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Next Step: Loan Strike!
Forget the government. Take this fight to the banks. Let them stay up all night worrying.
by LAWRENCE WESCHLER
November 22, 2011
So Shlomo is up again all night, tossing and turning—or so the old story goes—and by three in the morning, Hannah, his long-suffering and increasingly exasperated wife, has had it. "Enough already with the tossing and turning, Shlomo! What's keeping you up like this night after night, and me too while we are at it?" "It's Moishe across the lane," explains Shlomo, trembling. "I owe him 10 rubles, due tomorrow, and I don't have it." To which Hannah, climbing out of bed and heading over to the window, retorts, "Is that all? Geesh, no problem." She opens the shutter, leans out, and yells, "Moishe!" A few moments pass till Moishe across the way angrily flings his window open: "For God's sake, Hannah, what could you possibly want at this hour?" "It's Shlomo," she explains. "He owes you 10 rubles in the morning and he doesn't have it!" Whereupon she latches her shutter and returns to bed. "There," she tells her husband, "now you go to sleep and let Moishe stay up all night worrying."
In the mode of that story, I'd like to offer a proposal to the Occupy Wall Street activists and their well-meaning supporters scattered all around the country, and for that matter to many of you who don't yet actively support them. Do you have a mortgage? Are you burdened with a student loan? Well, listen up!
To Begin With, Though, a Few Words About Our Current Situation
Start with Occupy Wall Street. At some point, the Occupiers are going to need to sharpen their demands, or at least widen their tactical and strategic vision. They are going to need to find a way of reaching out to constituencies well beyond their original cohort, including millions of fellow citizens who, while they may not have the time or the current life situation or the disposition to be able to join the diehards in encampments, would nevertheless love to be offered some concrete way into the movement, a practical means of expressing their anger and frustration, to say nothing of their sheer human solidarity with one another. It is becoming the responsibility of Occupy Wall Street (just as it was the responsibility of the original antiwar mobilizers back in the Vietnam days) to find some way of building bridges to those people. And finally, even were it not for the increasing incidences of confrontation and forced evictions, winter is fast approaching and ongoing occupation by itself may no longer prove a viable tactic for anything more than a token force over the next several months. Sure, we will all reconvene come the spring, and in ever greater numbers, it is to be hoped, but what to do in the meantime?
Turning to the situation of the wider economy. While the big corporations sit on piles of cash, small businesses are failing to thrive because people are not spending; people are not spending because they either have already lost their jobs or live in justifiable fear that they may yet soon. Fully a quarter of current mortgage holders are underwater, meaning they owe more to the banks than their houses are worth, with foreclosure only a family-financial-hiccup away. The possibility of moving anywhere else (where there might be a job) is likewise foreclosed to them if they don't want to lose everything they've put into their houses, since housing markets generally have seized up as a result of the crisis.
Meanwhile, recent college grads groan under the weight of unprecedented amounts of debt—loans of the sort students in most other countries were never required to take on to fund what most everyplace else is seen as a self-evident public good: an educated populace, after all, being to everyone's advantage. These loans were taken out under the assurance that the resultant degrees would open out onto careers that would allow the loans to be repaid: jobs that no longer exist.
With the general exception of the notorious 1 percent (who've been making out like bandits all through this period, just as they did throughout the previous three decades), the vast majority of Americans don't spend, hence businesses lay off more workers. Then tax revenues decline and local governments in turn lay off more teachers, police, and firefighters, who therefore no longer spend, and so forth.
And what does government seem capable of doing in the face of all this? Not much. If anything, the wheels of governance seem more bollixed and mired than those of the economy at large. One party is being held hostage by a Tea Party pretty much entirely untethered from any understanding of its own actual economic interests, a faux populist insurgency lashed into existence by billionaires (the Koch brothers and their ilk) and prodded along via the Pavlovian ravings of opinion-shapers employed by another (Murdoch and his), the rage of its members cleverly channeled onto the governments and civil servants that have (granted) proved so hapless in trying to deal with the crisis rather than onto the financial behemoths that brought the crisis on in the first place. The other party, alas, ever since the days when the Clinton-Rubin regime engineered its grand surrender (for purposes of all that excellent fundraising), has been captive to that same finance industry, a sinister embrace which their new leader, President Obama, for whatever reason (personal psychological issues, heartfelt political conviction, meritocratic identification, Stockholm syndrome, despairing realpolitik sense of what can any longer be achieved—who knows and who anymore cares?) has proven singularly incapable of sundering.
