Systemic Failure

Last night I watched Frontline on PBS, which was devoted to the recent collapse in the financial markets.  I was impressed (and somewhat DEpressed) by the interconnectedness of all of our financial and corporate entities.  It was this close relationship between seemingly widely divergent industries and markets that caused our current economic struggles.

It went something like this:  Speculation (read "get rich quick") in the real estate market coupled with deregulation of the financial services industry led to a secondary market in questionable mortgages.  This led to a increase in questionable loans, as now there was a ready market to buy these previously unattractive assets.  One of the companies that was heavily invested in these mortgage-backed securities was Bear Stearns.  Once Wall Street got a glimpse at Bear's portfolio, and its heavy mix of troubled assets, the traders voted with their bids, and Bear found itself with almost no value.  Employee stock accounts were now trading at $2.00 a share, when only days before they were in the $80.00 range or higher.

The government stepped in and forced JP Morgan Chase to buy Bear (and backed it with billions in federal dollars).  

Problem solved, right?

Um, no.  Turns out Fannie Mae and Freddie Mac were also top heavy in bad mortgages.  The government stepped in again, this time in the form of huge guarantees from the Federal Reserve.   But then the market noticed that Lehman Brothers was also addicted to bad mortgage money.  The government decided it had had enough, and didn't intervene with Lehman.

Lehman failed.  The markets plunged.  Credit evaporated.  Balance sheets became violently red overnight.  It was September 15, 2008, and strong companies like General Motors couldn't get a loan for one day because even the banks were out of money. 

You remember the rest of the story - huge billion dollar bailouts of the insurance industry giant AIG, automotive behemoths GM and Chrysler, and the entire banking industry.

Almost a trillion dollars went out the door of the federal reserve in the last quarter of 2008.

And the economy still tanked.

What does this have to do with us here on the eMMAUS road?  Well, one of the motivations for saving all of these troubled companies was the idea of systemic failure, that is, the fear that one company could collapse, and all of the companies invested in, and related to, it could collapse, and so on.  Its kind of a negative Bernie Madoff Ponzi scheme situation.  All these companies failing would cause the whole economic system to collapse.

It strikes me that this situation is very much in keeping with our Reformed faith.  We believe that the "system" is broken inasmuch as our world is a fractured place that is not working the way it should.  We also believe that we are connected to each other both inside the church and in the world at large so that we all rise and fall together in the end.

Our scripture this week is another selection from the Gospel of John (John 17:6-19).  It is a difficult read (at least to me) and I struggled to find the point for awhile.  But ultimately it occured to me that Jesus is talking about how we are all connected - to Him, to each other, and to God.  

It is this interconnectedness that is the answer, I believe, to the systemic failure going on in our world.

How could our relationships change the seemingly insurmountable problems facing us?  What are your thoughts on this issue?