Ending the Secrecy of the Student Debt Crisis

Posted on September 16, 2018 by Yves Smith

https://www.nakedcapitalism.com/2018/09/ending-secrecy-student-debt-crisis.html

Yves here. This article describes how the stigma of struggling to pay student debt is a burden in and of itself. I wish this article had explained how little it take to trigger an escalation into default interest rates and how punitive they are. The piece also stresses the value of activism as a form of psychological relief, by connecting stressed student debt borrowers with people similarly afflicted.

But the bigger issue is the way indebtedness is demonized in a society that makes it pretty much impossible to avoid borrowing. One reader recounted how many (as in how few) weeks of after tax wages it took to buy a car in the 1960s versus now. Dealers don’t want to talk to buyers who want to pay in full at the time of purchase. And if you don’t have installment credit or a mortgage, the consumer credit agencies ding you!

It goes without saying that the sense of shame is harder to endure due to how shallow most people’s social networks are, which is another product of neoliberalism.

In keeping, the New York Times today ran an op-ed by one of its editors on how student debtors are also victims of the crisis, reprinted from a longer piece in The Baffler (hat tip Dan K). Key sections:

Because of the loans’ disgracefully high interest rates, my family and I have paid more or less the equivalent of my debt itself in the years since I graduated, making monthly payments in good faith — even in times of unemployment and extreme duress — to lenders like Citigroup, a bank that was among the largest recipients of federal bailout money in 2008 and that eventually sold off my debt to other lenders. This ruinous struggle has been essentially meaningless: I now owe more than what I started out owing, not unlike my parents with their mortgage….

Many people have and will continue to condemn me personally for my tremendous but unexceptional student debt, and the ways in which it has made the recession’s effects linger for my family. I’ve spent quite a lot of time in the past decade accepting this blame. The recession may have compounded my family’s economic insecurity, but I also made the conscious decision to take out loans for a college I couldn’t afford in order to become a journalist, a profession with minimal financial returns. The amount of debt I owe in student loans — about $100,000 — is more than I make in a given year. I am ashamed and embarrassed by this, but as I grow older, I think it is time that those profiting from this country’s broken economic system share some of my guilt…

[At my commencement in 2009] Mrs. Clinton then echoed a fantasy of boundless opportunity that had helped guide the country into economic collapse, deceiving many of the parents in attendance, including my own, into borrowing toward a future that they couldn’t work hard enough to afford. “There is no problem we face here in America or around the world that will not yield to human effort,” she said. “Our challenges are ones that summon the best of us, and we will make the world better tomorrow than it is today.” At the time, I wondered if this was accurate. I now know how wrong she was.

By Daniela Senderowicz. Originally published in Yes! Magazine

Activists are building meaningful connections among borrowers to counter the taboo of admitting they can’t pay their bills.

Gamblers and reality TV stars can claim bankruptcy protections when in financial trouble, but 44 million student loan borrowers can’t. Unemployed, underpaid, destitute, sick, or struggling borrowers simply aren’t able to start anew.

With a default rate approaching 40 percent, one would expect armies of distressed borrowers marching in the streets demanding relief from a system that has singled out their financial anguish. Distressed student debtors, however, seem to be terror-struck about coming forward to a society that, they say, ostracizes them for their inability to keep up with their finances.

When we spoke to several student borrowers, almost none were willing to share their names. “I can’t tell anyone how much I’m struggling,” says a 39-year-old Oregon physician who went into student loan default after his wife’s illness drained their finances. He is terrified of losing his patients and reputation if he speaks out about his financial problems.

“If I shared this with anyone they will look down upon me as some kind of fool,” explains a North Carolina psychologist who is now beyond retirement age. He explains that his student debt balance soared after losing a well-paying position during the financial crisis, and that he is struggling to pay it back.

Financial shame alienates struggling borrowers. Debtors blame themselves and self-loathe when they can’t make their payments, explains Colette Simone, a Michigan psychologist. “There is so much fear of sharing the reality of their financial situation and the devastation it is causing in every facet of their lives,” she says. “The consequences of coming forward can result in social pushback and possible job–related complications, which only deepen their suffering.”

