Wednesday, June 18, 2008

Financial Crisis

I just read an article titled "How rising home value, easy credit, put your finances at risk" ( 17, 2008) This article focuses on how the banks advertized for homeowners to take a line of equity to pay off credit cards during the peak of home sales and now they have over-extended themselves and have run the credit cards back up, as the banks raise the credit limits to allow for more spending and raising the fees associated with not having the money to pay this debt back. (I do not know how to link this article, so if you want to read it, leave your email in the comment section and I'll send it to you.)

As I read this article, this statement pierced my heart:

Banks are "hoping that in an atmosphere of tight credit, these people will have nowhere to go and be forced to pay high interest on their card balances," says Elizabeth Warren, a Harvard law professor. "It's a straight forward profit calculation."

This articles blames the banks for making credit easily available to consumers while the bamks defend themselves saying the consumers had the choice to spend or decline the money.

After I read this statement, I instantly gave thanks to Heavenly Father for giving us council through latter-day prohets to not go into debt. Here are a couple of qoutes from The Church of Latter-Day Saints prophets and leaders given to us:

* President Heber J. Grant once said"If there is anyone thing that will bring peace and contentment into the human heart and into the family, it is to live within our means; and if there is anyone thing that is grinding and discouraging and disheartening, it is to have debts and obligations that one cannot meet."

* President Gorden B. HInkley:"We are beguiled by seductive advertising. Television carries the enticing invitation to borrow up to 125 percent of the value of one’s home. But no mention is made of interest.

* President J. Reuben Clark Jr., in the April 1938 general conference, said from this pulpit: Once in debt, interest is your companion every minute of the day and night; you cannot shun it or slip away from it; you cannot dismiss it; it yields neither to entreaties, demands, or orders; and whenever you get in its way or cross its course or fail to meet its demands, it crushes you.” (in Conference Report, Apr. 1938, 103)

* President Gordon B. Hinckley, CR October 1998 "I recognize that it may be necessary to borrow to get a home, of course. But let us buy a home that we can afford and thus ease the payments which will constantly hang over our heads without mercy or respite for as long as 30 years"

* Elder L. Tom Perry of the Quorum of the Twelve Apostles reiterated this counsel:
Avoid excessive debt. Necessary debt should be incurred only after careful, thoughtful prayer and after obtaining the best possible advice. We need the discipline to stay well within our ability to pay. Wisely we have been counseled to avoid debt as we would avoid the plague. …

“ ‘Live within your means. Get out of debt. Keep out of debt. Lay by for a rainy day which has always come and will come again. Practice and increase your habits of thrift, industry, economy, and frugality’ ” (“If Ye Are Prepared Ye Shall Not Fear,” Ensign, Nov. 1995, 36).

* Elder Joseph B. Wirthlin, Quorum of the Twelve "Remember this: debt is a form of bondage. It is a financial termite. When we make purchases on credit, they give us only an illusion of prosperity. We think we own things, but the reality is, our
things own us." (Ensign, May 2004)

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