Leadership and Crisis (34 page)

Numerous other examples abound. According to the
Wall Street Journal
, in late 2006 Goldman Sachs executives were already convinced that the “sub-prime market was heading for trouble.” So what
did they do? They sold off their “stockpile” of mortgage-backed securities and effectively started selling short, that is, betting that the market would go down. But what did they tell their clients? They encouraged them to keep buying these toxic investments. Goldman Sachs made $4 billion from selling these securities. Their clients didn’t do so well.
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Other reports looked at the leadership at Bear Stearns, the investment house that imploded and had to be bought out in March 2008. It explained how the CEO, in the months leading up to the crisis, spent a lot of time playing golf, enjoying bridge tournaments, and even smoking dope, all the while being well compensated for his efforts.
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I once read somewhere that the love of money is the root of all evil.

But let’s not stop there. Banks made loans to people they knew could not afford them. There were so-called liar loans (where they didn’t even ask to see proof of your income) and even NINJA loans (no-income, no-job loans). Handing out these disastrous loans became a common practice in an industry focused more on earning fast commissions and fees than doing due diligence and responsibly handling its business. The greed was so extensive it was almost comical. Washington Mutual, once the sixth largest bank in the country, gave a loan to a non-English speaking strawberry picker in California earning $14,000 a year. The loan was for $720,000.
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Did I mention Washington Mutual had to file for Chapter 11 bankruptcy?

Politicians played their part in stoking the crisis. In hopes of appealing to specific demographic groups, they pressured banks to give risky mortgages to homeowners who were extremely unlikely to pay them back. Regulations like the Community Reinvestment Act (CRA) forced banks to make loans based not on the applicants’ merits, but
because they had to strike agreements with radical “community” groups such as ACORN. In fact, the federal government sued banks to force them to make risky mortgage loans. Andrew Cuomo, secretary of Housing and Urban Development during the Clinton administration, bragged at a 1998 press conference about reaching a settlement with a major lender worth billions of dollars. Cuomo even admitted he knew some of these loans would not be paid back.
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Nice thing to do with other peoples’ money.

Some of the blame also belongs to consumers, who borrowed money they knew they couldn’t repay. Interest rates were low and mortgages were easy to get, and lots of people jumped at the opportunity to buy a bigger house than they could really afford. So they traded up and borrowed more than they could handle because, well, we all deserve a big house, don’t we? Owning a home is part of the American Dream. But getting it through an interest-only adjustable rate mortgage is more like a nightmare.

Predictably, after the meltdown liberals called on the government to adopt strict new regulations to ensure it will not happen again. (Good luck with that.) But more regulations can’t solve what is largely an ethical problem within the culture. Unchecked avarice at every level has taken its toll on our economy.

I have no doubt we will overcome the economic crisis. But if we want to prevent a similar crisis from erupting in the future, we need to recommit our nation to the bedrock values that keep us committed to doing the right thing. We cannot serve both God and Mammon.

MSNBC anchor Contessa Brewer recently advised Republicans to “focus away from morals and values into things that affect people’s lives.” Her guest,
New York Times
reporter John Harwood, agreed:
“Well, bingo, Contessa, that’s exactly right.”
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This couldn’t be more wrong—morals and values affect everything in people’s lives. Republicans taking campaign advice from the media is like a chef getting culinary advice from cannibals—it won’t end well. Still, some Republicans are tempted by this argument. They believe we’ll get more votes by focusing on free market economics and ignoring all that “divisive” talk about values and morality. The trouble is that the world doesn’t naturally divide into neat categories. If we focus narrowly on political strategy and ignore more fundamental issues of right and wrong, we will fail. That great campaign consultant Confucius had some applicable thoughts: “The superior man understands what works; the inferior man understands what sells.”

Think about why America, the wealthiest nation in world history, still suffers from social ills such as child poverty. The truth is, economics alone are not to blame. Studies consistently show children in broken homes are four times more likely to live in poverty. The poverty rate for children of married couples is 8.2 percent, compared to 35.2 percent—four times higher—for children of single parents.
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While recognizing the heroic work done by single moms across the country, we cannot ignore the evidence that families matter, that children of two parent households tend to do better, and that the family unit is the foundation of society. When America launched the war on poverty in 1965, the child poverty rate was 20.7 percent. More than forty years later, the rate is only slightly lower.
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We have spent trillions of dollars to fight poverty with meager results. Why? Because simply throwing money at the problem will not fix it. Poverty, like so many other economic problems, is not simply about money. It’s about values that work.

