The Waiting is the Easy Part

Once again, I had the opportunity to offer the sermon for the Sunday after Christmas, since our regular pastor is visiting his family in West Virginia.  So what follows is the essential make-up of what I spoke on, Sunday, December 28th.

There’s an old church joke you may have heard before, I’d like to share with you:

There was an economist who was reading 2 Peter 3:8-9 and was quite amazed by it and decided to ask God about it.

He prayed, “Lord, is it true that a thousand years are just like one minute to you?”

The Lord replied, “Yes.”

The economist said, “Well then a million dollars to us must be like one penny to you.”

The Lord replied again, “Well, yes.”

Thinking he had the perfect plan, the economist then asked, “Lord, can I have a penny?”

To which the Lord replied, “Absolutely.  Just give Me a minute.”

How often do we find ourselves in this economist’s position, praying for what we think we need and struggling when God’s response appears to be, “Wait”

The Gospel passage for this week that churches across the country are teaching from is Luke 2:21-40, often known as Simeon’s Song.  If you could turn in your Bibles to that passage, and if you don’t have a Bible with you, there are some under most of the chairs.  Luke is the third Gospel, in the New Testament.  Just a few days ago, we covered most of the first two chapters during Christmas Eve services…

Luke writes, “On the eighth day, when it was time to circumcise him, he was named Jesus, the name the angel had given him before he had been conceived.   When the time of their purification according to the Law of Moses had been completed, Joseph and Mary took him to Jerusalem to present him to the Lord 23(as it is written in the Law of the Lord, “Every firstborn male is to be consecrated to the Lord”), 24and to offer a sacrifice in keeping with what is said in the Law of the Lord: “a pair of doves or two young pigeons.”

25Now there was a man in Jerusalem called Simeon, who was righteous and devout. He was waiting for the consolation of Israel, and the Holy Spirit was upon him. 26It had been revealed to him by the Holy Spirit that he would not die before he had seen the Lord’s Christ. 27Moved by the Spirit, he went into the temple courts. When the parents brought in the child Jesus to do for him what the custom of the Law required, 28Simeon took him in his arms and praised God, saying:

29″Sovereign Lord, as you have promised,
you now dismiss your servant in peace.
30For my eyes have seen your salvation,
31which you have prepared in the sight of all people,
32a light for revelation to the Gentiles
and for glory to your people Israel.”

33The child’s father and mother marveled at what was said about him. 34Then Simeon blessed them and said to Mary, his mother: “This child is destined to cause the falling and rising of many in Israel, and to be a sign that will be spoken against, 35so that the thoughts of many hearts will be revealed. And a sword will pierce your own soul too.”

36There was also a prophetess, Anna, the daughter of Phanuel, of the tribe of Asher. She was very old; she had lived with her husband seven years after her marriage, 37and then was a widow until she was eighty-four. She never left the temple but worshiped night and day, fasting and praying. 38Coming up to them at that very moment, she gave thanks to God and spoke about the child to all who were looking forward to the redemption of Jerusalem.

39When Joseph and Mary had done everything required by the Law of the Lord, they returned to Galilee to their own town of Nazareth. 40And the child grew and became strong; he was filled with wisdom, and the grace of God was upon him.”

This entire reading is about waiting.  Jesus waits a week to be circumcised, Mary waits 33 days from the circumcision to be purified and reenter the temple, according to the Levitical law.  Anna had been worshipping at the Temple for probably more than 60 years, waiting for something.  Simeon had been waiting for many years, for he had been told by the Holy Spirit that he would not die until he had seen the Christ.  Now, we don’t know how old he was at the time, although there is a traditional Eastern Orthodox story that would place his age at somewhere around 200+ years at the time he met the Holy Family at the Temple in Jerusalem.  Imagine waiting for almost two centuries for a promise to be fulfilled.  But not only that, it says that Simeon was waiting for the consolation of Israel.

