Thursday, September 25, 2008


In the midst of our current economic turmoil, there are many talking heads. I have read a number of interesting pieces. The Freakonomics blog of the NYT is always an interesting, if somewhat offbeat look at economic analysis. Steven D. Levitt's post of September 22 is interesting and contains a link to an explanation of the current situation from Doug Diamond and Anil Kashyap. He also includes a link to a brief article by Luigi Zingales from the University of Chicago. It is posted below.

Why Paulson is Wrong
Luigi Zingales
Robert C. Mc Cormack Professor of Entrepreneurship and Finance
University of Chicago -GSB

When a profitable company is hit by a very large liability, as was the case in 1985 when
Texaco lost a $12 billion court case against Pennzoil, the solution is not to have the
government buy its assets at inflated prices: the solution is Chapter 11. In Chapter 11,
companies with a solid underlying business generally swap debt for equity: the old equity
holders are wiped out and the old debt claims are transformed into equity claims in the
new entity which continues operating with a new capital structure. Alternatively, the
debtholders can agree to cut down the face value of debt, in exchange for some warrants.
Even before Chapter 11, these procedures were the solutions adopted to deal with the
large railroad bankruptcies at the turn of the twentieth century. So why is this well-
established approach not used to solve the financial sectors current problems?

The obvious answer is that we do not have time; Chapter 11 procedures are generally
long and complex, and the crisis has reached a point where time is of the essence. If left
to the negotiations of the parties involved this process will take months and we do not
have this luxury. However, we are in extraordinary times and the government has taken
and is prepared to take unprecedented measures. As if rescuing AIG and prohibiting all
short-selling of financial stocks was not enough, now Treasury Secretary Paulson
proposes a sort of Resolution Trust Corporation (RTC) that will buy out (with taxpayers’
money) the distressed assets of the financial sector. But, at what price?

If banks and financial institutions find it difficult to recapitalize (i.e., issue new equity) it
is because the private sector is uncertain about the value of the assets they have in their
portfolio and does not want to overpay. Would the government be better in valuing those
assets? No. In a negotiation between a government official and banker with a bonus at
risk, who will have more clout in determining the price? The Paulson RTC will buy toxic
assets at inflated prices thereby creating a charitable institution that provides welfare to
the rich—at the taxpayers’ expense. If this subsidy is large enough, it will succeed in
stopping the crisis. But, again, at what price? The answer: Billions of dollars in taxpayer
money and, even worse, the violation of the fundamental capitalist principle that she who
reaps the gains also bears the losses. Remember that in the Savings and Loan crisis, the
government had to bail out those institutions because the deposits were federally insured.
But in this case the government does not have do bail out the debtholders of Bear Sterns,
AIG, or any of the other financial institutions that will benefit from the Paulson RTC.

Since we do not have time for a Chapter 11 and we do not want to bail out all the
creditors, the lesser evil is to do what judges do in contentious and overextended
bankruptcy processes: to cram down a restructuring plan on creditors, where part of the
debt is forgiven in exchange for some equity or some warrants. And there is a precedent
for such a bold move. During the Great Depression, many debt contracts were indexed to
gold. So when the dollar convertibility into gold was suspended, the value of that debt
soared, threatening the survival of many institutions. The Roosevelt Administration
declared the clause invalid, de facto forcing debt forgiveness. Furthermore, the Supreme
Court maintained this decision. My colleague and current Fed Governor Randall Koszner
studied this episode and showed that not only stock prices, but bond prices as well,
soared after the Supreme Court upheld the decision. How is that possible? As corporate
finance experts have been saying for the last thirty years, there are real costs from having
too much debt and too little equity in the capital structure, and a reduction in the face
value of debt can benefit not only the equityholders, but also the debtholders.

If debt forgiveness benefits both equity and debtholders, why do debtholders not
voluntarily agree to it? First of all, there is a coordination problem. Even if each
individual debtholder benefits from a reduction in the face value of debt, she will benefit
even more if everybody else cuts the face value of their debt and she does not. Hence,
everybody waits for the other to move first, creating obvious delay. Secondly, from a
debtholder point of view, a government bail-out is better. Thus, any talk of a government
bail-out reduces the debtholders’ incentives to act, making the government bail-out more

As during the Great Depression and in many debt restructurings, it makes sense in the
current contingency to mandate a partial debt forgiveness or a debt-for-equity swap in the
financial sector. It has the benefit of being a well-tested strategy in the private sector and
it leaves the taxpayers out of the picture. But if it is so simple, why no expert has
mentioned it?

