We're Number 2! Well, It Could Have Been Worse

Utahns have, for the past several years, been right up there near the top in an ignominious category--bankruptcies. Now we're nearly tops in another one! Do these shortcomings indict Utah culture, Mormon culture, or both?

I've often wondered whether the breakdown of bankruptcies in Utah into religious statistics would match the Utah religious demographic. In other words, if 60% of Utahns are LDS, do 60% of bankruptcies in Utah involve LDS people? I suspect, but have no evidence for it, that the ratio of Mormons in bankruptcies is higher than the general demographic.

Now, along comes another statistic that has to worry us--mortgage fraud.

For subprime loans, Utah ranked second nationally in fraud levels, up from No. 3 in 2005.

The most common type of fraud is to claim that a purchased home will be the owner's primary residence in order to get a better interest rate from their lender.

Why do I think (again without proof) that LDS people might be disproportionately involved in such fraud? How can LDS people specifically justify committing such fraud? Here's my theory: in many cases it is a perverse misunderstanding of the counsel of church leaders to stay out of debt.

First of all, the Book of Mormon teaches that when people are righteous that they will be prosperous. It's easy (although incorrect) to turn this around and assume that if we are prosperous, we must be righteous. (I suspect that some people go even further by putting up the appearance of prosperity--getting more into debt than they should--in order to have the appearance of righteousness.)

Second of all, investments can help us get out of debt if they go well. However, many people jump on the investment bandwagon when they clearly do not have the means to do so. For most people, investments should be of the safer variety--savings accounts, certificates of deposit, etc. But people's impatience for getting out of debt gets the best of them, and ultimately several of them are mired in debt when a too-risky investment goes sour.

A friend of ours illustrated the Mormon thrift mentality during a white elephant gift party we attended a few years ago. After "stealing" a relatively expensive gift for the second time, against the rules of our white elephant party she declared that it could not be stolen for a third time (three steals was the rule we had established.) It was embarrassing to see her defiance, so we ultimately chose to ignore it, let her keep the gift, and continue the game as though nothing untoward had happened. At that point, her defiance turned to feelings of victory, because she had made the most out of her white elephant investment.

Staying out of debt is important. Getting out of debt by immoral means and giving the appearance of being out of debt are train wrecks waiting to happen.


  1. I haven't read the Book of Mormon, but didn't the Bible say "the race does not always go to the swift, etc etc, but luck and chance happen to them all"?

    The US national identity has sadly become one of rampant consumerism and materialism. People think that they have to have stuff 1. to impress people 2. because they think they deserve it. This is exacerbated by the quickly enlarging gap between rich and poor. People of modest means, instead of waking up to the fact that we live in an unequal society in which the rich are increasingly grabbing more than their fair share through manipulation of the tax code, just sink further into denial and pretend they're rich by buying what they cannot afford.

  2. Human nature, the natural man, and all that being what it is, I suspect many Mormons have financial troubles due to violation of basic teachings.

    I worked in the financial industry in Utah for many years. I ran into two basic types of people with financial problems. I might class them as low enders and high enders.

    The low enders were almost always operating at some level of financial ignorance. Many sort of stumbled into their problems. The real estate agent tells them they can qualify for a certain loan amount and pushes them to get as much house as they can get. They go along. The same thing happens with the cars. Pretty soon they find that it is difficult just to make ends meet. Then when what should be a minor financial setback occurs, it causes their whole financial world to fall apart.

    High enders with problems almost always were into acquiring all of the trappings and toys that go along with an affluent lifestyle. This often occurred during a period of high earning. Then they find themselves in trouble when the cycle naturally trends downward and their income level drops. And, yes, there are a number of "Look at my wealth as proof of my righteousness" folks in that crowd.

    However, a study of the connection of charitable donations and bankruptcies in Utah showed that those declaring bankruptcy are generally not those that are donating much. In other words, those paying a full tithing are generally not the ones filing bankruptcy.

    Draw your own conclusions.

  3. Elizabeth,

    I haven't studied the gap between rich and poor, but whether or not it's widening, I support a flat tax, so that no one can manipulate the tax code.


    This is a very interesting insight about tithing. I'd like to know more about it. It goes pretty much counter to what Paul Toscano said in his book "The Sanctity of Dissent" in that some Mormons have to occasionally take out loans to pay their tithing (he said it much better, but that was the gist of it.)

    The promises for paying tithing are enormous, and I can say that my wife and I have put the challenge to the test and have reaped huge benefits. Or...maybe it was just coincidental... ;-)

  4. An interesting anecdote:

    We recently sold our home. In doing so, we bid on a smaller home without a contingency clause requiring the sale of our larger residence. (We were getting offers, but were also in a bidding "war" with another party for our new place.) We had enough in reserve (and through family "loans") to pay for both places for several months, if we needed to (we didn't).

    The irony was that the mortgage companies wouldn't believe that the mortgage request was for a primary residence, because it was for a smaller (less expensive) place. Who in their right mind (they reasoned) would want to down-size? Had we up-sized, the broker explained the companies would have believed us with hardly any comment.

    It took a bit of convincing to end up with an approved loan. We're now comfortably in our smaller home (and because we reinvested most of our equity, we're saving a considerable amount every month.)

    It was frustrating the companies on the lookout for fraud we're actually preventing responsible financial behavior.

  5. Frank, I agree and disagree with you at the same time. While I agree thatmortgage fraud is obviously not the right thing to do, I disagree with your investing ideas as I don't see savings accounts and CODs investments. THey are just a good way to save money. Now I am not saying that is a bad thing. But I think that if people want to invest in other ways-whether it be stocks, real estate or buying businesses- they very much should. Because your return on most savings accounts and money markets-at least at my financial institution (and I think we share the same one Frank)-You have to invest over 100,000 before making more than 3% interest. Being 3% is the average inflation a year. You are either losing money or breaking even before that point. I am not saying don't save, that would be foolish. I am also not saying that you should go invest without any idea of what you are doing. I personally invest as much as possible. But first, I have at least 3 months worth of expenses in savings, no debt except a house, and, most importantly, only invest what you can afford to lose. I think that is the most forgotten "rule." I have only been investing for just over a year (both stocks and real estate) and have seen people lose a lot of money in both and be in trouble because they were "bettin' the farm."
    I think investing is very wise idea. But 1)Do it legally 2)Do it smart, and be prepared for anything.

  6. Tom,

    Congratulations to you! I like to hear about people who are doing it right. In our LDS sacrament meeting recently a man told of his three married children: two started off with getting everything they wanted, while the third lived frugally and incrementally. The third child is in a MUCH better situation today.


    You're right. I should have been a little bit more detailed in suggesting kinds of investments rather than just savings accounts and CDs. I agree that we should have at least 3 months in savings. I like your idea of only investing what you can afford to lose. We recently turned down a large investment, because we didn't think we were ready for it, but a smaller (but still sizable) investment came our way, we took that one.


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