Debtors are isolated, anxious, and in the worst cases have taken their own lives. Simone confirms that she has “worked with debtors who were suicidal or had psychological breakdowns requiring psychiatric hospitalization.”

With an average debt of just over $37,000 per borrower for the class of 2016, and given that incomes have been flat since the 1970s, it’s not surprising that borrowers are struggling to pay. Student loans have a squeaky-clean reputation, and society tends to view them as a noble symbol of the taxpayers’ generosity to the working poor. Fear of facing society’s ostracism for failure to pay them back has left borrowers alienated and trapped in a lending system that is engulfing them in debt bondage.

“Alienation impacts mental health issues,” says New York mental health counselor Harriet Fraad. “As long as they blame themselves within the system, they’re lost.”

Student debtors can counter despair by fighting back through activism and political engagement, she says. “Connection is the antidote to alienation, and engaging in activism, along with therapy, is a way to recovery.”

Despite the fear of coming forward, some activists are building a social movement in which meaningful connections among borrowers can counter the taboo of openly admitting financial ruin.

Student Loan Justice, a national grassroots lobby group, is attempting to build this movement by pushing for robust legislation to return bankruptcy protections to borrowers. The group has active chapters in almost every state, with members directly lobbying their local representatives to sign on as co-sponsors to HR 2366. Activists are building a supportive community for struggling borrowers through political agitation, local engagement, storytelling, and by spreading a courageous message of hope that may embolden traumatized borrowers to come forward and unite.

Julie Margetaa Morgan, a fellow at The Roosevelt Institute, recently noted that student debt servicers like Navient have a powerful influence on lawmakers. “Student loan borrowers may not have millions to spend on lobbying, but they have something equally, if not more, powerful: millions of voices,” she says.

A recent manifesto by activist and recent graduate Eli Campbell calls for radical unity among borrowers. “Young people live in constant fear that they’ll never be able to pay off their debt. We’re not buying houses or able to afford the hallmarks of the American dream,” he explains.

In his call for a unified national boycott of student loan payments, inevitably leading to a mass default on this debt, Campbell hopes to expose this crisis and instigate radical change. In a recent interview he explained that the conditions for borrowers are so bad already that debtors may not join the boycott willingly. Instead, participation may simply happen by default given the lack of proper work opportunities that lead to borrowers’ inability to pay.

While a large-scale default may not happen through willful and supportive collective action, ending the secrecy of the crisis through massive national attention may destigmatize the shame of financial defeat and finally bring debtors out of the isolation that causes them so much despair.

Activists are calling for a significant conversation about the commodification of educating our youth, shifting our focus toward investing into the promise of the young and able, rather than the guarantee of their perpetual debt bondage. In calling for collective action they soothe the hurt of so many alienated debtors, breaking the taboos that allow them to say, “Me, too” and admit openly that in this financial climate we all need each other to move forward.

Fighting Debbie Wasserman Schultz & Election Fraud w/Tim Canova

https://www.youtube.com/watch?v=lYXvLb_fhPY

A new authoritarian axis demands an international progressive front

Bernie Sanders

https://www.theguardian.com/commentisfree/ng-interactive/2018/sep/13/bernie-sanders-international-progressive-front

There is a global struggle taking place of enormous consequence. Nothing less than the future of the planet – economically, socially and environmentally – is at stake.

At a time of massive wealth and income inequality, when the world’s top 1% now owns more wealth than the bottom 99%, we are seeing the rise of a new authoritarian axis.

While these regimes may differ in some respects, they share key attributes: hostility toward democratic norms, antagonism toward a free press, intolerance toward ethnic and religious minorities, and a belief that government should benefit their own selfish financial interests. These leaders are also deeply connected to a network of multi-billionaire oligarchs who see the world as their economic plaything.

Those of us who believe in democracy, who believe that a government must be accountable to its people, must understand the scope of this challenge if we are to effectively confront it.