It’s probably not news to you that we as Americans, hate to wait.  We buy microwave dinners, TiVo our favorite shows to watch them commercial-free and logon to the Internet to get our news, rather than waiting for the paper or even the 6 o’clock news.  Yet, we just finished a time of waiting – the season of Advent, a time of waiting and anticipation of the birth of Jesus.  It may surprise you to learn this, but Advent isn’t just a time that commemorates the waiting for Jesus’s birth – it is also the time for anticipating and the celebration of waiting for His eventual return.

So even here in Florida, we’ve been looking forward to Christmas for at least 4 weeks.  Of course, the stores, in a desperate quest for more of our dollars, have been waiting for Christmas since Halloween.  Which just proves that they don’t watch their own sales figures – which show that the last two weekends prior to Christmas are the busiest shopping days of the year.  In fact, Black Friday traditionally ranks as the 8^th busiest shopping day of the year, despite all the ads in the Thanksgiving papers.

The season of Christmas, which for the church started on Wednesday night and continues through the next couple of weeks, is about celebrating that the Lord has fulfilled his promise.  It’s reminding us that the waiting is worth it – the promise will be fulfilled in His time, and we will be even better for having waited for it.  I have often thought that when Jesus said in John 14 that he was going to prepare a place for us, he also meant that he was going to prepare us for that place.

Waiting is hard, but it is essential to the Christian walk, which is why some find it so hard to follow Christ, and others preach shortcuts to God’s blessings and peace.  In his book, Waiting: Finding Hope When God Seems Silent, Ben Peterson writes, “What God does in us while we wait is as important as what it is we are waiting for.”

So if we find ourselves waiting, we have to ask, what is God trying to teach me in this place, at the same time realizing that we may not divine the answer or even realize it in hindsight when the waiting we are doing has past.

The second thing this passage teaches is about Reconciliation.  The act of Mary’s being cleansed by the sacrifice is the act of reconciling her body to once again be able to worship God in the Temple.  The consecration of Jesus as the first born is part of God’s reconciliation for the sins of Cain and Adam, both “first” born.

In verse 25, it mentions that Simeon was waiting for the consolation of Israel.  Seven hundred years prior to this instant, Isaiah had prophesied that one would come to reconcile not only the nation of Israel, but also the Gentiles – a portion of the prophecy many in the Temple at the time of Simeon discounted or disbelieved.  Yet Simeon proves he knows his Isaiah – part of his song directly references two passages in Isaiah,

“I, the LORD, have called you in righteousness; I will take hold of your hand. I will keep you and will make you to be a covenant for the people and a light for the Gentiles, (Isaiah 42:6)

“It is too small a thing for you to be my servant to restore the tribes of Jacob and bring back those of Israel I have kept. I will also make you a light for the Gentiles, that you may bring my salvation to the ends of the earth.” (Isaiah 49:6)

And now Simeon knows he can die in peace, dismissed from his service to God.  Even his death, when it comes, will be a sign of hope.

What’s more, the prophetess Anna also proclaims to all that were looking forward to the redemption of Jerusalem, that the child was to fulfill that prophecy.  Unfortunately, I’m sure many of them misunderstood what form the redemption of Israel would take, just as they would 33 years later.

In just a few days, we’ll be celebrating a new year.  2008, for good or bad, will be over and 2009 will begin.  The new year is often a time of change, a time when people have their hopes raised and the future seems somehow brighter, regardless of what may actually happen.  And this year, for many seems like an even bigger and brighter new beginning.

Just three weeks from now, we will be inaugurating a brand new president.  President-elect Barack Obama campaigned on a platform of change, that, whether you agree with him or not, resonated with a large portion of the American population.  A population tired of housing slumps, foreclosures, bankruptcies, economic bail-outs and rising unemployment rates.

