The High Church of Finance

Posted in Markets by Nina Mehta on November 24, 2008


Running an errand the other day, I did a double-take on Park Avenue in the east fifties. The New York Stock Exchange’s familiar lantern-blue floor column gleamed off a poster on Park and 51st, at St. Bartholomew’s Church. I crossed the street. The giant poster at the Byzantine-style church showed a trader in a black trading jacket wearing a headset, his hand pressed to his forehead: a physical response to loss. The poster’s tag line was simple: “A church for these times.”

In the winter and year after the ’87 market crash, churches and religious groups in the city ran ads in subway cars, urging people to come in for solace and community. After months of seeing the ads, it dawned on me that they were less an attempt to hawk religion than a recognition that faith and solace needed to advertise.

This time round, what’s different is that the religion of the markets is under siege. Vast amounts of cash have been lost, but faith in the market is also gone. Efficient markets, the purported stewardship of corporate leaders (at least from the perspective of shareholders), the strength and viability of the biggest banks, the ability of markets right themselves, the habit of mean reversion—all this has dissipated. Across the markets, liquidity skittered away. Citigroup soared today along with the financials, courtesy of the government’s rescue package, but tomorrow some of that may evaporate as the market remembers that the real economy is suffering and will only get worse. Buyers are nowhere, they’re not confident enough to get involved, their funds are gone or greatly reduced, and no one knows where real value lies.

The stability and refuge religion offers won’t solve that problem. Time will solve it, people say. But the uncertainty is deeper because the way forward is less clear. The market didn’t just drop—the bottom fell away. This last week Bush and Paulson and now Obama and others have said in clear, straightforward words that systemic risk has put the very financial system on the precipice. This has been the case since this past summer, if not August of 2007, but the acknowledgement is more public. And yet it’s hard to tell how much of this crisis of faith is visible in the midst of all the other problems facing people, from investors to legislators and regulators. Trust in people comes and goes, and the same with companies. Fraud is prevalent. But trust that the markets will function isn’t something that’s been questioned as seriously as it’s now being questioned.

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