A Serious Decay

We're paying the bill for relativism.

Americans are hoping the new administration will ride into Washington like a knight in shining armor to rescue us from our economic woes.

Let's pray it does. The sub-prime mess has shaken financial markets worldwide; it's the deepest crisis since the Great Depression. Millions have lost their homes to foreclosure; the unemployment rate climbed from 5.7 percent in August 2008 to 6.1 percent at the beginning of October. Great Wall Street institutions have collapsed, sinking the Dow Jones and plunging world markets into chaos. Western governments have injected massive amounts of capital into their banks.

Can Washington really fix all this? The government is surely responsible in large part: Congress was grossly negligent, milking Fannie Mae and Freddie Mac for multimillion-dollar patronage jobs and forcing them to give shaky mortgages to unqualified borrowers. So reform is desperately needed (if only Congress could reform itself).

But if we look honestly at what started the credit crisis—moral failures and following false worldviews—we recognize that the solution demands more than any political savior can possibly deliver.

The roots of the crisis go beyond political blunders to Wall Street, which devised a clever new product: Buy mortgages from banks, bundle them into mortgage-based securities, and sell them. Wall Street bankers reaped a windfall, but the scheme shifted the risk from the lending bank or mortgage broker to some Swiss hedge fund. Unintended consequences quickly followed. With cash flooding into the banks (which had no risks), every savings and loan, Internet start-up, lender, and mortgage broker urged people to take mortgages whether they could repay them or not.

The result: Many who could not afford a ...

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