Sukkot and the Great Meltdown

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All the Jewish holidays are times of rejoicing, but only Sukkos is specifically known as “the time of our rejoicing.” The special joy of Sukkos is connected to the extra measure of closeness to God we feel as we leave our fixed, permanent dwellings to spend a week in an impermanent structure, with no fixed roof over our heads.

That miniature exile, explains Rabbi Eliyahu Eliezer Dessler, leads to a negation of the material world (bitul hayesh) and paves the way for a greater closeness to God. The sukkah is a reminder of the Clouds of Glory that protected our ancestors in a howling wilderness, and helps us feel God’s enveloping love.

THE ENTIRE WORLD is currently experiencing its own form of negation of the material, though few have been heard expressing much rejoicing . World stock exchanges are crashing, and the retirement nests that millions had squirreled away in “safe” pension plans are disappearing. The only question according to many economists is whether we are on the cusp of a worldwide recession or depression.

Already the meltdown in financial markets has had major consequences. Two of the world’s leading investment banks have bit the dust, and the rest are being reorganized on a completely new footing. The American presidential election, which was a dead heat three weeks ago, increasingly looks like it will end in a Obama rout, though he has given no indication of any economic understanding and even though one of the causes of the crisis was the pressure placed on banks by Democratic legislators to offer mortgages to non-creditworthy home purchasers. (By speaking more frequently and impulsively, McCain has removed any doubts about his own grasp of economics.)

Whatever slim chance remained that President Bush might act to thwart Iran’s nuclear ambitions prior to leaving office have been reduced to zero. The global economy could not bear another such shock at present.

In my own community, the social safety net based on private philanthropy from abroad has been removed from under thousands of families, as much of the massive wealth which supported thousands of chesed organizations has disappeared.

ECONOMISTS WILL STUDY and debate the causes of the meltdown for years. But one thing is clear: part of the crisis has a moral component – in particular a severing of the relationship between productive activity and wealth. Decades ago, I read that the economic future of a society could be judged by the ratio of engineers to lawyers (and, we might add, financiers.) For the last fifteen years, too many of Americas brightest have been drawn not just to the big law firms but to Wall Street and affiliated hedge funds. Rather than to inventing better widgets or finding a cure for cancer, they opted for the quickest way to earn millions.

Financial institutions play an indispensable part of the grease that makes a global economy possible and play an indispensible role in wealth production. But the only thing that the twenty somethings in big Wall Street firms could take pride in was the size of their annual bonuses, which were often in the millions and based almost entirely on short-term profits. Money became the measure of all things.

No wonder the young hotshots ended up, in the prescient words of a 2007 British comedy skit, amalgmating thousands of mortgages pushed upon “unemployed . . . men in string vests” sitting on the porches of tumbledown shanties, into investment packages sold to other investment firms around the world, in which neither buyer or seller had any idea of the value of the mortgages comprising the package. If the underlying real estate turned out to be worthless, well, the bonuses would have already been paid and someone else left holding the bag.

As long as these young men and women were pulling down million dollar bonuses, they were sure that their success owed directly to their superior brains and talents. “They were infused,” writes David Brooks in the New York Times, “with a sense that they had it all figured out.” But the complex risk-allocation instruments and swaps they developed, failed to take into account the markets’ heard psychology, and their risk-sharing swaps only served only to link financial institutions around the world in one death grip, like a drowning swimmer pulling down his would be rescuer.

Hundreds of thousands who viewed their million dollar bonuses as the just measure of their talents are now out of jobs. And the fingers of blame are pointed elsewhere – at dim-witted politicians, failed bosses, and all manner of forces beyond their control.

Not only on Wall Street and other world financial centers was the relationship between productive activity and the enjoyment of the fruits of such activity severed. Americans have been living well beyond their means, unwilling to postpone enjoyment of those things money can buy until that money was earned. Credit card debt swelled to 100% of GNP in 2006 from 50% in 1980.