The major players in the financial sector do not like it. It is much more appealing for the
financial industry to be bailed out at taxpayers’ expense than to bear their share of pain.
Forcing a debt-for-equity swap or a debt forgiveness would be no greater a violation of
private property rights than a massive bailout, but it faces much stronger political
opposition. The appeal of the Paulson solution is that it taxes the many and benefits the
few. Since the many (we, the taxpayers) are dispersed, we cannot put up a good fight in
Capitol Hill; while the financial industry is well represented at all the levels. It is enough
to say that for 6 of the last 13 years, the Secretary of Treasury was a Goldman Sachs
alumnus. But, as financial experts, this silence is also our responsibility. Just as it is
difficult to find a doctor willing to testify against another doctor in a malpractice suit, no
matter how egregious the case, finance experts in both political parties are too friendly to
the industry they study and work in.

The decisions that will be made this weekend matter not just to the prospects of the U.S.
economy in the year to come; they will shape the type of capitalism we will live in for the
next fifty years. Do we want to live in a system where profits are private, but losses are
socialized? Where taxpayer money is used to prop up failed firms? Or do we want to live
in a system where people are held responsible for their decisions, where imprudent
behavior is penalized and prudent behavior rewarded? For somebody like me who
believes strongly in the free market system, the most serious risk of the current situation
is that the interest of few financiers will undermine the fundamental workings of the
capitalist system. The time has come to save capitalism from the capitalists.

Monday, September 22, 2008

Fallout Continues

Making the rounds, I found this post of the letter to Duncan. I was shocked by some of the comments. Comment 5 is extremely grown-up...They will know we are Christians by our love.

Stand Firm

Saturday, September 20, 2008

From NYT

For Wall Street’s Needy, No Separation of Church and Sanity

Trinity Church was founded in 1697. The current church, at Broadway and Wall Street, dates to 1846. (Photo: Bess Greenberg for The New York Times)
Trinity Church, which became an emotional refuge amid the fallout at ground zero, is offering services to its neighbors during a time of crisis: free spiritual and psychological counseling for workers who have been affected by the current Wall Street financial turmoil.

Note: Sessions are free, in contrast to the $600-an-hour therapists trying to help some of the masters of the universe who helped create this mess.

The church is offering the service of two therapists from its affiliated Psychotherapy and Spirituality Institute of New York City, whose Web site is, notably, the very holistic

Dr. Mary Ragan, who has done work after 9/11 and Hurricane Katrina, welcomes “people to come share their experiences, questions and anxieties in a compassionate and helpful space.” Dr. Michael Bednarski, a consulting psychologist, will offer career counseling.

Therapy for money-related stress counseling has been on an uptick since the 1980s, when a wave of mergers and acquisitions created a flood of white-collar layoffs. Then came the recession of the early 1990s, coupled with war.

The loss of a paycheck can rattle a marriage and put a strain on families who need two incomes to make ends meet.

There have been financial crises before: the crash of 1987, the dot-com bust and the aftermath of 9/11. But therapists have said the current economic downturn — with its cascade of layoffs and the steady beat of grim financial news — has exacted an especially daunting psychic price. They have described a “psychological terror” that has haunted the corridors of troubled financial institutions since last summer.

Psychotherapists have said that Wall Street employees — who are often drawn to the intensity and volatility of their profession — are more prone to anxiety, depression, substance abuse and other mental stresses than the general population. And because they are typically measured by the size of their paychecks — bonuses, in particular — their self-worth is deeply threatened when the money evaporates.

As this may be the worst financial meltdown since the Depression, what we are witnessing may mark the end of the second Gilded Age. (The first one ended also with a financial crisis, the Panic of 1893 that led to serious depression lasting until 1897).

The current crisis may not be as visually devastating as Hurricane Katrina, but the repercussions throughout New York City and the country — economic and otherwise — may be even more so.

All the following sessions will be held at 74 Trinity Place in the second floor parlor.

Coping With Stress in Uncertain Times with Dr. Mary Ragan

Mondays, Sept. 22 and 29, 12:45 to 1:30 p.m.
Wednesdays, Sept. 24 and Oct. 1, 5:15 to 6 p.m.
Navigating Career Transitions with Dr. Michael Bednarski

Monday, Sept. 29, at 4 p.m.
Thursday, Oct. 2, at 6 p.m.

Friday, September 19, 2008

Bishop Duncan Speaks

Bishop Duncan's Statement on his "Deposition"
Document Actions

It is a very sad day for The Episcopal Church. It is also a sad day for me, a faithful son of that church.

