Monday, December 15, 2008

Judaism and bailouts

I can make a Christian case against the various bailouts-- and a very strong case against Christians pursuing bailouts-- but I'm not all that familiar with what other religions have to say about such things.

Here's a WSJ article by Robert Schonberger (hat tip: Linda Christiansen) to explain this gap in my knowledge:

It's well known that the world's oldest religions have a lot to say about that most timely of concerns, money. If we'd all followed the Muslim ban on lending with interest, for example, we wouldn't have this credit crunch. (Of course, we also wouldn't have credit.) But what's less well known is that religions have dealt specifically with credit crunches before. Judaism came up with one answer surprisingly relevant to our own day.

Two thousand years ago, Rabbi Hillel the Elder, the head of the rabbinic court during the reign of King Herod, faced a liquidity crisis in the debt markets of his day. Hillel saw that the rich were refusing to lend money to the poor because biblical law mandated debt forgiveness during the Sabbatical year [in Deuteronomy 15]...With this dictate in mind, lenders would refuse to do business with debtors as the Sabbatical year approached.

In response, Hillel inaugurated a controversial legal construct known as a "prozbul," which effectively nationalized private debts. In so doing, he allowed lenders to bypass the dictates of Deuteronomy, which demanded debt forgiveness only between individuals -- debts owed by a person to the community at large were exempt. This sweeping transformation of privately held debts into publicly held obligations is recounted in the Mishnah, the great codification of Jewish law from Hillel's time.

Without overplaying the parallels of Hillel's debt crisis to our own day, it is worthwhile to reflect on Hillel's ancient struggle to accommodate the demands of his moral system while also remaining responsible for the practical realities of keeping an economy going. Hillel saw that letting his own debt crisis continue was not without moral costs....

Hillel knew that if he did not offer a public bailout for lenders, not only would the poor suffer, but he would be leading both rich and poor to moral as well as economic ruin. Nevertheless, the Torah prophecy remains clear that a truly just society ought to engage in periodic debt forgiveness...

Fast forwarding to our own times, Henry Paulson's attempted bailout of the debt markets is a bitter moral pill for most Americans to institute a Sabbatical year not for the poor among us, but rather for Wall Street America today we are returning [to this dilemma] with a historical irony that is hard to miss. Mr. Paulson's plan is, after all, a rejection of the morals of modern finance in favor of the morals of Deuteronomy, but with a perverse role reversal between rich and poor, lenders and debtors.


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