Obama promises to eliminate all of those worries in a sweeping, expensive ‘New Deal’ style package that could be the most dramatic start to a presidency since Franklin Delano Roosevelt’s first hundred days in office.  Barack Obama is promising a redemption of the United States, a return to its greatness.  Will Obama truly bring about a change like many hope?  I don’t know, although if history is any reflection, then the answer is probably no.

But regardless of the success of our new president, we have to ask ourselves, where does our hope lie?  Does it lie in politicians and presidents?  Does it lie in money or possessions?  Does it lie in relationships – families, friendships?

Humans have a tendency to look in the wrong places to find their answers – or to forget what sustained them when they had no answers.

When God led the people of Israel out of Egypt under Moses’ leadership, he set them free from a life of slavery, building temples to other people’s gods.  He brought them, eventually, to the Promised Land – or at least their descendants.  Yet, just a few generations later, in an eerie reflection of their slavery in Egypt, Solomon, the son of David, is using slave labor to build the Temple of the Lord, among other things.  After the dedication of the Temple, God comes again to Solomon to warn him what will happen if the Israelites forget their deliverer and turn to serve other gods.  Solomon promises to obey, but halfway through his reign, he has gotten comfortable, disobedient and forgets who gave him the power he wields, prompting God to punish his descendants and once again tear the Israelites from their home, this time culminating with the destruction of the temple, losing the Ark of the Covenant, and more.

In his latest book, Jesus Wants to Save Christians, Rob Bell points out,

“That’s always the danger, isn’t it?  That we’ll be broken, our empires will collapse, we’ll cry out for help, and when that help comes, when we get back on our feet, when there’s money in our account again, and things are back to how they were, the danger is, once we get it back – whatever ‘it’ is – we’ll forget what just happened.”

We’ll forget that Jesus is the one who saves us, who gives us hope, even in the darkest times, even in the deepest recessions.  I don’t have any figures to back this up, but it looks like church attendance is up across the nation over the past few months.  Not just Christmas Eve, but every Sunday, as people search for answers to the problems in their lives.  The question is, once they have some answers, once they are back on their feet, once their investments start performing again, will they continue to serve God, or will they forget where their hope came from in light of their new-found blessings?  And are we any better?

Our church body, small as it may seem, sponsored two families for Thanksgiving and two more families for Christmas.  In this time of struggling economy, we looked at our blessings, even the small ones, and chose to give, in some cases sacrificially, some of that back to members of our community that were struggling even more than we were.

The challenge is, when things turn around – when we do see better days – and we will see better days – history has taught us that – the United States still holds 90% of the world’s wealth, not to mention other benefits that the rest of the world can’t even imagine – when the waiting is over and the promise comes true, will we still be focused on the One who gives us hope?  Will we remember who He is and what He has called us to do?  Or will we be more like the Israelites, turning our back on the One who saved us and sustained us.

My prayer for you is that you patiently and prayerfully endure the waiting, while seeking to learn and grow, so that when the promise is fulfilled, you remember He who gave you all things, even the very ability to work and earn money.  Reconciliation that leads to hope.  Amen.

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And In the End… The Terrorists Win

On September 29, 2008, I had one of my best days ever on this website.  In fact, I had the second highest hit count ever.  The next two days following also had similarly high hit counts.  Why?  Because of an article I wrote back in April of 2007, titled, “Wachovia Looking Forward to Screwing Customers, Shareholders.”  You can utilize the link to read the whole article, but the gist is this, Wachovia purchased a company known as Golden West Financial Corp, which specialized in “creative financing,” vaulting Wachovia to the #2 slot as an owner/servicer of such wonderful mortgages as Option ARMs and Income-Stated loans.  I went on to predict that 2-4 years from then, that Wachovia shareholders and customers would feel a serious pinch.  Well, depending on who you talk to, whether it was inevitable or was accelerated by the media’s need for ‘forced panic,’ my prediction was about 6 to 24 months off.