Nevertheless it is also a hopeful day, hopeful because of the unstoppable Reformation that is overtaking the Christian Church in the West. It is also a hopeful day for me personally as I am unanimously welcomed into the House of Bishops of the Anglican Province of the Southern Cone, an act applauded by Anglican archbishops, bishops, clergy and people all around the world.

The Episcopal Diocese of Pittsburgh will move forward under its new Ecclesiastical Authority, its Standing Committee. That body will carry the diocese through to our realignment vote on October 4. With the success of that vote, it will be possible that we be joined together again as bishop and people.

I offer my deepest thanks to the company of saints all around the globe who have sustained me, my wife and all who are dear to me in these days.

Robert Duncan

- Posted September 18, 2008 -


It is sad. Deposition, for whatever reason, is no cause for celebration. Reform of the Church is a worthy and lofty goal. The demand of the Gospel is to grow in faithfulness. What we have is a disagreement as to how that should happen. There are arguments that all the voices offer that I find compelling and persuasive. The scriptures are the supreme source of authority, and are to be taken seriously. The question is how do we reconcile the Church to that authority? Are the scriptures a list of eternal dos and dont’s? Yes, but certainly more than that. Jesus’ own use of the Hebrew Bible would seem to indicate a deeper view. Do varying views justify the escalation of our conflict?

I have no particular canonical expertise. There will certainly be arguments offered based upon canon. Structure and process are important. It seems clear to the casual observer that Duncan was in the process of removing his diocese from the Episcopal Church. That is certainly what the House of Bishops found and affirmed in their vote to depose Duncan. While we are members of the Anglican Communion, attempting to take a diocese out of the Episcopal Church doesn’t strike me as being faithful to this church. I don’t question Duncan’s faithfulness to the Gospel, but it is clear that he feels he can’t remain in the Episcopal Church. I applaud him as a man of conviction, despite my disagreement with his conclusions and actions.

If you are committed to reforming the Episcopal Church stay and do it. If you feel it impossible, I understand the need to leave; go in peace. Yet, realignment for the sake of remaining in communion with Canterbury and keeping property is an, until recent times, untried and unprecedented act. Let’s not pretend it is reformation of the Episcopal Church. It is leaving it in hope of replacing it.

I long for some kind of settlement. I wish the Episcopal Church would meet with those that are, let’s face it, already gone, and work out the property issues. Surely, some property could be sold to those departed and departing. Let’s have a look at a map of parishes, measure the desires of parishes, and settle this thing. Sell some buildings to those that want to go, and keep some buildings for those that want to stay. Proceeds could be used to start new Episcopal churches, and those leaving would have a home. I wish we were as committed to the Gospel, as we are buildings.

I fear we will not settle any of this anytime soon, because we are all too busy wrapping ourselves in moth-eaten cloaks of pretentious holiness, the same type Jesus encountered.

Thursday, September 18, 2008

This in from The Lead on the Duncan Deposition

Duncan deposed
The Episcopal Church's House of Bishops has deposed Bishop Robert Duncan of Pittsburgh for abandonment of communion. Eighty-eight bishops voted in favor of deposing Duncan, 35 voted against and four abstained according to several sources in the House of Bishops.

Two statements from the Diocese, which was clearly expecting this outcome, are here and here. Note that Geoff Chapman, author of the Chapman Memo is a member of the Standing Committee. The statement is not unanimous. The Rev. James Simons, who opposes secession, did not sign. Geoff Chapman, as you may recall was the author of the "Chapman Memo" which put forth a plan by which a group of conservative Episcopalians intended to gain control of the assets of the Episcopal Church.

As Ann Rogers of the Pittsburgh Post-Gazette points out in a story written before the vote:

The step comes as the Diocese of Pittsburgh nears an Oct. 4 vote on whether to secede from the Episcopal Church -- the U.S. branch of the Anglican Communion -- and realign with the more theologically conservative Anglican Province of the Southern Cone in South America.
Here is some additional background from Episcopal Cafe.

The group "Progressive Episcopalians of Pittsburgh" (PEP) has released a statement and published it here.

Paul Marshall, Bishop of Bethlehem, writes, in a preliminary letter to the Dioceses:
The House of Bishops voted at about 3:15 today to authorize the Presiding Bishop to carry out the deposition.
I will have a good deal more to say about this at our clergy retreat and diocesan convention. Like many bishops, I came here willing to have the matter postponed, but information revealed last night, along with other factors discussed in this morning's session, led to all four Pennsylvania bishops voting yes at the roll-call vote, which I am sure someone will publish.

