They were accusing him of impropriety. We agreed that the
very idea of propriety in business is pretty laughable. Why is this the case
and how do we respond?
In the realm of interest and debt, investment and risk there are times when businesses settle with creditors for less than the agreed for amount. While to some this seems less than ethical, the truth is (as usual) a bit more complicated.
An agreement is an agreement... right? At least Tevya
thought so in Fiddler on the Roof until he was proved wrong. Sometimes it's not
that simple.
For example a lender may look at a situation where they've
received payments with interest, and they may have already generated a profit
but are now willing to break the contract and make a final settlement.
Why would they do this? If the debtor is about to collapse
or reach a point of being unable to pay they run the risk of all payments
stopping. They would rather 'settle', squeeze a little more money out of the
deal and let the debtor go free and walk away. In many cases they're still
making money, just a bit less that they would have if the agreement had been
allowed to mature or finish the term.
While on the one hand it looks like an agreement is being
broken, on the other hand it just makes good sense. The Capitalist ethic
demands a maximizing of profit coupled with maximum efficiency and in that
particular case... settling does that.
Is the debtor still under obligation to pay back the full
amount with interest?
Many Christians would insist that he is. Why? Those were the
terms of the contract. But if the lender's interests are to tear up the
contract and negotiate a settlement, then what's the problem?
You gave your word.
Really? Is it that simple?
In a world of exorbitant interest rates is this always that
easy? What about the concept of risk? Capitalism and the whole notion of
investment are rooted in risk. That's why the purveyor of Capital is supposed
to reap the greater reward. Can risk be eliminated? If every business that
collapsed left the lender with an obligation to pay back every dime, not only
would American business law with respect to corporations have to be changed,
but you would find very few people willing to risk taking a loan.
Well, that's good some would argue. People shouldn't go into
debt.
At this point I might agree with them, but in terms of the
Western economic system you have to just smile. They don't understand how it
works. The whole thing would quickly collapse.
Ironically in the American system the individual borrower is
burdened with a great moral obligation but the corporation is exempt. The
'smart' business people have learned how to insulate their personal borrowing
and risk by putting it in the context of business and corporate law. Does this
mean they're more ethical or have they just learned how to work the system?
Very few people, even the church elders would say that an individual is responsible
for paying back the lingering obligations of a collapsed business.
The ethics here get a little fuzzy. There are arguments to
be made for structuring the legalities in this way. It allows individuals to
take risks by forming corporations or partnerships without risking
self-destruction. Is it moral? It depends how you define morality.
Capitalism as a coherent system is a child of the
Enlightenment. The principles are viewed as laws of nature akin to mathematical
concepts and physical laws like gravity. Because there are 'laws' attached to
the concept of the market, then those laws carry a moral and ethical weight. A
Christian Capitalist can argue the consequences are also moral and Christians
have laboured to prove this system is Biblical. If they're wrong, then the
ethical implications are pretty staggering.
Some are ardent advocates and believe in the morality of the
system while others seem to realize the system while supposedly perfect on
paper operates in a very flawed way in a real and fallen world. Some turn
Consequentialist and say that's the way the world is, let's make the best of
it.
Is that the approach taken in the Gospels and the rest of
the New Testament? Are we to just go along and get along? Not a few Scripture
twisters will argue this is the case. Others suggest we need to exploit the
'loopholes' of the fallen world. Many just refuse to look reality in the eye
and have never really wrestled with these issues.
Now if they're willing to admit the whole thing is one big
farce, an immoral racket that we (as Christians) should have as little to do
with as possible I will happily agree with them.
But for Christians that means economic disenfranchisement.
It means Christians are going to be at the bottom (where I believe we belong),
and we certainly won't be the movers and shakers in society. This presents a
theological tangle for many of these folks. A substantial number of people have
embraced a theological paradigm which equates piety and Kingdom growth with cultural
advancement and success. I would argue you
can't have it both ways.
It's even more problematic if they're going to agree with me
and still try and maintain the fiction that the West is somehow representative
of this nebulous (and erroneous) concept called Christendom.
What if you're struggling along to pay your debt and the
lender decides to sell your debt to someone else? Did you contract with the
other party? Are you still obligated? Maybe the contract stipulates that
they're permitted to sell your loan to a third party. Okay, but in many cases
the Third Parties are little more than bottom feeders paying pennies on the
dollar to purchase delinquent loans. They know that 99% of the time they're not
going to get anything near the full amount. They're purchasing the loans of
people who are in financial straits. They're deliberately targeting people they
know can't pay. That's why they only pay pennies on the dollar. The primary
lender is just dumping the loan and try to squeeze the last little bit out of
it before they wash their hands and walk away.
The Bottom Feeders/Third Party now harasses the debtor and seeks
a settlement. For them it's almost all profit. They often employ ex-convicts to
man their call centers and a sleazy law firm to back them up. They get you to
pay something, and your incentive is that they'll remove the thing from your
credit report.
It's all a dirty business....on all fronts. Yes, we
shouldn't take out loans that we can't repay, but business and investment
contain elements of risk. That's the nature of our society.
Again just to re-emphasize, as Christians maybe we should
re-think that. I'm all for such a review. But it will have social implications
for Churches and individuals that are looking to move within not only
influential circles but even the middle class itself.
After settling with a third party, is the Christian
obligated to still pay back the balance of the loan to the first party, the
original lender?
Again, if you look at how loans are structured, the first
thing they do is get their money back out of it. You'll spend years paying
interest before you even substantially touch the principal. By then you've
already more or less repaid the original amount you borrowed. How guilty should
we feel? I don't know. It's all a bit of a game.
Contractually after the final settlement your obligation (in
terms of the law) is rescinded.
There are mechanisms in the business world... accounting tricks
and the tax code that allow businesses to shrug their shoulders at these loan
defaults. Obviously too many will hurt them, but they expect quite a few every
year and use them to their advantage. In some cases the lenders would not only
be confused but distressed if you attempted to pay them back post-settlement.
You might generate a bit of an accounting headache for them as that money would
have to be received in a different way than interest on a loan.
In the end I think there's no black and white answer. What
matters is the heart. Did you set out to deceive? Are you defaulting because of
indifference or for some other motive?
It's ironic because the financial industry has been spent a
great deal of time carrying on about the ethics of borrowers and the more
dubious ethics involved in a default... but they never question their own actions. They never for
a moment pause and consider the structuring of loans, the taking advantage of
people in distress, charging exorbitant rates, locking up money to squeeze a quick
investment dollar out of it, charging endless made up fees, not to mention the
way they pay out bonuses.
Investment and brokerage houses think nothing of harming
clients when it serves their own interest.
If our ethic is to do unto others as we would have them do
unto us, the financial industry cannot point a finger.
Does their misconduct excuse our own? Of course not. I'm
merely pleading for a little perspective. The whole system is the fruit of
man's fallen conduct.
We have a problem, because we have an entire economy, an
entire society that's built a model that demands and rewards selfishness and an
ability to take advantage of and manipulate others.The more you learn about the financial industry the more you will realize just how corrupt and rigged the system is. So how do we respond?