Let me be the first to say this, cause I haven’t noticed anyone else pointing it out yet.  The terrorists won.  Go figure.  Let’s step back a few years to September 11, 2001.  If you’ll recall, almost everyone who predicts such things was claiming that the terrorists who flew the planes into the World Trade Center towers and the Pentagon were doing it, for a large part, in an attempt to destabilize the United States economy.  What they did instead was rally Americans to stand beside each other and re-created the sense of community that many citizens had lost.  In fact, due to Americans coming together, the economy actually rose significantly.  Yes, the stock market fell, predictably, but it recovered a lot faster than such events in the past and things seemed very rosy for the American public and the American dream.

Flash-forward seven years and the economy is doing just what the terrorists hoped it would, crumbling under the weight of Capitalist greed.  You see, regardless of which political side you stand on, it’s hard to deny that there is one thing that got us into this mess – greed.  From the family who wants to buy a home larger than they can afford, to the mortgage broker who gets them that mortgage, knowing they’ll probably end up in the hole, but happy with his commission check, to the banks who approved such loans, looking for larger paydays, to government regulators and so-called watchdogs who turned a blind eye to such practices, to Fannie Mae and Freddie Mac who bought the mortgages, knowing that they probably weren’t good investments, but assuring the investing public, that mortgage-based securities were the safest non-insured investments.

And now, we have an $811-Billion bailout package, approved by Congress and the President.  And no, I didn’t misquote that – pull out your calculator and do the math.  For that matter, who needs the bailout?  JP Morgan Chase had the wherewithal to purchase Washington Mutual, Citi grabbed Wachovia (or did they?) and Bank of America picked up Merrill Lynch and Countrywide.

Personally, I am of the opinion that this nation could use a revisit to the Great Depression reality check.  This bailout is not going to help in the long run, just delay things again a little more.  And if our legislators and Chief of State want to really help, they’d send the American public the money, in the form of individually-coded vouchers that they could only utilize to pay their mortgage or rent.  That way, the banks get bailed out, people get to keep their homes, and the economy has a chance of gently recovering.  Trust me, in the long run, the 11% interest they’ll charge the banks for the bailout cash won’t scratch the surface of the long-term effects of this action.

You may be wondering how even the Republicans can support this bailout.  The answer is easy.  You see, we don’t have a true Capitalist society here in the United States anymore.  We haven’t since – guess when – that’s right, the 1930’s, when our esteemed government tried to fix the last Great Depression.

You remember, when Congress and FDR passed “The New Deal” – various legislations creating Welfare, Medicare, Medicaid, Social Security, the FDIC, extending mortgages past seven year terms, the Agricultural Adjustment Act (which pays farmers NOT to grow crops), and most importantly, the Banking Act of 1933 (the second Glass-Steagall Act), which paved the way for the elimination of the Gold Standard.

For the uninitiated, the Gold Standard states that gold is the standard of value for a country’s currency.  In other words, a hundred dollar bill could be redeemed for $100 worth of gold.  You may recall your grandparents talking about gold certificates or silver certificates – those are currency, which, by definition, still fall under the gold standard.  What is most important about the Gold Standard is that it defined the value of our money by “hard currency.”  Without that definition, our money is barely worth the paper it is printed on – as many folks are now learning.  Nixon sealed the deal back in August of 1971, completely eliminating the gold standard, which has not been used by any country since then.  Instead, we use a Fiat money system, which means that our money is intrinsically useless; it is merely a medium of exchange.

From FDR’s own inaugural speech,

Practices of the unscrupulous money changers stand indicted in the court of public opinion, rejected by the hearts and minds of men.

True they have tried, but their efforts have been cast in the pattern of an outworn tradition. Faced by failure of credit they have proposed only the lending of more money. Stripped of the lure of profit by which to induce our people to follow their false leadership, they have resorted to exhortations, pleading tearfully for restored confidence. They know only the rules of a generation of self-seekers. They have no vision, and when there is no vision the people perish.