It is a matter for some rejoicing that a house that described itself as "dysfunctional" in 1991 carried itself through this deeply-felt matter w/o any acrimony or even raised voices. Strong positions were taken on both sides, but with respect, charity, and restraint.

The four PA bishops also met this morning to determine ways we can support the remaining Episcopalians in Pittsburgh, and I will keep you posted on those developments as well.


Reports are also appearing online that the bishops were motivated to take this step in advance of the vote by Diocese of Pittsburgh, October 4th, to avoid another situation similar to the one in the Diocese of San Joaquin. Two entities are making claims to the assets of that Episcopal Diocese. This concern was enough to motivate a number of bishops who came to the meeting prepared to defer a vote to change their minds and vote to depose Bishop Duncan at today's meeting.

epiScope has the Episcopal Church press release here including this statement from Bishop Lillibridge of West Texas:
“As difficult as this decision is for me and many others in our Church, it is important to realize that the decision in the House today was not based on the theological convictions of Bishop Duncan, but rather on the evidence presented regarding statements and actions concerning moves to take the Diocese of Pittsburgh out of the Episcopal Church.”
Statement of Presiding Bishop Katharine Jefferts Schori on the actions of the House of Bishops, Thursday, September 18, 2008
The House of Bishops worked carefully and prayerfully to consider the weighty matter of Bishop Duncan. The conversation was holy, acknowledging the pain of our deliberations as well as the gratitude many have felt over the years for their relationships with, and the ministry of, Robert Duncan. The House concluded, however, that his actions over recent months and years constitute “abandonment of the communion of this church” and that he should be deposed. Concern was expressed for the people of the Episcopal Diocese of Pittsburgh in the face of leadership which has sought to remove itself from The Episcopal Church. In the days and months ahead, this Church will work to ensure appropriate pastoral care and provision for the members of the Diocese of Pittsburgh, so that mission and ministry in that part of Pennsylvania may continue in the name of Jesus Christ and in the tradition of the Episcopal Church.
Following are some other statements from bishops:

A statement from the Rt. Rev. J. Jon Bruno, Bishop of the Episcopal Diocese of Los Angeles, September 18, 2008
The Bishops of Los Angeles are in full agreement with the clear reasons why the Rt. Rev. Robert Duncan is to be deposed as bishop of the Episcopal Diocese of Pittsburgh.

The Title IV Review Committee certified in 2007 that Bishop Duncan has abandoned communion of the Episcopal Church, defined by the canons as "an open renunciation of the Doctrine, Discipline, or Worship of this Church ..." (Title IV, Canon 10, Section 1).

Bishop Duncan has persisted in his attempts to lead large numbers of people out of his diocese and into affiliation with the overseas Anglican Province of the Southern Cone -- even after our Presiding Bishop, and also the Archbishop of Canterbury, most recently this summer at the Lambeth Conference, called for an end to such actions.

The House of Bishops' vote calling on the Presiding Bishop to depose Bishop Duncan is a direct result of Bishop Duncan's actions, and not a referendum on his beliefs. People may leave the Episcopal Church as they choose, but dioceses, constituted by the General Convention, do not leave. Rather, the property of dioceses and congregations, given by past parishioners, is held in trust for the Episcopal Church's mission at present and for the future.

The people of the Diocese of Pittsburgh especially need our prayers at this time, and the faithful Episcopalians there need our reassurance that their congregations continue as part of the Episcopal Church. We also pray that Pittsburgh's diocesan convention, meeting on October 4, will choose a course of continuing and vital mission within the Episcopal Church.

A statement from Paul Marshall, Bishop of Bethlehem, correcting some misinformation in the blogosphere:
There is already a huge amount of misinformation and, sadly, disinformation on the web, so I will make a few points about today and leave you in peace as I go to dinner with my colleagues at the new church center in SLC.
Bishop Duncan's deposition was not approved because of what he _might_ do in October, but on account of what he has done heretofore. That was the only basis on which the PB, the Review Committee, or the House had any business proceeding.

The House of Bishops did not have the choice to say, oh, well, he should have a full-blown trial (which is actually more damaging to the defendant). Priests and lay people in Pittsburgh filed the complaint that his actions came under the meaning of the canon by abandoning the discipline of the church. We could act only on what the complainants in Pittsburgh laid before us.

Bishop Duncan was invited to come, with any witnesses and other evidence he might wish to produce, to the hearing last night and the sessions today. He could have easily purged himself of his abandonment of communion, but chose not to. I believe this attests to his basic integrity, by the way.