It should be clear by now that Donald Trump and the rightwing movement that supports him is not a phenomenon unique to the United States. All around the world, in Europe, in Russia, in the Middle East, in Asia and elsewhere we are seeing movements led by demagogues who exploit people’s fears, prejudices and grievances to achieve and hold on to power.

This trend certainly did not begin with Trump, but there’s no question that authoritarian leaders around the world have drawn inspiration from the fact that the leader of the world’s oldest and most powerful democracy seems to delight in shattering democratic norms.

Three years ago, who would have imagined that the United States would stay neutral between Canada, our democratic neighbor and second largest trading partner, and Saudi Arabia, a monarchic, client state that treats women as third-class citizens? It’s also hard to imagine that Israel’s Netanyahu government would have moved to pass the recent “nation state law”, which essentially codifies the second-class status of Israel’s non-Jewish citizens, if Benjamin Netanyahu didn’t know Trump would have his back.

All of this is not exactly a secret. As the US continues to grow further and further apart from our longtime democratic allies, the US ambassador to Germany recently made clear the Trump administration’s support for rightwing extremist parties across Europe.

In addition to Trump’s hostility toward democratic institutions we have a billionaire president who, in an unprecedented way, has blatantly embedded his own economic interests and those of his cronies into the policies of government.

Other authoritarian states are much farther along this kleptocratic process. In Russia, it is impossible to tell where the decisions of government end and the interests of Vladimir Putin and his circle of oligarchs begin. They operate as one unit. Similarly, in Saudi Arabia, there is no debate about separation because the natural resources of the state, valued at trillions of dollars, belong to the Saudi royal family. In Hungary, far-right authoritarian leader Viktor Orbán is openly allied with Putin in Russia. In China, an inner circle led by Xi Jinping has steadily consolidated power, clamping down on domestic political freedom while it aggressively promotes a version of authoritarian capitalism abroad.

We must understand that these authoritarians are part of a common front.

They are in close contact with each other, share tactics and, as in the case of European and American rightwing movements, even share some of the same funders. The Mercer family, for example, supporters of the infamous Cambridge Analytica, have been key backers of Trump and of Breitbart News, which operates in Europe, the United States and Israel to advance the same anti-immigrant, anti-Muslim agenda. Republican megadonor Sheldon Adelson gives generously to rightwing causes in both the United States and Israel, promoting a shared agenda of intolerance and illiberalism in both countries.

The truth is, however, that to effectively oppose rightwing authoritarianism, we cannot simply go back to the failed status quo of the last several decades. Today in the United States, and in many other parts of the world, people are working longer hours for stagnating wages, and worry that their children will have a lower standard of living than they do.

Our job is to fight for a future in which new technology and innovation works to benefit all people, not just a few. It is not acceptable that the top 1% of the world’s population owns half the planet’s wealth, while the bottom 70% of the working age population accounts for just 2.7% of global wealth.

Together governments of the world must come together to end the absurdity of the rich and multinational corporations stashing over $21tn in offshore bank accounts to avoid paying their fair share of taxes and then demanding that their respective governments impose an austerity agenda on their working families.

It is not acceptable that the fossil fuel industry continues to make huge profits while their carbon emissions destroy the planet for our children and grandchildren.

It is not acceptable that a handful of multinational media giants, owned by a small number of billionaires, largely control the flow of information on the planet.

It is not acceptable that trade policies that benefit large multinational corporations and encourage a race to the bottom hurt working people throughout the world as they are written out of public view.

It is not acceptable that, with the cold war long behind us, countries around the world spend over $1tn a year on weapons of destruction, while millions of children die of easily treatable diseases.

In order to effectively combat the rise of the international authoritarian axis, we need an international progressive movement that mobilizes behind a vision of shared prosperity, security and dignity for all people, and that addresses the massive global inequality that exists, not only in wealth but in political power.

Such a movement must be willing to think creatively and boldly about the world that we would like to see. While the authoritarian axis is committed to tearing down a post-second world war global order that they see as limiting their access to power and wealth, it is not enough for us to simply defend that order as it exists now.