…there must be an end to a conduct in banking and in business which too often has given to a sacred trust the likeness of callous and selfish wrongdoing. Small wonder that confidence languishes, for it thrives only on honesty, on honor, on the sacredness of obligations, on faithful protection, on unselfish performance; without them it cannot live.

There must be a strict supervision of all banking and credits and investments. There must be an end to speculation with other people’s money. And there must be provision for an adequate but sound currency…”

So all we have to fear is fear itself?  Did I mention how much it cost the US government to finance the various aspects of Roosevelt’s New Deal?  Somewhere between $10 and $20-Billion, over a nine year period, ending with World War II.  Yes, that’s right, just in 1936 alone, the cost was $9-BILLION!  $9-Billion, in 1936! Taxes went up, up, up, needless to say.  Do I need mention that almost all of the programs FDR initiated that still exist today are already Billions of dollars in arrears?  Now we’ve initiated a single bank bailout program that will INITIALLY cost nearly 80-times the total payout for FDR’s programs over a 10-year period.  Hey, maybe we can get Germany to try and take over the world again.

In all seriousness, have we learned nothing from our grandparent’s generation who lived through this mess back in the 30’s?  Apparently not, since we’re on track to fall once more into the well.  Now, there were some really great things that came out of FDR’s reign in the White House.  For one, labor unions and other workforce reforms were put into place that are still in effect which have had a positive effect on our economy – although I would suggest that many of the labor unions have run their course at this point.

But back to the United States economic policies – since FDR’s New Deal, American capitalism has actually been a form of Socialized Capitalism.  Adam Smith would be rolling in his grave.  Again, this was not necessarily a bad thing, as it did help American workers get back on their feet and curtailed industrialist greed, at least temporarily.  In fact, John Maynard Keynes predicted that if the reforms were carried on to their logical conclusion, that we would be working shorter hours and earning more money in just a few decades.

Unfortunately, his theories did not fully anticipate the government’s attempts to siphon-off man hours to help fight the 1950’s Cold War with Russia.  Or the continued movement of women into the workforce that began in 1950 and rose significantly through the 70’s and 80’s.  Not to mention the fact that there is some evidence to suggest that longer working hours leads to sustained inflation, which leads to longer working hours, which leads to – well, you see my point.

So now that we have Socialized Capitalism, where we routinely bail out individuals – to a point where we need some sweeping reforms of the welfare and unemployment programs – so why not bail out corporate America when it gets greedy and overreaching?

This isn’t new news.  Larry Burkett predicted this back in 1991, in his classic, but now out of print book, The Coming Economic Earthquake.  The book includes a chapter that gives a fictionalized account of how things might play out in 1999, if Larry was right.  What’s scary is how very un-fictional much of his story sounds now.  Economic Journalists Neil Howe and Phillip Longman pointed out back in 1992 that government spending for entitlements was out of control and if not curtailed would eventually result in disaster.  Meanwhile Pastor Gary Keesee may have wished his latest book, Fixing the Money Thing, wherein he explains a number of the concept his Forward Financial Group have used to help people out of debt, had come out a few weeks later (or maybe a few months earlier).  In the early chapters, he lays the groundwork of what is happening in the country and also has vision of the future, which turns out to be a little more conservative, but still a horribly scary picture of what our next few months may look like.

And in the end, the terrorists have won.  No matter how this eventually plays out, they’ve proven that Americans are greedy, capitalist fiends.  What’s more, we’ve also managed to prove that our grand system of capitalism is a fraudulent, failed beast – after all, if it really worked, we’d let these banks flounder and recover on their own.  And neither candidate is willing to say which of their programs they may have to eliminate to help pay for this bailout.  My guess is, regardless of who gets elected, we aren’t going to see another personalized economic stimulus package, but rather, higher taxes across the board, for everything from income to foreign goods (tariffs) to telecommunications to tobacco and alcohol and sales – anything to help “stimulate” the economy by saving some bank CEOs’ butts.  The same banks that now charge fees for everything from using the ATM, to cashing a check, to talking to a teller or processing a payment over the phone or Internet.

