In Which I Unpack a Finance-Based Atonement Parable (or Mammas Don’t Let Your Babies Grow Up to Work on Wall Street)

Understanding the Atonement is tough.[fn1] To try to understand it, theologians have come up with theories to describe the whys and hows of the Atonement, and stories to illustrate how the Atonement works.

We’ve got a handful of favorite illustrative stories in Mormonism, including bicycles and lickings. I was recently reading chapter 12 of the Gospel Principles manual, and I came across an Atonement story that I haven’t seen in a while: a parable of a debtor and a creditor. What follows are my thoughts as I reread it:[fn2] 

Note that what follows is reflective of my thought process, not any objective theological reaction to the underlying parable. And read my caveats in footnote 2.

First, that loan is structured in a really strange way. There doesn’t appear to have been a payment plan; rather, it looks like the full amount of the loan came due at some later date. I mean, there are (or, at least, prior to the financial crisis there used to be) interest-only loans, where the borrower only pays interest through the life of the loan, and then the full principal amount is due at the end. But a borrower would make regular (probably monthly) payments of interest throughout the term of the loan.

There are loans that don’t require borrowers to pay any interest during the life of the loans. They’re called (at least in my world) “original issue discount” bonds. The way they work is, the borrower gives the lender a note for $100, due in one year. The lender, then, gives the borrower $95.24. The $4.76 difference between the face about of the note and the amount the borrower gets represents the interest paid to the lender. But on original issue discount, a borrower wouldn’t make any payments during the life of the loan. So the loan described in the parable probably isn’t an original issue discount loan.

Then, of course, is the fact that there is no reason an economically rational lender would send a debtor to prison rather than renegotiating the terms of the loan.[fn3] I mean, if the lender sends the debtor to prison,[fn4] the debtor isn’t going to repay the debt. The lender will end up with nothing. If, however, the lender extends the term, reduces the interest, and/or reduces the principal, the lender won’t have to write off the investment. She may not be repaid in full—and that may not be pleasant—but she will recoup at least a portion of her investment.[fn5]

Of course, the financial crisis taught us that lenders aren’t always economically rational. Plenty of banks should have reduced the principal amount of borrowers defaulted mortgages, but for a long time, banks resisted.[fn6]

Moreover, the ultimate solution—having a third party pay off the loan—may not be cost-free to the borrower. Under the federal income tax, to the extent a lender forgives a loan, the borrower has taxable income. For example, say Andy borrowed $100 from Betty. Andy falls on hard times and is having trouble making payments, so Betty agrees to forgive the loan. Suddenly, Andy has $100 of taxable income.

And it’s the same whether Betty unilaterally forgives that amount or whether Carl comes in and makes a $100 payment to Betty on Andy’s behalf.

Of course, in the parable, it appears that the mediator takes over the loan. There aren’t nearly enough details,[fn7] but presumably the debtor will owe the mediator something. If the debtor owes the mediator $100 (but the mediator has extended the term of the loan, or reduced the interest rate), there will be no tax consequences to the borrower.

If, however, the mediator has reduced the principal amount—that is, if Andy now owes Carl only $80, rather than $100—Andy has $20 of taxable income. That is, his taxable income increases by the same amount as his debt decreases.

Such were my thoughts as I read chapter 12.

And that, ladies and gentlemen, is why you shouldn’t let your children grow up to work on Wall Street.[fn8]

[fn1] Brilliant insight, no?

[fn2] A couple important caveats: I don’t mean in this post to say anything substantive about the Atonement, about why it is necessary, or how it works. Lots of really smart people have tried, and have failed. Heck, the bicycles, lickings, and debtors of Mormonism all contradict each other in terms both of need and of function.

Second, I don’t mean this as a criticism of Pres. Packer, either religiously or secularly. The parable breaks down, of course, as any will, and I’m entirely sure he didn’t mean it to be the last word in understanding the Atonement.

On the secular side, the parable’s understanding of debt is odd. But keep in mind that Pres. Packer’s educational and professional background was in education, not in finance, and he delivered this parable in 1977, years before the financialization of the U.S. economy. So the fact that his understanding of lending sounds like it comes out of a combination of the New Testament and Dickens makes a lot of sense.

[fn3] Or selling the bad loan, for pennies on the dollar, to a collection agency or other distressed debt investor.

[fn4] Which, for the record, you don’t go to prison for defaulting on debt in the U.S.  Well, usually not, and not for long.

[fn5] I guess what I’m saying is, lenders aren’t generally motivated by justice or by mercy. They’re motivated by profit.

[fn6] Felix Salmon explains the economics here. He posits that part of the reason banks resisted renegotiating the terms of defaulting mortgages was because they didn’t want to admit they’d made idiotic loans, and part was an in terrorem effort to keep other homeowners from defaulting.

[fn7] I mean, wouldn’t it be awesome if Pres. Packer had told us the term, the interest rate, the security (if any), and the terms of the transfer? I’m seriously drooling just thinking about it.

