Real Estate and Life in Colorado and Beyond

An Ox for an Ox: Chapter and Verse on Subprime Lenders

For their role in stoking the Great Recession of the early 2000’s, subprime mortgage lenders and other bad actors on Wall Street were said to deserve “Old Testament justice.”

More on their misdeeds in a moment.  First, exactly what is that brand of justice?  I went straight to the source—to the Book of Genesis in the Old Testament of the Christian Bible.

We’ve all heard, “an eye for an eye.”   It’s a call for reciprocity.  If someone is wronged or injured, the offender should pay a proportionate price.

That principle is stated many times in the Old Testament. Initially it appears in Genesis, which lays out some very specific circumstances and penalties:

“If someone steals an ox or sheep and then sells or kills it, the thief must pay back five oxen for each ox stolen, and four sheep for each sheep stolen.” (Genesis 22:1)

Penalties apply “when someone leaves a donkey, ox, sheep, or any other animal with a neighbor safekeeping.”  If the animal dies or escapes, the neighbor must take an oath swearing that it was not stolen.  (22:11)

But If the missing creature was “torn to pieces by a wild animal,” no compensation is due.  The remains of the carcass must be shown as evidence.

Suppose someone digs or uncovers a pit and then an ox or donkey falls into it. The offender “must pay full compensation to the owner of the animal.” (22:16-17)

But then they get to keep the dead animal.

When a man seduces a virgin, he must marry her and pay the “customary bride price,” presumably to her father. (22:16-17)

“Anyone who has sexual relations with an animal must certainly be put to death.” (22:19)

(My intent here is not to challenge these biblical rules, but just to contextualize the calls for Old Testament justice in modern times.)

Lending and borrowing are addressed in Genesis 22:25-26.

“If you lend money to any of my people who are in need, do not charge interest as a money lender would. If you take your neighbor’s cloak as security for a loan, you must return it before sunset.”

It seems like just yesterday.  But it was 15 years ago, in the 2008-09 timeframe, when the U.S. economy was deep in crisis.

Subprime home loans were at the center of it. Credit standards were lowered and borrowers were encouraged to take on more debt than they could ever repay.  Lax regulation permitted the purchase of property with no proof of income and little or no money down.

The scheme was based on a belief that home prices would rise forever. When they started to fall. defaults and foreclosures became common, especially in the “sand states” of Florida, Arizona, Nevada, and California.

Wall Street financial institutions failed spectacularly.  Among them were Bear Stearns, Merrill Lynch, and Lehman Brothers.  The S&P 500 stock index fell by 48 percent in six months. Many people lost their life savings. Unemployment was in double digits.

The story was well told in a 2009 book titled “Too Big to Fail,” by journalist Andrew Ross Sorkin.  An HBO movie by the same name was based on the book, with this concise explanation of the entire crisis.

A key figure in 2008 was Timothy Geithner, soon to take over as be head of the U.S. Treasury. Geithner engineered the Trouble Asset Relief Program, a $700 billion bank bailout.

TARP was hugely unpopular. People saw it as a reward for excessive risk-taking. Geithner was seen as a duplicitous ally of Wall Street.

In more recent interviews, he was asked why none of Wall Street’s worst offenders went to prison. Geithner has sidestepped the question, saying it was more important to “put out the fire.”

One candidate for prison time arguably was Angelo Mozilo, who died in 2023.  Mozillo was CEO of what was by far the largest subprime lender, Countrywide Financial.  He was reportedly the target of a criminal investigation and a defendant in more than a hundred civil lawsuits. Mozilo was charged with insider trading and paid a $67 million fine to the SEC for misleading investors.

Geithner has said the saga contained elements of “Old Testament justice.” Americans wanted to see someone pay, and not just by forfeiting a few sheep.  A congressman once said he wanted to see Mozilo boiled in oil.

“Figuratively,” he added, seemingly as an afterthought.  This from a lenghty 2009 piece in the New Yorker.

But Geithner noted that an entire system is what failed, with complicity even by individual borrowers and home buyers—not just lenders and bankers.  Calls for lengthy prison sentences were unrealistic, he seemed to suggest.

Maybe so.  But if that sort of fate wasn’t fitting, there are other biblical admonitions.  This one reminds the wrongdoers what awaits them after death:

“God will keep them securely chained in prisons of darkness, waiting for the great day of judgment.” (Jude: 6)

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