The worst part is, the American people, as far as I can tell, are largely against the bailout, but the politicians, by and large, ignored literally thousands of calls to the switchboard – not by some artificial grassroots organizations, but from hundreds of actual citizens, taking an interest in the government, trying to let our elected officials know how they thought the bailout should be handled.  They were, unfortunately ignored.  Now, while I’m not usually one to jump on the bandwagon – I usually lean towards the idea that there may have been information that elected officials were privy to that the public is not – I think in this case, Congress and the President should have listened to the people.  And just in case you wondered, here are links to which people voted for and against the bailout – in the House and the Senate.  You might want to take that into account when you head to the polls later this year.

I wish I had more answers to offer, but I don’t, other than to offer a couple of words of wisdom from God’s Word, spoken to the Israelites, “What other nation is so great as to have their gods near them the way the LORD our God is near us whenever we pray to him?  …Only be careful, and watch yourselves closely so that you do not forget the things your eyes have seen or let them slip from your heart as long as you live. Teach them to your children and to their children after them.  Remember the day… if from there you seek the LORD your God, you will find him if you look for him with all your heart and with all your soul.  When you are in distress and all these things have happened to you, then in later days you will return to the LORD your God and obey him.  For the LORD your God is a merciful God; he will not abandon or destroy you or forget the covenant with your forefathers, which he confirmed to them by oath.” (Deuteronomy 4: 7, 9, 29-31)

And, “if my people, who are called by my name, will humble themselves and pray and seek my face and turn from their wicked ways, then will I hear from heaven and will forgive their sin and will heal their land.  Now my eyes will be open and my ears attentive to the prayers offered in this place.” (2 Chronicles 7:14-15)

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Is A Debt Reversal Coming?

It seems like only yesterday, mortgage brokers were encouraging their clients to use the equity in their homes to pay off the high balances on their credit cards.

In all truth, that’s not a bad idea.  First off, mortgage interest is deductible off of your federal income taxes, while credit card interest is not.  Credit cards are revolving debts as opposed to *most* mortgages’ fixed rates.  In fact, paying the minimum owed on a $6000 credit card debt at 19.99% interest rate will take longer to pay off than a $200,000 balance on a traditional fixed mortgage at 8% APR.  And especially with the new higher monthly minimums, a mortgage payment can be significantly smaller than paying even the minimums on several credit cards.  By the way, don’t let your broker reset your mortgage every time you refinance (Yeah, I hear you – this is the last time… unfortunately, the statistics don’t agree with you).

But there may be a strange reversal coming – one that’s already happening in Australia.

Australia’s # 1 newspaper, the Sunday Herald Sun, is reporting that thousands of families are paying their rising adjustable rate mortgage payments with credit cards – to the tune of $160-grand, in one family’s case.  In fact, the Australian Reserve Bank says that credit card holders there took an estimated $1.035 BILLION in cash advances in January 2007 alone.  And that’s not even taking into account 20%-plus interest rates on the cash advances.  And still foreclosures have doubled in the last four years.

Add to that, the fact that, despite the stiffer bankruptcy laws and increases in the minimum amounts owed each month, and credit card rates rising past 30% in more cases than I care to think about… According to the Federal Reserve, United States credit card debt has blossomed an additional $58-BILLION since the payment adjustments went into effect.  And now families who bought more homes than they could really afford or even those who thought they were getting better deals on their current mortgages thanks to the housing boom are finding themselves with rates adjusting up and equity levels dropping dramatically, leaving them no refinance parachute other than going deeper into the hole their banks already dug for them.

