| HIGHLIGHTS OF DAWN | February 2009 |
Meltdown on Wall Street:
Colossal Crisis
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“Neither their silver nor their gold shall be able to deliver them in the day of the LORD’s wrath; but the whole land shall be devoured by the fire of his jealousy: for he shall make even a speedy riddance of all them that dwell in the land.” |
IN THIS SCRIPTURE, GOD’S prophet used symbolic language to describe the deepening and widening effects of the great time of trouble that clearly marks our day in prophecy. This distress of nations was to come upon them as a result of the untold degree of selfishness and pride especially during the closing years of the present Gospel Age. Those Christian people who are watching the unfolding chaotic events of our day are not disturbed as others may be, but recognize that we are now living in the great day of preparation and are yearning for the long-promised establishment of Christ’s future kingdom. The administration of that reign of peace will provide the only answer for the present dilemma, and it will ultimately bring order out of chaos for the blessing of the whole groaning and sin-sick human family.
PROPHETIC FOREGLEAMS
The Prophet Zephaniah began by pointing out the Heavenly Father’s ultimate purpose in allowing the present social order to be destroyed. Guided by the Holy Spirit of God, he wrote, “I will utterly consume all things from off the land, saith the Lord. I will consume man and beast; I will consume the fowls of the heaven, and the fishes of the sea, and the stumblingblocks [idols, Marginal Translation] with the wicked; and I will cut off man from off the land, saith the Lord.”—Zeph. 1:2,3
The earth, together with its human and animal creation, will never be destroyed as revealed in the writings of Solomon, who said, “One generation passeth away, and another generation cometh: but the earth abideth for ever.” (Eccles. 1:4) Concerning our Heavenly Father’s long-range plan for his earthly creation, the Psalmist David also wrote, “Thy righteousness is like the great mountains; thy judgments are a great deep: O Lord, thou preservest man and beast.” (Ps. 36:6) In Zephaniah’s prophecy, he used illustrations such as the ‘fowls of the heaven’ when pointing to earth’s ecclesiastical heavens that will be set aside to make way for the soon-to-come kingdom of Christ. The term ‘fishes of the sea’ serves to identify mankind as likened to by another of God’s prophets, who wrote, “[Thou] makest men as the fishes of the sea.” (Hab. 1:14) These, and numerous other symbols, taken from our natural surroundings serve as important illustrations to teach meaningful lessons to the Lord’s people.
When Zephaniah spoke of our day in prophecy, he also pointed to its significance and true meaning in relationship with the presence of our Lord at the end of this Gospel Age. He said, “Hold thy peace at the presence of the Lord GOD: for the day of the Lord is at hand: for the Lord hath prepared a sacrifice, he hath bid his guests. And it shall come to pass in the day of the Lord’s sacrifice, that I will punish the princes, and the king’s children, and all such as are clothed with strange apparel.”—Zeph. 1:7,8
A DAY OF WRATH
In the context of Zephaniah’s prophecy, he foretold, “The great day of the Lord is near, it is near, and hasteth greatly, even the voice of the day of the Lord: the mighty man shall cry there bitterly. That day is a day of wrath, a day of trouble and distress, a day of wasteness and desolation, a day of darkness and gloominess, a day of clouds and thick darkness, A day of the trumpet, and alarm against the fenced cities, and against the high towers.” (vss. 14-16) Earth’s ruling class and financiers who felt secure and untouchable behind their ‘fenced cities and high towers’ of enormous accumulated power and wealth, will be made manifest to the people in a remarkable way as they are swept away under the guise of their selfish and proud and greedy delusions.
FINANCIAL DOWNTURN
A major slowdown in the world’s economy began in the late summer and early autumn months of 2007, and continued throughout the year 2008 with widespread and disrupting consequences. Growing chaos quickly spread throughout financial markets, and required unprecedented intervention by world governments and financial experts who sought to restore order, but with little success.
Many analysts, who are studying the crisis, point out that its roots lay within the real estate boom that began in the mid 1990s. At that time, increasing prices for homes and businesses began to rise dramatically and coincided with government deregulation policies and questionable lending practices among many financial institutions. This situation allowed unqualified purchasers to take out large mortgages on properties that they could not afford. Because of the inflationary spiral, the prices for residential and commercial properties began to rise substantially every year which created an unrealistic market value. In the meantime, real estate loans were being spread throughout the financial system to disperse the risk on properties that had been purchased with little or no down payments.
