Wednesday, June 18, 2008

A Spiritual Message in the Credit Crisis

The current economic crisis in which we are in, which started with mortgage problems but spread to most of the banking system in the form of a credit crunch (that is hardly over!), has many lessons for those who are willing to look for them. Some of them are obvious, such as the need to perform adequate analysis before investing in a security. Others are more remote, like the importance of creating compensation packages that promote the right behavior. However, there is one lesson from this crisis that I find meaningful but have not seen anyone else discuss it. It is the fact that corporate denizens, the people who sit behind computer screens and roam the halls of large, faceless companies, created this mess. Why is this significant?

I only heard R. Henach Leibowitz speak once, and one of the questions he was asked was how a yeshiva-trained student, someone who was taught for all his life that he was created to learn Torah, can find meaning in his participation in the working world. This is a critical dilemma for the working person who usually spends the majority of his waking hours in the corporate (or retail, etc.) world. All that time and effort is spent trying to make money. How can a Ben Torah find peace with himself when he spends most of his day on such mundane things? The guilty feelings of being inauthentic to your ideals can be overwhelming.

Click here to read moreR. Leibowitz's response was that people who go out into the workforce should look at it as an opportunity to glorify God's name through praiseworthy behavior. I think that this is a powerful answer because it enables people to find meaning in every potentially mundane act. Furthermore, and perhaps more importantly, it encourages people to be on constant guard to act properly in the office and not fall prey to the many ethical and other pitfalls that come across their path.

Notwithstanding R. Leibowitz's approach, rather in addition to it, I have always struggled to see how my actions in the corporate world benefit mankind. This is usually a stretch. When I worked as a property & casualty insurance actuary, I used to try to make the case that my work enabled people to buy homes, start businesses, drive cars, etc. All of these things are only possible because insurance is available. My colleagues never bought it because it is a rather remote benefit. However, it seemed to me that I was helping society and enabling it to function.

When I moved into Finance, it became harder to see my work as benefiting mankind. Moving money from one large corporation's account to another's hardly seems to make society function. It is very, very remote from the individual customer.

However, what I've learned from the slowdown of the economy is that work in Finance does, in fact, benefit society. It allows people to buy homes (studies show that the securitization of mortgages enables lower rates). It allows banks to lend to other companies, including both big and small companies. It allows local governments to improve infrastructure, and even maintains lower local taxes than would otherwise be necessary.

When things break, you realize that they are important. Finance is broken for the moment. One consolation is that we now know that, when it works right, it actually benefits the lives of many people.

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