[fn8] Though, technically, I worked in Midtown, not Wall Street, along with lots of other Wall Street investment bankers and attorneys. Also, for your pleasure, I present Waylon Jennings and Willie Nelson singing “Mammas Don’t Let Your Babies Grow Up to Be Cowboys.”


  1. Realist says:

    I don’t think too much Wall Street is gonna be a problem–rather the reverse, esp. when one race-adjusts. :-(

  2. jlouielucero says:

    We make private loans for a living and it isn’t uncommon to have the interest accrue for the term of the loan and have a full balloon payment with accrued interest due at the end of the term. It is definitely not the preferred lending structure, but it happens often enough. However, the interest rate is usually like 24-36% and usually the length of the note isn’t more than 90 days.

  3. Yeah, an updated risk-management theory of atonement would be much, much more satisfying. (And maybe if I ever get tenure, I’ll write something about what I have in mind….)

  4. I always assumed the mediator was a guarantor of the debt – although perhaps unknown to the debtor at the time of the loan. The creditor rights are now subrogated, and who knows what the guaranty fee was (2-3%)?

  5. Sam, This is actually a very rich question–the language of the market in religion. Christ is the “redeemer” and saves us from the “price of our sins.” A lot of world religions, but especially Christianity is infused with this sort of imagery. I’ve been doing some research into ancient usury laws and religious texts and it seems that my first assumption that religion infused usury laws turns out to be wrong: it was the market and the credit/debtor instability that was infusing a lot of religious texts. It’s all over the Old and New Testament (and Hindu and Islamic texts as well). That is, if you’re looking. Check out Debt: The First 5000 Years by David Graeber. It’s an amazing history.

  6. Molly Bennion says:

    But please let them grow up to rewrite tax policy.

  7. Once you start thinking this way . . .
    The only time I’ve seen loans with terms like that are parent to child. (And matters get complicated–is there a gift element? some compensatory term or quid pro quo other than simple repayment? imputed interest? mutuality on the terms? especially when not reduced to writing?)
    So are we modeling the Father making the loan and demanding repayment at a time and place of His choosing and without any compromise?
    Then there’s the “friend” who steps in, but not to cancel or satisfy the debt (which depending on the circumstances might be a gift or income), or compromise the principal or extend the terms, but to lend on new terms which are hard but possible.
    So are we modeling the Son stepping in as a new lender with slightly better terms, in which case atonement is really the same debt with the same principal but on barely possible terms rather than impossible terms?
    Too late! I might rather not have started down this rabbit hole.

  8. “So are we modeling the Son stepping in as a new lender with slightly better terms, in which case atonement is really the same debt with the same principal but on barely possible terms rather than impossible terms?”

    This sums up well what always troubled me about that particular parable. I think the whole point of grace is that the “debt” we owe to Christ once we have been saved is a fundamentally different thing from the “debt” to justice (or to the Father) we incur when we sin. Saying that we owe Christ a “debt” that is the same kind of debt that we owe to justice implies that it is theoretically (if not practically) possible to pay it back, and that, if we did, we would be even with Christ. Or put differently, it implies that Christ doesn’t so much save us as buy us time to save ourselves. The problem with that view, to me, is that it suggests that we could save ourselves if we only had enough time, as if our repentance, good works, etc. actually had the power to erase history and change the fact that we sinned and are therefore condemned. The mystery of the atonement is that it actually does somehow effectively change the past (and the present) by turning us from sinners into saints. But that change is not something that we can effect; it is an act of grace. The conditions to receive that grace are clear, so when we receive it, we incur a “debt” of sorts, but it is a fundamentally different kind of debt because paying back our “debt” to Christ (i.e. repentance, obedience to the laws and ordinances of the gospel) only satisfies the conditions of receiving the gift, it does not pay for the gift; and it certainly does not replace the gift.

  9. I was always confused by this analogy when I was a kid too. I mean who is the loan shark representing? The universe? And then what are we supposed to pay the mediator? He didn’t forgive the debt like Christ did (atonement), he just made the payments more bearable. I don’t get it.

  10. rameumptom says:

    For me, the problem with the parable in chapter 12 is that we do not obtain a loan with Satan, a loanshark, or death. Our covenant of debt is with the Originator, even God. King Benjamin even notes this, saying God has given us life, and so we already owe him. And then when we do something to try and repay him, he blesses us, so we continue in his debt.

  11. Jared Wyatt says:

    I would say that the lender in this parable was actually quite rational. It is explicitly stated that the lender “not only had the power to repossess all that [the debtor] owned, but the power to cast him into prison as well” (

    It appears that the collateral was simply all that the debtor owned, including the thing for which he got himself into debt. If that thing retained any significant portion of its original value, then the lender could likely recoup most, if not all, of the outstanding debt right there. Auctioning off all of the debtor’s other possessions is just gravy. Estate sale, anyone?

    It’s also worth noting that, historically, debtors’ prison was more like an extortion racket than a traditional jail. It was common for a debtor’s relatives to become responsible for paying off the loan, after which time the debtor would be released from prison. Other forms of debtors’ prison involved the debtor working off the loan as an indentured servant. So, really, debtors’ prison could have been a very practical option when someone failed to pay a debt. Practical like a loan shark.