So could a debt reversal be on the horizon?  I hope not, but you never can tell…

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George Boelke Fights Crime

I want to point our readers to an excellent article by a true debt crusader in Canada.  George Boelke wrote a book called It’s Your Money: Tools, Tips & Tricks to Borrow Smarter and Pay It Off Quicker and the Spanish language version, Quedese con Su Dinero, a couple of years ago now, and despite losing a huge chunk of money when his publisher went under, has continued to campaign across the country, explaining to consumers about how they should see credit and debt and why they should wonder, “Who’s in your wallet,” rather than what (The fine print is killer, folks)

Anyways, I encourage everyone to check out George’s latest article, “Kinky Mortgage Loans & Predatory Lending: It’s A Crime – But It’s Legal?,” published on the American Chronicle website.  Then ask yourself, are you an unwitting victim or a contributor to the problem?  One of the things George doesn’t mention is that there are a lot of people out there who have NO IDEA that they have Adjustable Rate Mortgages (ARM’s), Interest-only Mortgages and Option-ARM’s, because, while it was “disclosed” to them, the mortgage broker and/or bank glossed over that paperwork while they were signing all 110 pages of your mortgage agreement. Even if you’ve been using the same mortgage company for years (ahem, Countrywide), don’t assume you’re immune.

I also would advise you, if you have any credit cards at all, to check out George’s book, which can be ordered directly from him here. You can check out George’s other insightful articles on debt, credit cards and your family, here.

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Wachovia Looking Forward to Screwing Customers, Shareholders

Okay, so maybe the headlines didn’t say that, but they probably should have.  With the purchase of Golden West Financial Corp., the lender has gone from dabbling in option-ARM’s (better known to the general public as “Pick-A-Payment” mortgages) after the acquisition of World Savings Bank to jumping to the #2 position in the country (Countrywide still holds the Gold).  Ninety-nine percent of all mortgages sold by Golden West are option-ARM’s.  Their secondary business is low-yield CD’s.

The chief administrative officer for Wachovia Mortgage, David Pope told reporters from American City Business Journal newspapers on a conference call that he “…expects loan officers at its branches and other areas of its longstanding system will make more option ARM loans as they become more familiar with the product.”  How lucky for the consumer.  But the news could be even worse for the 4th largest bank’s shareholders.

The CEO of Wachovia, Ken Thompson says he is confident that the $25-billion purchase is a good deal and that his shareholders will see the light shortly.  I’m not so sure.  Despite my obvious misgivings about the consumer use for option-ARM’s  – and I don’t care what anyone else says, there is no use whatsoever for option-ARM’s that in any consumer’s plan; the only thing they do is rack up more profits for the banks (in theory) and mortgage brokers and convince people they can afford homes they have no hope of holding on to in the long run – I would seriously question the judgement of any CEO who is convinced that option-ARM’s are going to benefit his shareholders.

Why are the profits only in theory?  Well, despite the fact that Golden West showed huge profits in the previous year, almost $755-million (or 59.6% of their overall profit) is from deferred interest.  For those of us outside of the banking world, a better term might be “phantom profits.”  In other words, the money’s made up, folks… In any other situation, we’d be screaming for the FTC or SEC to come in and crack down on executives for inflating profits and artificially driving stock prices up.  But this is the banking industry. 

What happens though, 2-4 years from now when the payment automatically and manditorily adjusts up to keep in line with the minimum deferred interest permitted (up to 125% of the loan amount, in some cases) and the consumer is faced with either paying a monthly payment 4-6 times higher than the one they picked or hoping they have enough equity and good credit to qualify for a refinance. 

A pretty big bet, when you’re looking at a collapsing housing market, federal officials talking about suitability regulations, and a banking industry that’s considering self-regulating to prevent getting caught with their hands too far in the cookie jar when the FTC does finally talk notice.

Oddly enough, some market watchers, including Forbes columnist Liz Moyer, criticized new Citigroup CEO Charles Prince for skipping out on the deal to purchase Golden West.  While I am far from Prince’s biggest fan, I’m thinking he made the right move this time around.

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