Bailouts—at full value, dollar for dollar—get lavished upon the banks and finance industry whose recklessness got us into the mess, without the slightest requirement that those institutions turn around and help the economy at large. While everyone else suffers, the executives take unconscionable bonuses, and meanwhile sluice good portions of the rest of their bailout funds into paying lobbyists and their designated politicians to gut even the mildest of regulations intended to forestall any further such criminal recklessness in the future. Is there any wonder that people are furious, alienated, and thrashing about for a response with any hope of opening up a horizon?
Which Brings Us to the Proposal
Occupy Wall Street and their far-flung allies might as well give up on addressing their demands to the government, at least for the time being. The slogan ought to be something like "We're tired of being pawned off on the help; from now on, we insist on dealing directly with the masters."
And the plan should be to spend the next several months developing, articulating, and organizing toward a major national mortgage and student-loan strike. Such a loan strike would begin—provided enough people sign on in advance (and I'm talking hundreds of thousands), and unless a concrete set of intervening demands is squarely met in the meantime—on, say, October 1, 2012, right in the middle of the next presidential campaign.
Such a demand is hardly as radical as it sounds (though the tactic of a mortgage strike may well be, harking as it self-consciously does straight back to the great tradition of direct political action which characterized so much of American history, from the actual tea party through Shays' rebellion and the Jacksonian movements and on past the stirring populist upsurge against the last great Gilded Age's generation of robber barons).
No less a figure than Martin Feldstein, the former chairman of Ronald Reagan's own Council of Economic Advisers, recently argued in a New York Times op-ed piece that the country will never get out of its current economic rut until the problem of underwater mortgages is squarely addressed. "House prices are falling because millions of homeowners are defaulting on their mortgages," he noted, "and the sale of their foreclosed properties is driving down the prices of all homes. Nearly 15 million homeowners owe more than their homes are worth; in this group, about half the mortgages exceed the home value by more than 30 percent." Noting the strangulating effect of this situation on the economy as a whole, Feldstein went on to propose how, in order "to halt the fall in house prices, the government should reduce mortgage principal when it exceeds 110 percent of the home value. About 11 million of the nearly 15 million homes that are 'underwater' are in this category. If everyone eligible participated, the one-time cost would be under $350 billion"—a cost he proposed be divvied up evenly between the banks (which is to say, their shareholders) and the government.
A similar calculus could be applied to student loans. The real scandal is the way the rates of the loans in question (I have friends who are locked into Citibank to the tune of coming on 10 percent!) might have made sense in the day when prime was 4 or 5 percent, though it becomes usurious at a time when the Fed has been busy shoveling money at those same banks at well nigh 0 percent, supposedly in order to help rev up the economy. Maybe those loans should be reset at just a few points above current prime, or some such—or else the overhanging principal reduced according to some fairer systemic formula. For that matter, there may be other ways of parsing the resetting of underwater mortgages (for example, allowing for the temporary recasting of the mortgage payment into a non-interest-paying rental, without loss of accrued stake in the property in the interim).
The Occupy movement could enlist the advice of sympathetic economists and loan experts to craft the precise terms of the demand. In addition to the alleviation of tremendous amounts of individual and family anxiety and suffering, the more generalized goal of the reset—and incidentally, why is it that up till now in this crisis only the improvident banks and investment houses have been allowed to reset the terms of their deals, without any penalty, whereas none of the rest of us have been accorded similarly revivifying largesse?—would be to free up all sorts of spending money at the lower reaches of the economy where it might actually do some good.
The naively self-deluding flaw in Feldstein's proposal, alas, is that he aims it at the government. It's past time that pundits like him start getting real: This government, paralyzed and entrammeled as it is these days, pretty much evenly split between bullies and weenies, is never even going to consider, let alone act upon, anything of the sort.
This Proposal, Charmingly, Bypasses Government Altogether
Again: Once the precise terms of the demand have been framed, a national campaign could kick into gear in which underwater-mortgage holders and overstrained postgraduate students would be invited to sign a statement to the effect that if by some specific date, some equally specific number of fellow debtors had likewise signed on to the plan, and if their grievances had not been satisfactorily addressed in the meantime, then all of them would simply stop paying the banks. It would become the banks' problem—and a veritable problem from hell at that, for as lavishly as the banks' executives have been paying themselves, the underlying institutions are still in pretty ginger shape. Let them stay up all night worrying about it. Let them figure out how to get their lobbyists to get their government retainers to respond in a fashion that would avert such a terrifying looming eventuality.