A BURSTING BUBBLE
When the bubble burst, the Federal Reserve, in an effort to stabilize the markets, began a series of interest rate cuts that it charges financial institutions for direct loans. In the summer of 2007, the rate was 5.25%. Since that time the rate has been reduced eight times, and at the time of this writing now stands at 1%. This represents a drastic move to address the problem that was already underway. In addition, the Federal Reserve agreed to extend unlimited credit for six months not only to commercial banks, but also to investment banks and brokerage firms that are less regulated. This was a move that had no precedent since the Great Depression of the 1930’s. By invoking this emergency provision that was enacted in1932, it indicated that the failure of major Wall Street firms were at risk.
BEAR STEARNS COLLAPSE
In March, 2008, Bear Stearns, Wall Street’s fifth largest investment bank, was having problems because of sub-prime mortgage debt, and because other banks had stopped lending to it. Rumor had also started that they were having liquidity problems, although they actually had around $18 billion in cash reserves. There was fear that the rumor might spread to Wall Street which had been tense for months. During the past few months, they had seen the mortgage market crash, and major financial companies such as Citigroup and Merrill Lynch write off billions of dollars in bad loans.
The big banks had all but stopped lending money, a trend which could spell disaster for trading firms and others. Within hours, a tidal wave of rumor and speculation began to crash down upon Bear Stearns, and within a few days it had destroyed a major financial institution that had done business successfully on Wall Street since its founding in 1923.
WIDESPREAD BREAKDOWN
However, the fall of Bear Stearns wasn’t just another financial collapse. There had never been anything on Wall Street to compare with it, a tragic run on a major investment bank that was in some ways caused by rumor and innuendo that had little basis in fact.
The news rattled investors worldwide. J.P. Morgan Chase helped bail out Bear Stearns by paying just $2 a share to take over the investment firm which a year earlier had been trading for as high as $170 a share. The purchase price was a rude awakening to just how far things had fallen. Financial analysts point out that the deal to buy the investment firm prevented a looming bankruptcy filing that would have created a new crisis in the financial markets who were also fearing that the credit crisis was deepening. Overnight, financial markets in Asia and Europe fell sharply.
There was little doubt that the collapse and its unfolding magnitude was a crisis of historic proportions. After a generation of media propaganda which praised the infallibility of Wall Street’s markets and financial wizards, the economy of the United States was at the very brink of a breakdown that had not been seen since the Great Depression of the 1930s. It marked a turning point in the history of capitalism indicating that the economic and social upheaval experienced many years earlier was again a likely possibility.
GIANTS FALL
As the crisis deepened, other major financial institutions began to fail. Among some of the most notable were The Federal National Mortgage Association (Fannie Mae) and The Federal Home Loan Mortgage Corporation (Freddie Mac) that were both taken over by the federal government. Lehman Brothers declared bankruptcy after failing to find a buyer, and The Bank of America agreed to purchase Merrill Lynch. The American International Group (AIG)—the nation’s largest insurance company—was saved by an approximate $152 billion-and-counting capital injection by the Federal Reserve.
A short time later the assets of Washington Mutual, the nation’s largest savings and loan association, were seized by The Federal Deposit Insurance Corporation (FDIC), and brokered the sale to J.P. Morgan Chase. Washington Mutual (WaMu) was the largest bank failure in American history. Several other United States banks that failed were also taken over by the FDIC during the year 2008. The Federal Reserve’s actions included massive infusions of liquidity into the financial markets, and an agreement to accept as collateral mortgage-backed assets that cannot be sold and have questionable value. Thus the United States central bank has taken onto its balance sheets hundreds of billions of dollars in bad investments.
BAILOUTS
In early October, President Bush signed an emergency $700 billion bailout fund for the banking industry. This took place after intense negotiation and persuasion that prompted the United States Congress to reverse its opposition to the plan a week earlier. Business leaders hoped that the rescue package would thaw out the frozen credit markets and restore confidence in America’s struggling banks. It included measures to limit pay for senior banking executives and to increase the insured limit of United States bank balances from $100,000 to $250,000.