I also said the beauty of America is not in our political system. Most of us are taught at an early age about the glories of our system of government. And there is no question that the elegant brilliance of our Constitution is to be marveled at. It is the best system of government ever created.

But our republic rests on self-government. That requires people to share a common commitment to virtue, to mutual respect, to core values, to doing unto others as you would have them do unto you, to selflessness, and to “peace, patience, kindness, and self-control.” (I took that from a certain ancient manuscript.) Our Founding Fathers understood that we can’t put our trust in our structure of government alone. George Washington in his Farewell Address recognized morality, faith, and our values as essential to our political survival. “Of all the dispositions and habits which lead to political prosperity, religion and morality are indispensable support.” He concluded by observing that “virtue or morality is a necessary spring of popular government.” Note that he didn’t say
helpful
; he said
necessary
.

Samuel Adams argued that if you want to see America prosper, you will devote your time and energies to promoting virtues and values. “He therefore is the truest friend to the liberty of his country who tries most to promote its virtue, and who, so far as his power and influence extend, will not suffer a man to be chosen into any office of power and trust who is not a wise and virtuous man.” Personally, I’d rather take the advice of Sam Adams than those talking heads on MSNBC.

Democracy simply won’t work among a people characterized by selfishness, greed, malice, or lawlessness. Fortunately, America has traditionally been kept on the right path thanks to our commitment to faith and religious values. Alexis de Tocqueville visited America in the
nineteenth century and wrote his celebrated book
Democracy in America
. As he described it, “On my arrival in the United States the religious aspect of the country was the first thing that struck my attention; and the longer I stayed there, the more I perceived the great political consequences resulting from this new state of things.” He continued,

De Tocqueville noted that at the time the “enlightened” philosophers in Europe were turning their backs on faith and arguing that religion and freedom were incompatible. (Sound familiar?) But de Tocqueville saw that America was proving them wrong. “Unfortunately facts by no means accord with their theory,” he wrote. “There are certain populations in Europe whose unbelief is only equaled by their ignorance and debasement; while in America, one of the freest and most enlightened nations in the world, the people fulfill with fervor all the outward duties of religion.”
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What de Tocqueville described still holds true today. As the late-Harvard professor Samuel P. Huntington put it, “Religion has been and still is a central, perhaps the central, element of American identity. America was founded in large part for religious reasons, and religious movements have shaped its evolution for almost four centuries.
By every indicator, Americans are far more religious than the people of other industrialized countries.”
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If we are feeling lost and wondering what our national purpose and direction should be, Huntington argued that we will find the answers by looking at our faith and culture.

Our faith, values, and culture bind us together. If we lose our commitment to common values, the country will inevitably fragment. Aristotle understood this and believed it to be the hub in the wheel. Without a common morality, he warned, a political community would become “a mere alliance.”
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This makes the United States unique among the nations of the world. As I mentioned earlier in this book, most national identities are tied to geography or ethnicity. Americans are different. We recognize the beauty of our country, but we don’t call ourselves Americans because of the soil beneath our feet. Back in 1849 a European visitor noted that an “American exhibits little or none of the local attachments which distinguish the European. His feelings are more centered upon his institutions than his mere country. He looks upon himself more than in the light of a republican than in that of a native of a particular territory.... Every American is thus, in his own estimation, the apostle of a particular political creed.”
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Nor is it simply our common history that makes us Americans. We should be inspired by what occurred at Plymouth Rock and Gettysburg, but these events are examples of what it means to be an American—they don’t make us Americans. There are millions of Americans such as myself who don’t have any familial link to those historical events but who are touched by them because they reveal values.

What defines us are our values and ideals, our commitment to individualism, a spirit of independence, limited government, and the
American spirit. The Founding Fathers identified these values for us in the Declaration of Independence and the Constitution. They also selected three Latin phrases to define our republic. The first is well known:
E pluribus unum
(“From many one”). The other two, which you don’t hear much about anymore, speak to the Founders’ sense of the historic nature of the American project. One phrase was
Annuit coeptis
(Providence has favored our undertakings); the other was
Novus ordo seclorum
(A New Order for the ages).
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Clearly, from the very beginning our Founders were motivated by a sense of American exceptionalism. And what make us exceptional are our culture and our national ideals.

Our political system has worked brilliantly for more than two centuries because it could rely on a culture in which people share a common commitment to doing the right thing. As John Adams warned, “Our Constitution was made only for a moral and religious people.”
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Without that, even a democracy could simply become the will of the mob.