times are hard. In addition, it is also fairly understandable that the government would back these companies and share the risk. It is possible to attribute a decision like that to something other than greed.
I won’t deny that greed played a large role in the economic crisis we landed in, but it was hardly the only factor. Consider what the government was trying to do in coercing big firms to offer sub-prime loans. It would be nice for everyone to own their own home,they probably figured, and a charitable heart could simply let matters lie there. They wanted to help the poor and unfortunate.
Even setting greed aside, there is a factor that still makes these legislators and bureaucrats culpable for the current crisis. As nice as good intentions, reality has to figure into the equation somewhere. It does little good to give to some at the ruin of others. While this doesn’t mean that we shouldn’t work towards helping those who are homeless or living in cramped conditions, it does mean that we should be willing to exercise prudence.
Prudence is one of the four cardinal virtues, alongside justice, fortitude, and temperance. It, above the others, is the virtue that aids us against that old adage about the road to Hell and good intentions.
We are called to follow our consciences, and in order to follow our consciences we must develop them. Similarly, to exercise prudence we have to develop our knowledge of cause and consequence, the interrelation of events. Consider what the Catechism has to say about conscience:
1790 A human begin must always obey the certain judgment of his conscience. If he were deliberately to act against it, he would condemn himself Yet it can happen that moral conscience remains in ignorance and makes erroneous judgments about acts to be performed or already committed.
1791 This ignorance can often be imputed to personal responsibility. This is the case when a man “takes little trouble to found out what is true and good, or when conscience is by degrees almost blinded through the habit of committing sin.” In such cases, the person is culpable for the evil he commits.
Couple this with what the Catechism has to say about conscience and prudence:
1806: …It is prudence that immediately guides the judgment of conscience. The prudent man determines and directs his conduct in accordance with this judgment. With the help of this virtue we apply moral principles to particular cases without error and overcome doubts about the good to achieve and the evil to avoid.
Thus in order to follow the conscience, we must exercise prudence, and to be prudent we have to work to develop the virtue. If we are lax in that development, if we cannot be roused to make the effort, we call judgment down on ourselves. Any claims to ignorance only exacerbate the situation. We could have learned, and we should have, at the very least, tried.
Let’s return to the economic crisis and its underlying factors. There’s a reason that credit rating and assets are such important factors when considering a loan. In order to be able to continue loaning money, a company must be able to recover the money it lends out. The company does not know the future, and so it has to gamble every time it makes a loan. To handle the risk, the company only gives loans to those it feels sure will pay them back with high probability.
In the long run, as long as the company is prudent in how it hands out loans, it will make money. Now, the company has the potential to make even more money by extending riskier loans, i.e. loans to people with poor credit or few assets. However, statistically the probability of gaining the money back is a lot lower. While some will make their payments each month, others will default, and if too many default, the company will go under. Thus the company has to balance the risks it takes versus expected return. It has to be prudent in how it proceeds, for otherwise it will fail.
The problem we ran into as a nation ran along the following lines. With the carrot of a booming housing market and the stick of threatened litigation, mortgage companies decided that the risk of extending loans to high-risk customers was less than the risk of not doing so. Lawsuits can be very expensive. More importantly, though, as long as the market kept booming, they could be reasonably assured of a return on the loans even in case of default.
Certainly greed interfered at this point. Sin always effects blindness, and blindness impairs prudence. That is why it is incumbent upon us to develop prudence as fully as we can. Consider the following. Suppose I’m going to be greedy, regardless. I look at the housing situation in two ways. Either I can simply focus on the short term and try to earn as much money as quickly as I can with the riskiest practices, or I can focus on the long term. In that situation, prudence suggests that I take less risk because ultimately I’ll earn more money with high probability. In other words, while greed can blind prudence, prudence in turn can temper greed.
Therefore a generous heart can simply assert that our public officials and the chief executives were imprudent in their choices to offer sub-prime loans. But even then, they call judgment down on themselves, because they, more than anyone else, should have had the knowledge required to act prudently to ensure that our crisis did not occur.
This does not mean that others don’t share a portion of the blame themselves. It is currently unfashionable to blame anyone who actually took out the loans. Consider how Governor Sarah Palin in one breath said that those people were not to blame while also stressing the importance of responsibility. To attribute blame to the unfortunates who are defaulting on their loans is simply not a political move.
However, we find again that among those who took out loans, prudence was lacking. Sometime back, I sat down with my wife to figure out just how expensive a house we could buy and still be under budget. Eventually we concluded that, based upon our stipends as graduate students, we could just afford a house of around $120,000. Here’s the catch: if anything went wrong, we would be overstretched on our budget, and if that continued for any amount of time, we would be unable to keep making payments.
Those who looked at the sub-prime loans, figuring they could at last own a house because their payments would fall just barely within their budgets, acted imprudently. As Sara and I noted, there needs to be a cushion there in case an accident happens, or someone falls ill. If rising gas prices force you over the limit, you should probably stick to the cheaper apartment.
There’s a flip side to all of this. While we need to act prudently and not spend recklessly or take out loans we can’t pay back, or give loans to people who won’t be able to pay us back, or force companies to take huge risks in an attempt get people their own homes, we also need to be aware that we can utilize prudence sinfully. Rather, we can disguise greed as prudence. For example, if we have plenty of money, we can justify hoarded our wealth by claiming that we’re acting prudently, saving against a disaster.
Consider my dreams, the ones that require me to spend millions of dollars. I would love to accomplish something like that, true, but consider the caveat. I would need to have millions of dollars to spare in order to set up a scholarship fund or convert a community college into a four-year institute. The converse is, if I don’t have millions of dollars lying around, then I won’t be able to help anyone. That is simply not true.
I could, instead of buying myself books or computer software, spend a few dollars each week to help a family in need. It isn’t a lot, true, but then, I don’t have much to work with at the moment. But the thing is, a large number of people making small contributions can have an enormous effect. That’s why we have government taxes and such things as health insurance. That’s why we have many people paying into funds that help only a few. The important thing, though, is to know what can and cannot be done; to know what effects will arise from our actions; to not let social injustices lead us into making rash and dangerous actions.
We need prudence. The higher we rise in life, and the greater the impact we can have on the lives of others, the more we need that virtue.