In the midst of the worldwide depression beginning in 1929, Rabbi Elchonon Wasserman, who would be martyred in the Kovno ghetto, wrote a piece that applies no less to today’s crisis. The problem, he wrote, was not that there was no more money, but that all trust had broken down. The credit upon which any modern economy is based had dried up. Those with money refuse to lend it (check the current interbank overnight lending rates), suppliers will not sell on credit.

Reb Elchonon saw a Divine lesson in that loss of trust. He attributed the loss of trust between people to a loss of emunah (belief) in God.

The sukkah beckons us to leave behind our false sense of security in the physical world and to enter into a different realm, a realm described in the Shemoneh Esrai of Rosh Hashanah and Yom Kippur, filled with awareness of God. The move from our fixed abode to the sukkah allows us to contemplate the world of Spirit, a world without limitation, in which men are not set against one another in competition over a limited pie.

The Talmud interprets the verse, “I caused the Children of Israel to dwell in booths (sukkot) when I took them out of Egypt,” to mean that only by throwing off our bondage to the physical world do we escape the spiritual depravity of Egypt.

Sukkos will not return to all the trillions that have been lost. But it can help us recognize that true joy does not come from the things money can buy and that our ultimate security does not rest in the size of our retirement fund.

Chag Sameach.

This article appeared in the Jerusalem Post on 17 October, 2008

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12 Responses

  1. Reb Yid says:

    To Ori:

    My comment was more about solving or working one’s way through the economic morass. It clearly requires (and has already seen) cooperation and coordination on a global scale.

    And I think we need to rid ourselves of the false binary equation that the only choices in foreign policy are to be belligerent/militaristic or seen as weak/appeasing a la Neville Chamberlain. It’s part of the Rovian tactics that to be patriotic one must wear a flag on one’s lapel, part of the culture war and politics of fear that finally, this election cycle, have boomeranged on the Republicans.

    There are a lot more possibilities in between.

    And in any event, I’m not sure how any of this (or the 6-10 separate anti-Obama articles or postings within the last few weeks) has anything to do with leading a Jewish life to the exclusion of other possibilities.

  2. Ori says:

    Reb Yid: The economic mess also lays bare the myth (as did the Iraq debacle) that the US can do as it pleases, as it perhaps once could.

    Ori: How does the economic crisis stem from the US acting on its own instead of consulting with other countries? If the EU and Japan were consulted, would they have suggested that banks shouldn’t provide sub-prime loans, or suggested that credit rating agencies should do thing differently?

    BTW, whether Iraq is a debacle or not is an open question. Most of the people I read on the subject say it’s not, that the surge is working and Iraq can be expected to become a reasonably secure US ally. But arguably members of the US military with first hand experience are biased.

    Reb Yid: We can no longer be the bully on the block…more nuance, understanding and diplomacy will be required. Some may not like this new reality, but that’s the 21st century.

    Ori: Other than the date, this exact same thing could have been said by the British in the 1930s. The EU has been trying to use diplomacy to get Iran to drop its nuclear program for years now with no success. Diplomacy without credible threats to back it up is just talk.

  3. Lawrence M. Reisman says:

    To YM: I checked out the 1999 article. It states that Fannie Mae was going to slightly ease its credit restrictions to allow some buyers the opportunity to get a mortgage without going into the subprime market. It does not in any way indicate that Fannie Mae was going into subprime loans itself, which it did not. The subprime mess was created largely by unregulated lenders who looked to packaging and selling their loans for the funds to make more subprime loans. The subprime mess exploded because investment banks like Bear Stearns and Lehman took on debt up to 30 times their capital to invest in the subprime mortgage market. There is nothing in the article that would allow you to blame Fannie Mae, except maybe that prediction (made by a resident fellow of the American Enterprise Institute). And the federal assistance going to Fannie and Freddie is nowhere near what happened in the S&L bailout of the 1980s.

  4. Barry says:

    The main article, and some of the comments, brings me to the conclusion that some here are more interested in partisan politics than anything dealing with judaism, and that the author, knows not much more about economics than Sen. McCain. In fact, anyone who knows how to read a data table and cares to do so, knows that Fannie and Freddie’s positions in sub-prime mortgages takes a back position to those of the private securitizers, and that they are considerably healthier than the private end of the business. It just wasn’t their fault. In the congressional hearings of the last couple of days it has become clear that no one in authority claims that Fannie or Freddie problems have caused the meltdown.