  12. Last Lemming says:

    Given talks like Elder Bednar’s most recent, I think the parable needs to be rewritten so that the lender no longer represents the Father, but is just a regular banker-type guy (the Father shifting to the role of an unseen judge). Then the parable can be expanded to accommodate the following passage from Bednar:

    Thus, the Savior has suffered not just for our sins and iniquities—but also for our physical pains and anguish, our weaknesses and shortcomings, our fears and frustrations, our disappointments and discouragement, our regrets and remorse, our despair and desperation, the injustices and inequities we experience [like people not paying back their loans], and the emotional distresses that beset us.

    But this is contrary to Sam’s intent for this post, so I won’t pursue it further.

  13. Oh, but Last Lemming, when was the last time I managed to keep control of a comments thread? (Nice ideas, btw.)

    Thanks, everyone, for running with me on this. Robert, I look forward to reading your risk-management theory of the Atonement. That sounds (no sarcasm here) scintillating. And Mehrsa, I look forward, too, to finding out more about the various interactions between market language and religion.

    And, like I said, the metaphor certainly is imperfect, breaks down, and could use updating, but there is at least some value, I think, in it. As long as we don’t take it as absolute and literal.

  14. Totally off topic but I am personally encouraged by the fact that Mormon’s are among the lower percentages for higher income (Realist’s link in comment 1). To me that means that some of the smartest, most able members of the LDS church have directed their efforts to more important things than Mammon. Working in the lowest levels of finance myself I know how easy it is to become focused on wealth.

  15. Jason K. says:

    Apropos your point that the debtor must owe the mediator something, the Puritan divine Richard Baxter has a fascinating take on this metaphor in his 1649 Aphorisms of Justification. There are two versions (in Thesis 24 and Thesis 30). Instead of a loan, the metaphor involves a lease of property. In the first version, the tenant owes the mediator rent of a peppercorn per annum, but this looks too much like works-righteousness (replacing rent with smaller rent doesn’t allow for enough distinction between the Covenant of Works and the Covenant of Grace), so in the second version the peppercorn becomes a one-time token of homage to be paid upfront. This leaves God as the property-holder (because the tenant would become independent if the land were given as a gift, without any consideration). Intriguingly, in both versions the original contract still remains valid, although Baxter retreated from this position a few years later.

  16. Thanks, Jason. Interestingly enough, Baxter’s two examples are economically indistinguishable. That is, calculated correctly, you can make a one-time upfront payment into the equivalent of an annual payment over time. If you were to assume that the lessee would pay one peppercorn every year for the next twenty years, and assume a five-percent interest rate, the lessor should be willing to accept about 13 peppercorns upfront in place of the 20 peppercorns he would receive over the life of the lease. Though I understand the impulse, then, the difference between the up-front token payment and an annual payment doesn’t really have any substance on which to hang a theological difference.

  17. Sam, I think your “no theological difference” assumes no uncertainty — and that can make all the difference. (John Milbank is one theologian who has made a fair bit of this distinction, though I’m not sure if he discusses it with respect to atonement theory. He discusses “economic” modes of relationship, and assumes this refers to identical and immediate exchanges. If the exchange is over time, and entails uncertainty, it significantly alters things — like relationships built on a kind of long-term trust that will roughly “be worth it,” but without a strict logic of economy.)

  18. Jason K. says:

    Sam: I think there is some theological difference, in that annual payment allows for the possibility of future breach of contract in a way that one-time upfront payment does not. In Baxter’s theology, given that the new lease is supposed to represent the Covenant of Grace, this difference is bound up with the question of whether one can fall from grace. And, even though Baxter seems in the end to opt for the one-time-payment, he still has to reckon with the fact that the tenant in practice becomes sanctified only gradually, not all at once at the time of payment. Still, you are right that, so long as some payment is required, there’s still some works-righteousness involved no matter the form of the payment, and this is a point upon which various people hammered Baxter throughout the 1650s.

  19. While there may not be much of an economic distinction between an upfront “payment” in peppercorns and a payment in peppercorns made in token of an act of homage, I think there is a real, not illusory, distinction there, albeit not an economic one. The act if homage does not pay for the land in any sense at all; it merely binds the Lord and his liege man together in a covenant relationship, and the ability to possess the land is just one of the perks of that relationship–just in the same way that a wedding ring does not pay for sex, but rather secures a relationship of which sex is incidental. The confusion seems to stem from the fact that the act of homage is a “payment.” The distinction would be clearer if it were some more clearly non-financial act of homage, like taking an oath of fealty, for example. (Though to be fair, a peppercorn is already so plainly not conferring any significant economic benefit, that this might be picking at a really minor point.)

  20. Jason K. says:

    JKC: your comment is spot-on. I argue that Baxter makes the change in an attempt to have the peppercorn signify acceptance of God’s sovereignty and nothing else (especially not consideration).

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