I can already hear the baying screeches welling up from the coddled opinionati—almost a whole other charm of the proposal. Not fair! Against the rules! (Wait a second, isn't it the lender's responsibility to ascertain the viability of the loan in question, and isn't the prospect of default the supposed reason they've been allowed to rake in all that intervening interest? Is it our fault if they weren't able to calculate the eventual consequences of all these decades' worth of their compoundingly insouciant arrogance?) Moral hazard! (Now they start worrying about moral hazard?) What about those who played by the rules? (You mean an earlier generation that never had to rack up these sorts of student debts because college was much cheaper? You mean home buyers who happened to secure their loans before the bubble and back when regulations still prevented the sorts of predations to which their neighbors succumbed? Beyond which, this crisis affects all of us equally, with the exception again of that impervious 1 percent. If neighborhoods don't recover as a whole, no one in them is going to have a secure horizon.) And finally, that last-ditch all-purpose room clearer: class warfare! (Yeah: right.)
One further charm of the proposal is that many of those it seeks to engage would be distinctly easy to organize: In many neighborhoods, house after house is underwater, and it would just be a question of going door-to-door. A similar pattern pertains to recently graduated students, who tend to congregate, unemployed, in the same watering holes and in any case can be reached via their alumni organizations. (Indeed, one could deploy one group to organize the other.) Once reached, such reengaged individuals could form the basis for a significant widening of the innovative mass-participatory democratic impulse so brimmingly in evidence at the various current occupations. Something old and ailing, the economy, might receive a vivifying jolt—and in the process, something new and dynamic and gleamingly hopeful might quicken into being.
There are worse ways to imagine spending the coming winter. Enough with occupying Wall Street: It's time to start preoccupying Wall Street. It's time for the rest of us to start worming our way into their dreams.
Lawrence Weschler, director of the New York Institute for the Humanities at NYU, is a veteran, from his days at the New Yorker, at reporting from such far-flung popular upsurges as Poland, Latin America, and South Africa. His most recent collection, just released, is Uncanny Valley: Adventures in the Narrative. He reads from Uncanny Valley at Elliott Bay Book Company on Mon Nov 28 at 7 pm.
Forget the government. Take this fight to the banks. Let them stay up all night worrying.
by LAWRENCE WESCHLER
November 22, 2011
So Shlomo is up again all night, tossing and turning—or so the old story goes—and by three in the morning, Hannah, his long-suffering and increasingly exasperated wife, has had it. "Enough already with the tossing and turning, Shlomo! What's keeping you up like this night after night, and me too while we are at it?" "It's Moishe across the lane," explains Shlomo, trembling. "I owe him 10 rubles, due tomorrow, and I don't have it." To which Hannah, climbing out of bed and heading over to the window, retorts, "Is that all? Geesh, no problem." She opens the shutter, leans out, and yells, "Moishe!" A few moments pass till Moishe across the way angrily flings his window open: "For God's sake, Hannah, what could you possibly want at this hour?" "It's Shlomo," she explains. "He owes you 10 rubles in the morning and he doesn't have it!" Whereupon she latches her shutter and returns to bed. "There," she tells her husband, "now you go to sleep and let Moishe stay up all night worrying."
In the mode of that story, I'd like to offer a proposal to the Occupy Wall Street activists and their well-meaning supporters scattered all around the country, and for that matter to many of you who don't yet actively support them. Do you have a mortgage? Are you burdened with a student loan? Well, listen up!
To Begin With, Though, a Few Words About Our Current Situation
Start with Occupy Wall Street. At some point, the Occupiers are going to need to sharpen their demands, or at least widen their tactical and strategic vision. They are going to need to find a way of reaching out to constituencies well beyond their original cohort, including millions of fellow citizens who, while they may not have the time or the current life situation or the disposition to be able to join the diehards in encampments, would nevertheless love to be offered some concrete way into the movement, a practical means of expressing their anger and frustration, to say nothing of their sheer human solidarity with one another. It is becoming the responsibility of Occupy Wall Street (just as it was the responsibility of the original antiwar mobilizers back in the Vietnam days) to find some way of building bridges to those people. And finally, even were it not for the increasing incidences of confrontation and forced evictions, winter is fast approaching and ongoing occupation by itself may no longer prove a viable tactic for anything more than a token force over the next several months. Sure, we will all reconvene come the spring, and in ever greater numbers, it is to be hoped, but what to do in the meantime?