    Alas, the author, in claiming to the contrary, just makes himself look partisan.

  5. Reb Yid says:

    The economic mess also lays bare the myth (as did the Iraq debacle) that the US can do as it pleases, as it perhaps once could.

    The truth is stark–we’re much more interconnected, in a global sense. We can no longer be the bully on the block…more nuance, understanding and diplomacy will be required. Some may not like this new reality, but that’s the 21st century. Obama is better equipped for the 21st century, while McCain is more suitable for the 20th.

  6. YM says:

    Charles B. Hall, check out the article “Fannie Mae Eases Credit To Aid Mortgage Lending”, by STEVEN A. HOLMES, published in the New York Times on September 30, 1999 (nine years ago). It is absolutley clear that the Clinton Administration pressured Fannie Mae and Freddy Mac to give more loans to minority groups. The article contains a prediction that when the economy goes bad, a bailout similar to the Savings and Loan bailout of the 1980’s will be necessary because of these loans.

  7. Dave Weinstein says:

    Clarification: I went and looked, and the Gramm authored legislation originally passed the Senate on a party line vote; a compromise bill was bipartison (90-8).

  8. Dave Weinstein says:

    The primary causes of the current meltdown are a deregulatory law authored by Phil Gramm and passed along party lines by a Republican Senate which specifically forbad the government from regulating the securitization of mortgages, and a decision by the SEC in 2004 to remove the capital restrictions on large banks so that they could invest large sums of money in these self-same securitized mortgages.

    Neither is the fault of the Democrats (although you could give Bill Clinton a portion of the blame for refusing to veto a Republican measure).

    To the extent that the push for increased home ownership may have played a contributing factor, that increase is hardly a party line matter. In fact, the Bush Administration pushed heavily for increased home ownership among people with lower incomes as part of their drive for “an ownership society”.

  9. Chaim Fisher says:

    My stockbroker identified Americans’ loss of trust as being twofold: they lost trust in their financial institutions as capital crashed, and they lost trust in their political institutions as some of our poorly-chosen candidates revealed they had aboslutely zero idea what was going on and how to fix it…

    Comptetence counts on Pennsylvania Avenue more than it does on Wall Street.

  10. Charles B. Hall says:

    “one of the causes of the crisis was the pressure placed on banks by Democratic legislators to offer mortgages to non-creditworthy home purchasers.”

    This claim, repeated incessantly by right wing pundits, has been debunked:

    http://www.slate.com/id/2201641

    You would have expected that conventional banks that fall under the CRA mortgages would be in much worse shape, but in fact it is these regulated banks like JPMorgan Chase, Bank of America, and Well Fargo who are cleaning up the wreckage.

    But more importantly, why do you have to spoil an otherwise excellent essay with partisan political points? I can go to dailykos.com or redstate.com for that!

  11. shmuel s says:

    As we complete a shmittah cycle and fill out pruzbol forms, we can now see the economic impact of a “credit crunch” when lenders refuse to lend capital to businesses. Hillel first saw a similar credit crunch develop in his time thus necessitating the pruzbul. One can only be awed to think that for hundreds of years prior to Hillel, klall Yisroel had the bitachon in HKBH to exist without a pruzbol and continued to lend to one another knowing that shmittah would absolve the debtor of his legal obligation to pay.It was only in Hillel’s dor, when machlokes began to proliferate, a generation preceding the churban, did their bitachon begin to wane and the need for pruzbol come about lest the door be closed before the needy. We can only long for a return to a day of such bitachon.

  12. Bob Miller says:

    We can blame government for pushing the banks to transact questionable mortgages to—ostensibly—benefit minorities. The matter of derivatives is another thing entirely. To pile side bet onto side bet, all based on a set of shaky mortgages, is a blot on the credibility of the financial institutions themselves.