We must look honestly at how that order has failed to deliver on many of its promises, and how authoritarians have adeptly exploited those failures in order to build support for their agenda. We must take the opportunity to reconceptualize a genuinely progressive global order based on human solidarity, an order that recognizes that every person on this planet shares a common humanity, that we all want our children to grow up healthy, to have a good education, have decent jobs, drink clean water, breathe clean air and live in peace.

Our job is to reach out to those in every corner of the world who share these values, and who are fighting for a better world.

In a time of exploding wealth and technology, we have the potential to create a decent life for all people. Our job is to build on our common humanity and do everything that we can to oppose all of the forces, whether unaccountable government power or unaccountable corporate power, who try to divide us up and set us against each other. We know that those forces work together across borders. We must do the same.

Bernie Sanders is a US Senator from Vermont

We asked Yanis Varoufakis to comment on Bernie Sanders’ piece. Here is his response:

Bernie Sanders is spot-on. Financiers have long formed an international “brotherhood” to guarantee themselves international bailouts when their paper pyramids crash.

More recently, xenophobic rightwing zealots also formed their very own Nationalist International, turning once proud people against another so that they control their wealth and politics.

It is high time that Democrats from across the world form a Progressive International in the interests of a majority of people on every continent, in every country.

Sanders is also right when he says that the solution is not to go back to a status quo whose spectacular failure has paved the ground for the rise of the Nationalist International.

Our Progressive International must lead with a vision of the green, shared prosperity that human ingenuity is capable of providing – as long as democracy is given a chance to enable it.

To that end we need to do more than campaign together. Let us form a common council that draws out a common blueprint for an International New Deal, a progressive New Bretton Woods.

How We Pay for Medicare for All: An In-Depth Breakdown

https://www.youtube.com/watch?v=njJFXIuK2io

The Progressive Magazine

https://www.youtube.com/watch?v=PYUVkiGkGzI

Zu Asche, zu Staub - Severija Janušauskaitė (English Subtitles)

https://www.youtube.com/watch?v=dF0Kg06dolw

Retrospectives of the Financial Crisis Are Leaving Out the Most Important Part--Its Victoms

BY DAVID DAYEN

http://inthesetimes.com/working/entry/21440/financial_crisis_lehman_brothers_anniversary

Because I’m a masochist, I’ve read as many retrospectives as I could about the 10th anniversary of the fateful failure of Lehman Brothers, the emblematic event of the financial crisis. And I can’t help but notice a gaping hole in the narratives.

I’ve heard from Lew Ranieri, the Salomon Brothers trader who invented the mortgage bond in the 1980s, and now regrets it. I’ve heard bailout architects Ben Bernanke, Hank Paulson, and Tim Geithner justify their beliefs in doing whatever it took to save the banks. I’ve endured you-are-there narratives about bankers and policymakers racing to rescue the financial system. Wonks, pundits, and reporters have all offered thoughts on the crisis’ origins, the response, and its ultimate meaning.

It seems the only people not consulted for their perspective were those most powerfully affected by the crisis’ impact—the millions of families who suffered foreclosure and eviction. Flip through the nation’s major newspapers and periodicals and you’ll strain to find a single voice of a homeowner left adrift when the housing bubble collapsed. They remain as invisible to the media and the culture as they were to policymakers in 2008. And this tragic blind spot explains nearly everything about how America conducted the bailouts, and for whose benefit.

Let me try to remedy this by introducing you to Terrie Crowley of Deerfield, Illinois. She began seeking a loan modification for her modest, 1,500 square-foot rancher in 2009. She’s been in active litigation with her mortgage company, Wells Fargo, since 2011. And she’s still fighting to keep her home. “It’s not just a $200,000 house,” Crowley said in an interview. “It’s where I work, where my family is, where we’re building memories. It’s what I worked so hard in my life to develop. I will not let somebody steal my house under those terms.”

Unlike most people wrapped up in the crisis, Terrie had experience in the financial industry. Her first job was on the trading floor at the Chicago Mercantile Exchange, and she eventually became a real estate broker in the 1990s. But that was one of many industries that imploded when the bubble popped. Combine that with two emergency surgeries in 2008 and the out-of-pocket expenses that came with them, and Terrie feared that she wouldn’t be able to keep up with her mortgage.