Turning to the situation of the wider economy. While the big corporations sit on piles of cash, small businesses are failing to thrive because people are not spending; people are not spending because they either have already lost their jobs or live in justifiable fear that they may yet soon. Fully a quarter of current mortgage holders are underwater, meaning they owe more to the banks than their houses are worth, with foreclosure only a family-financial-hiccup away. The possibility of moving anywhere else (where there might be a job) is likewise foreclosed to them if they don't want to lose everything they've put into their houses, since housing markets generally have seized up as a result of the crisis.
Meanwhile, recent college grads groan under the weight of unprecedented amounts of debt—loans of the sort students in most other countries were never required to take on to fund what most everyplace else is seen as a self-evident public good: an educated populace, after all, being to everyone's advantage. These loans were taken out under the assurance that the resultant degrees would open out onto careers that would allow the loans to be repaid: jobs that no longer exist.
With the general exception of the notorious 1 percent (who've been making out like bandits all through this period, just as they did throughout the previous three decades), the vast majority of Americans don't spend, hence businesses lay off more workers. Then tax revenues decline and local governments in turn lay off more teachers, police, and firefighters, who therefore no longer spend, and so forth.
And what does government seem capable of doing in the face of all this? Not much. If anything, the wheels of governance seem more bollixed and mired than those of the economy at large. One party is being held hostage by a Tea Party pretty much entirely untethered from any understanding of its own actual economic interests, a faux populist insurgency lashed into existence by billionaires (the Koch brothers and their ilk) and prodded along via the Pavlovian ravings of opinion-shapers employed by another (Murdoch and his), the rage of its members cleverly channeled onto the governments and civil servants that have (granted) proved so hapless in trying to deal with the crisis rather than onto the financial behemoths that brought the crisis on in the first place. The other party, alas, ever since the days when the Clinton-Rubin regime engineered its grand surrender (for purposes of all that excellent fundraising), has been captive to that same finance industry, a sinister embrace which their new leader, President Obama, for whatever reason (personal psychological issues, heartfelt political conviction, meritocratic identification, Stockholm syndrome, despairing realpolitik sense of what can any longer be achieved—who knows and who anymore cares?) has proven singularly incapable of sundering.
Bailouts—at full value, dollar for dollar—get lavished upon the banks and finance industry whose recklessness got us into the mess, without the slightest requirement that those institutions turn around and help the economy at large. While everyone else suffers, the executives take unconscionable bonuses, and meanwhile sluice good portions of the rest of their bailout funds into paying lobbyists and their designated politicians to gut even the mildest of regulations intended to forestall any further such criminal recklessness in the future. Is there any wonder that people are furious, alienated, and thrashing about for a response with any hope of opening up a horizon?
Which Brings Us to the Proposal
Occupy Wall Street and their far-flung allies might as well give up on addressing their demands to the government, at least for the time being. The slogan ought to be something like "We're tired of being pawned off on the help; from now on, we insist on dealing directly with the masters."
And the plan should be to spend the next several months developing, articulating, and organizing toward a major national mortgage and student-loan strike. Such a loan strike would begin—provided enough people sign on in advance (and I'm talking hundreds of thousands), and unless a concrete set of intervening demands is squarely met in the meantime—on, say, October 1, 2012, right in the middle of the next presidential campaign.
Such a demand is hardly as radical as it sounds (though the tactic of a mortgage strike may well be, harking as it self-consciously does straight back to the great tradition of direct political action which characterized so much of American history, from the actual tea party through Shays' rebellion and the Jacksonian movements and on past the stirring populist upsurge against the last great Gilded Age's generation of robber barons).
No less a figure than Martin Feldstein, the former chairman of Ronald Reagan's own Council of Economic Advisers, recently argued in a New York Times op-ed piece that the country will never get out of its current economic rut until the problem of underwater mortgages is squarely addressed. "House prices are falling because millions of homeowners are defaulting on their mortgages," he noted, "and the sale of their foreclosed properties is driving down the prices of all homes. Nearly 15 million homeowners owe more than their homes are worth; in this group, about half the mortgages exceed the home value by more than 30 percent." Noting the strangulating effect of this situation on the economy as a whole, Feldstein went on to propose how, in order "to halt the fall in house prices, the government should reduce mortgage principal when it exceeds 110 percent of the home value. About 11 million of the nearly 15 million homes that are 'underwater' are in this category. If everyone eligible participated, the one-time cost would be under $350 billion"—a cost he proposed be divvied up evenly between the banks (which is to say, their shareholders) and the government.