The House upheld the rulings of the Chancellor, Parliamentarian, and the PB, that the canons were being appropriately applied. It was deeply uncomfortable for me to observe people who have over the last decade or so personally behaved with a somewhat remarkable flexibility about the rules of the church's life suddenly emerge as strict constructionists of certain canons. I wanted to rise to the mic and discuss the Commerce Clause with them, but did not feel it would add anything to an essentially ecclesial matter. That day may come, however.

As to the canon in question (IV-9), it describes several sets of ways one may be judged to have abandoned "the doctrine, discipline OR worship of this church." None of those ways require joining another church (which Robert Duncan claims to have done as of this morning). In a later section of the canon, we learn Abandonment can consist of as small an act as performing episcopal acts for churches not in communion with TEC. Had the complainants addressed that issue, of course, the case would have been even stronger.

The House, I think, has eight lawyer-bishops in it, and certainly contains many very sharp people in terms of our history and theology, so it would be very unfair to allege, as one colleague has publicly done this evening, that the proceedings of the last 24 hours were shallow or misinformed. While I heard things I disagreed with or thought ill-founded, I find that the bishops here are all people of considerable depth, and many of them have great breadth of learning as well.

The PB's leadership was, consistent with her entire public ministry since her election, flawless. She allowed no space for anything vindictive or self-pitying, and kept us focussed on our task. I was deeply impressed by how she handled herself at Lambeth, and am even more grateful for how she conducted herself during these days.

I really will stop now. I will see many of you next week and we can discuss things further in a more dialogical way.


A statement from Dean Wolfe, Bishop of Kansas:
The House of Bishops made a decisive determination today that Bishop Robert Duncan has abandoned the Communion of The Episcopal Church. The evidence presented to the House of Bishops was meticulously assembled and irrefutable to me and to a wide majority of the House. It is never a happy task to render such a judgment, but as bishops it is our solemn responsibility to protect the Unity, Doctrine and Discipline of our church, and we have done so. I ask that you keep the Episcopal Diocese of Pittsburgh and the Duncan family in your prayers.

Monday, September 15, 2008

Coptic Orthodox Church

In the sermon Sunday, I mentioned meeting a Coptic Priest. There was just not enough time to tell you much about the Coptic Orthodox Church. For those of you interested...I have a link to some material.

Coptic History

Saturday, September 6, 2008

Theological Education

This has been a tough year for Episcopal seminaries. The dean of GTS issued a letter addressing the financial state of the Episcopal Church’s oldest seminary. Seabury ceased the M.div. program. Bexley Hall and EDS sold off property in an effort to sure them up financially.

The latest edition of Episcopal Life has further information from GTS. In the article, an exploration of non-traditional programs is cited as a possibility for generating income. This strikes me as a sensible approach. It could be very useful in training individuals for work in and around the Church. An educated and theologically grounded staff, beyond clergy, is critical to the health of the Church. Too often, those with a real desire for active ministries, both professional and volunteer, are ill equipped. I would welcome seminary-based programs for those looking to enhance faith and education.

Some programs already exist like EFM through Sewanee. Virginia offers a program in Christian Education and Youth ministry. More opportunities would be useful, and if they benefit the seminaries, so much the better.

Thinking about preparing individuals for ordained ministry, I wonder how many persons are training for Priesthood at non-Episcopal seminaries? I know many go to seminaries and divinity schools close to where they live. This certainly can reduce the cost of educating future ordained leaders for the Church. I know, for many, it is a very practical approach. Some argue, rightly, that an ecumenical training ground is a plus. However, I have reservations about ordination track students not attending an Episcopal seminary.

Seminary is a relatively short course of study. There is barely enough time to cover the core areas. I am not sure that an ordination track student in a non-Episcopal seminary gets what he or she needs in that context. We should not forget that formation is more that course work. Something significant happens in living in community with persons sharing a common life and vision for the future. So much formation occurs through the context. I am not sure a class in Anglicanism meets the need.

The financial state of Episcopal seminaries might improve if all students preparing for ordination attended the Church’s seminaries. It would mean some creative restructuring, but If more funds were available to the seminaries, there could be more available for scholarships. As a Church, we must seek to stabilize the financial state of our seminaries that they are able to educate leaders for the future. This should be a front burner issue for us. I wish parishes, dioceses and our national structure would look to our common life, connected to the seminaries. Otherwise, we will be watching seminaries disappear, and the Episcopal Church lose some of its marvelous breadth.