Seamus Finn OMI is a priest with the Catholic religious order, Missionary Oblates of Mary Immaculate. He spends a good amount of his time on investment issues. He is a "socially responsible investing" (SRI) consultant and a leader in a new international effort to bring different religious traditions together in using their financial muscle for worthy causes. I asked him what is most on his mind these days: Wheat subsidies? Mining ventures? Gas prices? No, he said, outrage in his voice, it's the credit crisis. The current financial meltdown in the United States reflects failures to look at the ethical implications of basic lending practices right up and down the line. And millions of real people are hurting as a result.
What he sees behind it all is a failure to follow established lending criteria in the sub prime sector and an even more egregious failure to take responsibility for securitization models and the management of risk. And this time it is not like the East Asia crisis of 1997-99, that took place far away. Then, failures of financial institutions could seem abstract even though the numbers involved were stunningly large. What's happening here and now affects real people close to home, in real houses, right here and now, as well as that larger and, for most people, more shadowy financial system. So it brings the underlying issues, many of them ethics 101, right front and center.
The expansion of sub prime lending was not a bad thing, he says. It reaches down to people who otherwise would not be able to buy houses and have a chance at home ownership. They pay higher rates, a penalty for their credit weaknesses, but that is not intrinsically unreasonable. Where the problem comes is in how lending is presented and explained: the infamous fine print. That’s where basic honesty and common sense take flight. That's the start of most of the stories about people who find themselves trapped today. And in that larger financial house of cards? What galls Seamus is that no one seems to have felt themselves responsible for judging the ethics and the merits of the mushrooming lending - the fine print that is part of the structure right from the end borrower to the large firms that have taken on the paper without adequately assessing the risks involved. It's about not taking due diligence far enough, not thinking about who and what level of risk was behind the trends. And the results, as we now know, are catastrophic.
Faith-consistent lending has a fascinating history. Religious institutions have always had assets to invest and usually ponder and discuss the ethics of their investment decisions, at least to a degree. But what is newer is the variety of efforts for different faith traditions to band together and to define more explicitly both the critieria they use to evaluate investments and their social and environmental impacts.. "Faith consistent investing" is a general term for an emerging trend. The Interfaith Center for Corporate Responsibility has been an international leader here and the 3iG International Interfaith Investment Group --is bringing in investors from a wide range of religions across the world.
Financially savvy religious people like Seamus often describe themselves as canaries in the mine: they tend to be out in front testing the health of companies and systems because they ask tough and often uncomfortable questions. As some points, that has led them to withdraw from investments deemed unethical - South Africa, Sudan, arms manufacturers. But the approach today is moving towards more active engagement. Faith consistent investors are raising hell in stockholder meetings, commissioning studies, demanding transparency, filing resolutions, and so on.
The canaries are stronger than they sometimes seem. Their voices carry. But they are often ahead of their time because they ask questions that come not only from financial good sense but from tough deeper lying ethical questions. That’s why Seamus is so indignant that a crisis he saw coming was not caught earlier, and that so many people are suffering as a result.