So she called Wells Fargo, which serviced the loan, for assistance. With an 800 credit score and a history of paying her bills, Terrie thought she was a perfect candidate for a loan modification. But Wells Fargo blew her off for months, Terrie said. Finally, in a recording she was later able to obtain, a representative told Terrie that she had to miss payments in order to get a modification. “I said what are you talking about, I’m never late on my bills, that’s not who I am,” Terrie said. But with her business drying up she had little choice.

After filling out the modification applications, Terrie would use savings to get current on the loan, unable to endure the stress of being late. But it wasn’t true that borrowers had to be late on their mortgage to qualify for relief under the government’s Home Affordable Modification Program, or HAMP. Wells Fargo didn’t help Terrie even after she missed payments. The bank denied four applications, each for questionable reasons. Once they cited $2,300 in credit card debt that Terrie paid off years earlier.

What Terrie later found out from her lawsuit is that Wells Fargo had already told the investor in the loan, Fannie Mae, that they would be foreclosing on the house, despite the fact that she was current on the mortgage at the time. The bank conducted four hard credit checks to take Terrie’s credit score down to 660, making her ineligible for alternatives like refinancing. The whole thing was a pretext, using a government mortgage program to trap the borrower and capture the home.

Fannie Mae actually extended a loan modification offer to Terrie, which Wells Fargo never let her see. Instead, Wells Fargo gave her a “special forbearance” agreement, allowing her to freeze payments for a trial period. But Wells Fargo never made the modification permanent, asking her for the skipped mortgage payments after the trial period ended. Terrie pre-emptively sued Wells Fargo in 2011, the bank took her to court for foreclosure, and three attorneys later, she’s still locked in battle.

Terrie has been telling this story for years, and it’s at once unique and totally normal activity during the foreclosure crisis. Rampant fraud plucked homes from millions of borrowers who encountered struggle through no fault of their own and tried to do the right thing. Yet those who bore this burden continue to be forgotten.

In his retrospective, the New York Times’ Neil Irwin gestured at the massive “human cost of the foreclosure crisis.” But citing Rick Santelli’s rant against bailing out “the loser’s mortgages,” Irwin lamented, “the politics of helping troubled homeowners was more toxic than the crisis managers had foreseen.” That’s something that can only be written by somebody who hasn’t sat down with a foreclosure victim. It’s an excuse, used by policymakers and their enablers, so they can live with their actions. The same people who moved heaven and earth to secure extremely unpopular bank bailouts came up with all kinds of constraints when it came to foreclosures.

But the politics of not helping homeowners was far more toxic than Rick Santelli and the Tea Party have ever been. Millions of people saw the biggest financial purchase of their lives, the place they lived, the source of their stability, ripped away from them. They saw their government ignore, if not outright abandon them in their time of need. And they were fundamentally altered by the experience.

“I shed a lot of tears when I go to court and see another family devastated,” Terrie told me. “I had a woman, came out of court, she fell in my arms, saying ‘what am I going to do, my husband left me, I lost everything.’ I didn’t know her! I saw a World War II vet sitting to go in for an eviction date while his wife was dying of cancer. You don’t walk into environments like that over and over and not have it change you.”

These victims were segregated from the halls of power, humiliated into silence about their plight. Foreclosure victims don’t have lobbyists or liaisons that could grab the attention of elites. Not only did this prolong economic pain, it created a stew of anger and frustration, and lent evidence to the Reagan-era notion that government is the problem and not the solution. It prepared the ground for populist demagogues. It was a catastrophic mistake. And it’s impossible to assess the financial crisis and its conclusion without remembering this broken social contract, the moment the government chose to rescue Wall Street and not Main Street.

Incredibly, despite all this, Terrie Crowley is hopeful as she continues to fight for her home. “I’m past that fury stage,” she said. “Maybe if so many of us keep going and are successful, in some way it will educate people. I’m not going to change Wells Fargo. But these cases do matter. We just don’t know how they matter yet.”