Rogue Trading

It was unveiled today that a rogue trader in the UK was responsible for $2 bn in undocumented losses stemming from unauthorized trading at UBS (formerly the Union Bank of Switzerland).  UBS AG was the largest Swiss bank until it was forced to write down a swathe of subprime mortgage-backed securities in 2008.  This, coupled with accusations of aiding US clients in tax evasion, whittled down its position to become second to its neighbor in Zürich, Credit Suisse AG.  UBS, like other private banks such as Credit Suisse, JP Morgan, Merrill Lynch, Goldman Sachs, etc., does private wealth management, which is, to put it bluntly, banking for the über-wealthy.   Those with hundreds of millions (or billions) usually have a wide range of assets, from cash to stocks to yachts to private jets to expensive Italianate "palazzomobiles", and they need managing from a private banker.  To expose your holdings and allow them to be managed by an institution requires a great deal of trust, which is why banking insiders sometimes refer to this as "relationship banking" because individual bankers normally stay with their customers and get to know them, their habits, etc., and tailor-make solutions to fit their objectives, etc. 

Notwithstanding, when your institution has been assailed by poor investments and legal troubles, private banking customers would be quite nervous about keeping their assets managed by the institution in question.  Of course, ideally, because your banker has established him/herself as very trustworthy, you would stay with the bank despite its troubles.  Unfortunately when things really go south, even a trustworthy banker can't keep a customer.  UBS experienced this outflow of customers and - more importantly, capital - in the wake of the two issues mentioned above.  Since then they have tried to rebuild their reputation as a trustworthy institution.  But as the famous adage goes, it takes a lifetime to build a reputation, but only a second to destroy it.  UBS has, to my knowledge based on Google News (oh so reliable, is it not?) merely stemmed withdrawing customers.  This latest action by a rogue trader will only dent its reputation further.

Churches, in certain respects, are like private banks.  Of course, churches do not operate based on profit rooted in their parishioners' capital (at least, orthodox and biblical churches don't).  Churches are not open only to the super-wealthy (at least, orthodox and biblical churches aren't).  But like private banks, churches have a reputation that is built up based on their public witness.  Private banks measure their reputation based on the trifecta of assets, profits, and customers.  Churches, on the other hand, aren't quite so complicated.  They measure, ideally, their reputation based on their Christian identity.

For a time, when my dad was around, the job to have was one in the finance sector.  Everybody wanted to work in an investment bank.  That's the land of the six-figure salaries for newly-minted college grads.  Of course, in reality, the base salary is only five-figures, but when you add up the bonuses you might accrue (easy given that the stock market at the time was on a serious upward trend), you might arrive at the coveted six-figures.  Customers don't mind that - I didn't hear any complaints from theologians, etc., about those exorbitant bonuses (except Ron Sider of Palmer Seminary) and certainly not from ordinary Christians.   As long as their monies and assets are safe, nobody really questioned the extent of those bonuses.  As a result, the banks got away with an ethical infringement here, another there, they start pushing for subprime mortgages, etc. 

And I suspect the same situation occurs with the church.  The Roman Catholic church has gotten a great deal of flak lately for its handling of the child abuse crisis, particularly in Ireland.  Nobody really questioned the moral integrity of the priests.  After all, they were priests, right?  How could priests do such a thing?  My complaint with the Roman Catholic church is that nobody in the Vatican seems to have a grip on how serious the situation is.  All this goes to show that a leadership full of the best Catholic theologians in the world, all armed with glittering doctorates from the best theological faculties in the world and pastoral experience in the most elite cathedrals in the world, is no guarantee that they know what they are doing.  I would not be surprised if more Catholics leave the faith as a result of the handling of the crisis.  In general, when

What can the church learn from private banks?  Well, perhaps if we clarify what it means to be a "bank", we can shed some light into lessons for the church.  In economics, banks are not maleficent institutions.  Of course, banks are where ordinary folks like me and you store our hard-earned cash.  Our alternative is hiding our paychecks and checks under the mattress, but nobody trusts their mattresses anymore, right?  Banks use the money to lend to borrowers. So, in a rudimentary sense, banks efficiently allocate funding to where it is necessary.  The reason we save money in a bank is because, for one reason or another, we don't need the money at the time.  The reason a borrower wishes to borrow money is because, for one reason or another, they need the money at the time.