Federal Reserve’s chairman Ben Bernanke welcomed the plan’s approval and said, “The legislation is a critical step toward stabilizing our financial markets and ensuring an uninterrupted flow of credit to households and businesses.” The Democratic leader in the House, Steny Hoyer, said “The American people expected us to act, to respond to the best extent we could, to stop the downward flow in the markets and to restore the flow of credit in the economy.” John Lewis, a Democrat who switched sides, said, “I have decided that the cost of doing nothing is greater than the cost of doing something.” The United States Chamber of Commerce, which represents business leaders said, “With the American economy on life support, Congress took the necessary step to stop the bleeding.” Both presidential candidates, Barack Obama and John McCain also expressed support for the package in spite of an estimated $150 billion of controversial tax credits that were added to win support from those who had not voted for the plan a week earlier. Many critics of the bailout plan still have strong reservations.
AUTOMAKERS SEEK HELP
During the first week of December 2008, all three Detroit automaker companies’ CEOs returned to Washington a second time to seek billions of dollars of federal government bailout money. They needed the money to help General Motors Corporation, Ford Motor Company, and Chrysler Corporation to survive the present worldwide economic slump. When the ‘big three’ auto executives arrived in Washington in private jets two weeks earlier their request for $25 billion had been denied. Now they came in cars manufactured by their own companies, and were asking for a $34 billion bailout. The question that many lawmakers were asking is why should taxpayers bail out the automakers with billions of dollars?
Many factors have combined to bring the auto industry down, including poor management, too many brands, poor product and efficiency design, too many costly dealerships and the inability to compete with foreign automakers. Analysts point out that modern companies require strong, agile and efficient practices to survive. They ask, “If we bail out the auto industry, then which is next, the airlines?”
Congress has already given the ‘big three’ a $25 billion low-interest loan, and now they were asking for $25 billion more. These sums of money are more than Congress spends on highways in the United States each year. It is more than they spend annually on food stamps and child nutrition combined. A bailout of this magnitude means that every American household must give $450 to the automakers.
Another of the main reasons why these companies are on the verge of bankruptcy concerns their connection with the United Auto Workers Union (UAW). Through strikes they could easily shut down Detroit’s entire auto production and had the power to win almost any concession. UAW workers are among the world’s most affluent. Their take-home pay in wages and benefits is triple what the average private-sector worker earns. They may retire after 30 years on a generous pension regardless of age. If they don’t yet qualify for Social Security benefits, they may get special bonus payments until they do. At small cost, UAW workers and retirees are also eligible for comprehensive medical, hospital, surgical, and prescription drug coverage. Under union contracts the companies do not lay off workers when plants close. Instead, they transfer them to the Jobs Bank where they may receive nearly full pay. These and other benefits that are available to autoworkers is a contributing factor in the industry’s inability to compete with foreign companies that do not receive these concessions.
CRISIS OF CONFIDENCE
Destructive and convulsive financial panics have occurred several times in the United States since the early nineteenth century. However, the crisis that began on Wall Street in the summer of 2007 has been more devastating and widespread than any other. A climate of uncertainty and distrust has been created on a level that has not been seen until now. For decades, United States monetary indulgence, credit excess, and fiscal irresponsibility finally imploded. The folly of Wall Street financiers and the Federal Reserve, who believed that they could eliminate hundreds of billions of dollars of capital risk by making it appear invisible, were unsuccessful.
As a result, people across the country have lost faith not only with the banking and financial system as a whole, but also a collapse of confidence in the government which has failed to act responsibly on behalf of its citizens. Many family homes have been lost in foreclosure, retirement savings accounts have been lost, and unemployment has risen. What was once the industrial giant of the world has declined, and countless numbers of jobs have been moved out of the country. A high percentage of United States debt is now owned by foreign banks, and investors are fleeing the stock markets with the market average now down 40% from last year’s highs.
Even with the government’s unprecedented intervention, and the $700 billion rescue package paid by the taxpayers of this nation, the government has failed to stop the lack of confidence that the general public believes precipitated the collapse. The government’s takeover of Fannie Mae, Freddie Mac, AIG, and numerous other rescues have turned Washington into a mortgage lender and insurer. Drastic remedies, including partial nationalization of the banking industry and pumping vast amounts of money into the markets, have failed to persuade banks to resume regular lending. Countless numbers of investors have fled the stock markets.
