Catholic Perspectives on the Financial Crisis

As with most crises, the ongoing economic uncertainty has had a reckoning effect on people. Just a few years earlier, the nation was lost in a financial euphoria.  Today, it’s undergoing a profound and humbling period of soul-searching.

For people of faith, it is an especially important moment to examine our role in the country’s economic life. After an era of greed and excess, what is the Catholic approach to capitalism? What principles do and should Catholics apply to managing money?

It is a question the Church must consider every day. More than 1,000 Catholic institutions invest over $3 billion in assets through Christian Brothers Investment Services. This includes dioceses, religious institutes, schools and hospitals. Aligning the spiritual mission of these Catholic investors with their financial goals is the basis of our work. The aim is to fund their missions in a way that is consistent with Church teachings.

Many faith-based investors have watched the financial crisis with alarm.  Investors are both incredulous at the severity of the events and bewildered as to what to do in response, in both moral and practical terms. When governments and financial regulators are themselves bewildered and unclear as to the best course of action, there is good reason for citizens to be as well.

The righteous anger expressed by many Americans is understandable.  It is hard for many to comprehend the justness of public bailouts for banks and financial institutions, especially when some repay the government quickly and seem to return to former practices. After all, risky credit practices are at the center of the crisis that has caused so many individual families to lose retirement savings and jobs.

It is a complicated mess, to be sure, and one where reasonable people can profoundly disagree on the appropriate policy responses.

Whatever our individual political opinions, there is a perspective on this crisis that Catholics can share as socially responsible investors.  We believe that active ownership, or using our role as investors to advance and support Catholic principles, helps promote the development of a just and sustainable economy. That is, an economy that distributes its benefits broadly and fairly, and meets the needs of the current generation without compromising the financial security of future generations.

We can agree that there is something wrong with a financial system that rewards some bankers, traders and hedge fund managers who earn millions during the “good times.” However, when the bad times come, as they always must, it falls on the government – funded by middle-class taxpayers – to repair the damage caused by reckless speculation. Such transparent socializing of risk and privatizing of gain is neither just nor sustainable.

We can also agree that there is something profoundly wrong with a corporate governance system that rewards CEOs and top executives with multi-million dollar pay packages and golden parachutes. Meanwhile many Americans struggle in lower-wage jobs working for the same corporations or, even worse, lose those jobs after years of loyal service. In a more just system, CEO salaries would be tied to whether companies actually create lasting value – for shareholders, employees, and therefore, society.

Many Catholic institutions have long led, supported and sought out active ownership initiatives to address some of the causes of today’s crisis. This means, among other issues, pressing companies to practice responsible lending, and restrain excessive CEO compensation. Religious investors working through the Interfaith Center on Corporate Responsibility have pressed global financial firms to be more forthcoming about the risks they take with shareholder money.

At bottom, there are universally just principles necessary in order for a sustainable financial system to emerge going forward. From a Catholic perspective, these principles must include:

  • Human Dignity. Human beings are created in God’s image. The economy serves the human person, not the other way around.
  • Justice. The moral measure of any economy is how the weakest are faring. A fundamental concern for investors and corporate executives must be the impact of their actions on the well being of families and children, particularly the poor.
  • Stewardship. We are stewards of God’s creation, which it is our responsibility to nurture, respect, preserve and protect for future generations.
  • Shared Prosperity. Wealth is a gift to be shared, and work must be fairly and justly rewarded.
  • Responsible Ownership. Ownership of capital should be used to promote the common good.
  • Corporate Social Responsibility. Business must be responsible to shareholders, employees, and the communities in which it operates.

These principles offer guidance for individual behavior as well as for the laws that govern our financial system. They form the ethical foundation for a just, lasting and widely shared prosperity.

The crisis of the past year only reinforces the need for ethics and integrity to be places at the center of business strategies and decisions.  And the critical relevance of the teachings of our faith to the conduct of global finance has never been more obvious than it is now.

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