Historically, some of the largest borrowers were businesspeople who, to put it simply, had great ideas but are just short of financing.  In the "old days", however, they had to prove to the banks why their ideas were great.  The banks took a skeptical, "devil's-advocate" approach and it was the businesspeople who had to persuade them that they can pay back the loan with interest.  For homeowners, or people who wished to borrow money to add a new wing to their houses, the banks would give money to those who needed it, and would turn down those whose expenditures are unnecessary and whose borrowing history is not quite so stellar.  The economic telos of the banking system is simple: to reallocate money to those who need it to turn good ideas into a reality that ultimately makes the world better.  Indeed, profit is a reward of that, but in no way is profit the motive.  Otherwise, if profit were king, it would be immoral to criminalize social ills such as prostitution, and even slavery.  Profit can never be a legitimate telos except in an amoral society.

In fact, it was this lust for profit that allowed for the ingredients of the Great Recession to coalesce. Indeed, rogue traders come to be because of a lust for profit.  As a banking executive said on Bloomberg regarding rogue trading, the problem is not how do we set up more rules so that rogue trading can not occur, because the very nature of rogue trading suggests that they will find a way to exploit the loopholes.  What is needed is a way to teach traders that such trading is wrong and therefore something that should not even be considered in the first place.

I venture to suggest that the problem with the banking institutions is the lack of a community in these banks.  Of course, one can argue that I'm confusing a bank with a church, but that's not fair, because universities (and other institutions) are communities as well.  I graduated from Wheaton College (IL), and there is a belonging to that particular community, with all its glories and annoyances.  Even if I hated Wheaton College to death (which I don't), the fact is that I hold a diploma from Wheaton, and I cannot exorcise myself from their community.  The fact that I have something in common with Billy Graham and John Piper is quite exhilarating.  Unfortunately, the fact that I have something in common with Dennis Hastert might not be quite as honorific.  Nonetheless, there is a tangent point between my narrative and the story of Wheaton.  And I can say similar things about Princeton as well.

But banks don't work that way.  There is poaching for talent all over the place.  Of course, I suppose there's pride in working for JPMorganChase or UBS, but there's nothing compelling about the firm per se that motivates workers to stay.  Thus, the only way to get them to stay is to pay them very well.  To put it differently, why can't working at JPMorganChase be more like working at Google?  Why can't working at UBS be like working at Apple? 

I can, of course, chalk it up to investment culture, but that's no way forward.  No Christian would accept my excuse for sleeping with many women (for example) if I said, "Well, we live in a sinful world, so deal with that and leave me alone, okay?" Perfect Biblical world is perfect biblical world, but this is the real world, and in the real world, we all are not perfect, so leave me alone.  No!  What silly logic!  But we make that mistake if we say, "Well, Google is tech, and UBS is finance, and both are different worlds, so no way will UBS be like Google."  Frankly speaking, that's not good enough!  And it's not good enough because when something adverse happens to these too-big-to-fail financial institutions, the world starts to get massive financial hiccups!  The fact that there are rogue traders is a warning call that banks need to be less of a profit-making machine than a business community.  Of course, profit is part of that community, but it is a result of a community run and lived well. 

Of course, in the church, there are some who operate like banks.  But this bankish-behavior exists if we start recruiting pastors with talent as opposed to pastors with a calling!  What's "talent" after all?  Is "talent" the ability to write deep books and respond to academic theologians?  Is "talent" the ability to preach in a style the congregation likes?  Is "talent" the willingness for the pastor to go along with what the congregation decides?  If we think in terms of "talent", we begin to be tempted to poach pastors.  At the same time, we start singling out pastors who fit our idea of "talent".  Oh, Francis Chan has the right skin color, right eyes (squinty, obviously), and says things that make us feel right  Oh man, wouldn't it be great if Francis Chan were our pastor?  Oh, Johnny Goodshoes is married, kids all at Harvard, has a PhD in theology from Harvard Divinity School.  WOW!  Wouldn't it be great for Johnny Goodshoes to be our pastor!

But then, pastors start thinking that they're not good enough if they don't have the right skin color, the right eyes.  And they're not good enough if their kids end up going to the University of Illinois.  And they're not good enough if they don't get a PhD in theology from Harvard Divinity.  All this time, however, the problem is not them - the problem, the sad problem, is the congregation who heaps extra-biblical requirements on pastoral candidates that, frankly, are based more on worldly evaluation mechanisms than biblical ones.

So rogue traders teach us more than just "don't be like banks."  They teach us that if we are to be faithful Christians, we need to know when our thoughts and actions deviate from Christianity, and instruct ourselves in conforming to the Christianity that is painted in the Scriptures.  The gnawing truth is that what is Christian is sometimes antithetical to "the real world."  But the fact is that as Christians, we are called to doing what is right in God's sight.  And when we deviate from that narrow way, and uncritically utilize worldly methods in administering our churches, we may unwittingly end up with a church that is far from the biblical ideal.  

And then when things go south in a church like that, like UBS, things go really south.