A NEW WORLD ORDER
Students of the Bible are watching with much interest the dramatic events unfold that mark our day in prophecy. In our featured text, the Prophet Zephaniah spoke of the fire of God’s jealousy and that silver and gold would not deliver the people from the carnage of the Heavenly Father’s ultimate plan concerning his human family. The Prophet Isaiah also wrote of our time at the end of the present Gospel Age. “Come near, ye nations, to hear; and hearken, ye people: let the earth hear, and all that is therein; the world, and all things that come forth of it. For the indignation of the Lord is upon all nations, and his fury upon all their armies: he hath utterly destroyed them, he hath delivered them to the slaughter. Their slain also shall be cast out, and their stink shall come up out of their carcasses, and the mountains shall be melted with their blood.”—Isa. 34:1-3
The prophet’s words address the present structure of earth’s society that has been based on fallen men’s proud and selfish rule. Our Heavenly Father’s purpose is to remove these institutions and install a just rulership under the administration of Christ’s righteous kingdom. Under that new world order, selfishness and pride will no longer prevail, and everlasting life will be available for all of earth’s obedient.
In symbolic terms, the prophet describes the destruction of the old world order. “All the host of heaven shall be dissolved, and the heavens shall be rolled together as a scroll: and all their host shall fall down, as the leaf falleth off from the vine, and as a falling fig from the fig tree. For my sword shall be bathed in heaven: behold, it shall come down upon Idumea, and upon the people of my curse, to judgment. The sword of the Lord is filled with blood, it is made fat with fatness, and with the blood of lambs and goats, with the fat of the kidneys of rams: for the Lord hath a sacrifice in Bozrah, and a great slaughter in the land of Idumea.” (vss. 4-6) The ‘sword’ that accomplishes the destruction of the present ecclesiastical heavens is the sword of the Lord’s mouth—the Truth that reveals the lies, injustice, and selfishness that has been allowed to prevail over the people.
NEW HEAVENS AND EARTH
Isaiah also wrote of the new world order that our loving Heavenly Father would establish over the earth. God said, “Behold, I create new heavens and a new earth: and the former shall not be remembered, nor come into mind. But be ye glad and rejoice for ever in that which I create: for, behold, I create Jerusalem a rejoicing, and her people a joy. And I will rejoice in Jerusalem, and joy in my people: and the voice of weeping shall be no more heard in her, nor the voice of crying. There shall be no more thence an infant of days, nor an old man that hath not filled his days: for the child shall die an hundred years old; but the sinner being an hundred years old shall be accursed.”—Isa. 65:17-20
NEW JERUSALEM
The prophet’s reference to Jerusalem points to the completed Christ who will rule over the nations as foretold by the Revelator. “I saw a new heaven and a new earth: for the first heaven and the first earth were passed away; and there was no more sea. And I John saw the holy city, new Jerusalem, coming down from God out of heaven, prepared as a bride adorned for her husband.” (Rev. 21:1,2) This is the same illustration of the heavenly kingdom, of which the Prophet Jeremiah wrote, “At that time they shall call Jerusalem the throne of the Lord; and all the nations shall be gathered unto it; to the name of the Lord, to Jerusalem: neither shall they walk any more after the imagination [stubbornness, Marginal Translation] of their evil heart.”—Jer. 3:17
NO MORE SELFISHNESS OR PRIDE
Under the administration of the new world order, under ‘The Christ,’ pride and selfishness will be no more. “They shall build houses, and inhabit them; and they shall plant vineyards, and eat the fruit of them. They shall not build, and another inhabit; they shall not plant, and another eat: for as the days of a tree are the days of my people, and mine elect shall long enjoy the work of their hands. They shall not labour in vain, nor bring forth for trouble; for they are the seed of the blessed of the Lord, and their offspring with them. And it shall come to pass, that before they call, I will answer; and while they are yet speaking, I will hear. The wolf and the lamb shall feed together, and the lion shall eat straw like the bullock: and dust shall be the serpent’s meat. They shall not hurt nor destroy in all my holy mountain, saith the Lord.”—Isa. 65:21-25
“Ho, every one that thirsteth, come ye to the waters, and he that hath no money; come ye, buy, and eat; yea, come, buy wine and milk without money and without price.”—Isa. 55:1