A similar calculus could be applied to student loans. The real scandal is the way the rates of the loans in question (I have friends who are locked into Citibank to the tune of coming on 10 percent!) might have made sense in the day when prime was 4 or 5 percent, though it becomes usurious at a time when the Fed has been busy shoveling money at those same banks at well nigh 0 percent, supposedly in order to help rev up the economy. Maybe those loans should be reset at just a few points above current prime, or some such—or else the overhanging principal reduced according to some fairer systemic formula. For that matter, there may be other ways of parsing the resetting of underwater mortgages (for example, allowing for the temporary recasting of the mortgage payment into a non-interest-paying rental, without loss of accrued stake in the property in the interim).
The Occupy movement could enlist the advice of sympathetic economists and loan experts to craft the precise terms of the demand. In addition to the alleviation of tremendous amounts of individual and family anxiety and suffering, the more generalized goal of the reset—and incidentally, why is it that up till now in this crisis only the improvident banks and investment houses have been allowed to reset the terms of their deals, without any penalty, whereas none of the rest of us have been accorded similarly revivifying largesse?—would be to free up all sorts of spending money at the lower reaches of the economy where it might actually do some good.
The naively self-deluding flaw in Feldstein's proposal, alas, is that he aims it at the government. It's past time that pundits like him start getting real: This government, paralyzed and entrammeled as it is these days, pretty much evenly split between bullies and weenies, is never even going to consider, let alone act upon, anything of the sort.
This Proposal, Charmingly, Bypasses Government Altogether
Again: Once the precise terms of the demand have been framed, a national campaign could kick into gear in which underwater-mortgage holders and overstrained postgraduate students would be invited to sign a statement to the effect that if by some specific date, some equally specific number of fellow debtors had likewise signed on to the plan, and if their grievances had not been satisfactorily addressed in the meantime, then all of them would simply stop paying the banks. It would become the banks' problem—and a veritable problem from hell at that, for as lavishly as the banks' executives have been paying themselves, the underlying institutions are still in pretty ginger shape. Let them stay up all night worrying about it. Let them figure out how to get their lobbyists to get their government retainers to respond in a fashion that would avert such a terrifying looming eventuality.
I can already hear the baying screeches welling up from the coddled opinionati—almost a whole other charm of the proposal. Not fair! Against the rules! (Wait a second, isn't it the lender's responsibility to ascertain the viability of the loan in question, and isn't the prospect of default the supposed reason they've been allowed to rake in all that intervening interest? Is it our fault if they weren't able to calculate the eventual consequences of all these decades' worth of their compoundingly insouciant arrogance?) Moral hazard! (Now they start worrying about moral hazard?) What about those who played by the rules? (You mean an earlier generation that never had to rack up these sorts of student debts because college was much cheaper? You mean home buyers who happened to secure their loans before the bubble and back when regulations still prevented the sorts of predations to which their neighbors succumbed? Beyond which, this crisis affects all of us equally, with the exception again of that impervious 1 percent. If neighborhoods don't recover as a whole, no one in them is going to have a secure horizon.) And finally, that last-ditch all-purpose room clearer: class warfare! (Yeah: right.)
One further charm of the proposal is that many of those it seeks to engage would be distinctly easy to organize: In many neighborhoods, house after house is underwater, and it would just be a question of going door-to-door. A similar pattern pertains to recently graduated students, who tend to congregate, unemployed, in the same watering holes and in any case can be reached via their alumni organizations. (Indeed, one could deploy one group to organize the other.) Once reached, such reengaged individuals could form the basis for a significant widening of the innovative mass-participatory democratic impulse so brimmingly in evidence at the various current occupations. Something old and ailing, the economy, might receive a vivifying jolt—and in the process, something new and dynamic and gleamingly hopeful might quicken into being.
There are worse ways to imagine spending the coming winter. Enough with occupying Wall Street: It's time to start preoccupying Wall Street. It's time for the rest of us to start worming our way into their dreams.
Lawrence Weschler, director of the New York Institute for the Humanities at NYU, is a veteran, from his days at the New Yorker, at reporting from such far-flung popular upsurges as Poland, Latin America, and South Africa. His most recent collection, just released, is Uncanny Valley: Adventures in the Narrative. He reads from Uncanny Valley at Elliott Bay Book Company on Mon Nov 28 at 7 pm.
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