"One of the fascinating things about the media dominance of Occupy Wall Street has been how the conversation has shifted away from the deficit-obsession of the last few years. Suddenly the debt that everyone is talking about is personal, individual debt—student loans, mortgages, credit cards and other ways the big banks control our lives.
“That's one of the things, debt really does tie the 99 percent together. Everyone who is under the 99 percentile saw a debt runup in the 2000s,” Mike Konczal, finance blogger and fellow at the Roosevelt Institute, told me. “You can talk about 'the richest 1 percent makes this much money,' but part of what they're making is debt. Their wealth is a claim on everyone else's future income.”
That debt was for many years a substitute for wages in the pockets of many Americans. As incomes stagnated or even shrank, credit cards and home equity filled the gap—until the housing bubble popped, leaving millions underwater on their mortgages, owing more than their homes were worth, and unable to get more credit cards or even make the minimum payments on the ones they had.
Many have noted that what happened in 2007 and 2008, when the banks were handed billions in bailouts and secret ultra-low-interest loans, was essentially a capital strike. Finance essentially said that if they didn't get bailed out, they'd shut down the system—stop lending, jam up the works, and make life miserable for everyone.
Yet those same banks, once bailed out, have flatly refused to do the same for a nation of borrowers thrown into crisis by their actions. Their argument seems simple—the borrowers knew what they were doing, it's their obligation to pay. Most borrowers agree, and struggle to make payments on credit cards with 20 percent rates and student loans for educations that didn't help them find jobs, on homes that have plunged in value thanks to predatory lending.
Rep. Hansen Clarke, a Democrat from Michigan, recently noted that in fact a record amount of consumer debt is hurting everyone, writing on his Huffington Post blog: “Such high interest rates -- and high levels of household debt more generally -- have more of an impact on most Americans' real disposable income than higher European-style levels of taxation. They reduce Americans' purchasing power, which means they reduce demand for American goods and services and, in turn, worsen our employment situation. The situation is similar with mortgages and student loans.”
So wiping out some of that debt, most of which is owed to the same banks that broke the economy in the first place, would in fact be an economic stimulus. Why has there been no action?
David Graeber, anthropologist and author of Debt: The First 5000 Years, told Naked Capitalism, “If you want to take a relation of violent extortion, sheer power, and turn it into something moral, and most of all, make it seem like the victims are to blame, you turn it into a relation of debt.”
Steven Katz, founder of Debtorboards.com, recently explained to Mother Jones how he's evaded paying $80,000 in credit card debt. His Web site informs debtors of ways they can fight back against the banks; everything from filing suit against collection agencies to shielding your assets from seizure—and it has more than 10,000 members.
A woman recently posted a video to YouTube (which thus far has over 500,000 views) calling for a debtor's revolution. “Had you left me alone I would have continued to make my payments in good faith,” she says, but the hike in her interest rate to 30 percent has changed her mind.
“There is power in numbers,” she notes, and that's where the idea of an organized strike comes in. One person can be hounded, harassed, and scared into submission, but when enough of them work together, could the banks be pressed into backing down?
Stephen Lerner, a veteran organizer with SEIU, recently was called a terrorist for suggesting that perhaps homeowners, stuck with mortgages that are more than the value of their homes and banks that refuse to write down the principal on those loans, should band together and refuse to pay their mortgages until the banks decide to negotiate. A kind of collective bargaining for homeowners whose wealth was wiped out by the financial crisis, those who cannot pay their bills and those who can (for now) but still would benefit by spending that money elsewhere.
“What is the critical mass?” Lerner asked me. “The beauty of the underwater strike is that it would cause a crisis for the banks, which would mean they couldn't ignore the issue and would be forced to negotiate with homeowners. The big question is what's the number you'd have to hit to force them to negotiate?”
“The problem is that a debt-strike will take a lot of coordination to make it work,” Thomas Gokey points out, “It can't just be one person who is willing to risk their financial life, it only works when there are millions of people who are willing to take that risk together, and they are only going to take that risk if they can feel confident that everyone else has got their back.”
That in part is what Gokey hoped to solve by bringing the debt strike idea to ContactCon, but it's not the only one. Lerner points out that the debt strike also needs targets, demands and an answer to the question, “Who pays?”
“There should be debt forgiveness, but these guys--the student loan profiteers--should eat it, not the government and taxpayers,” he points out. “The banks should pay because they destroyed the economy, they sucked 18-year-olds into predatory loans they are stuck with for life.”
Banks have already, Mother Jones notes, written off some $90 billion in credit card debt since 2008, taking it off their books because it's unlikely to ever be recovered. Some nonpayment is built into the system—as Graeber notes in his book Debt: The First 5000 Years, “A lender is supposed to assume a certain degree of risk. If all loans, no matter how idiotic, were still retrievable—if there were no bankruptcy laws, for instance—the results would be disastrous. What reason would lenders have not to make a stupid loan?”
Aside from the fact, of course, that we wound up with an $8 trillion housing bubble from just those sorts of bad loans, there is in the US one type of debt that cannot be discharged in bankruptcy, that follows you for life and that has the full power of the US government behind its collection.
I'm speaking, of course, of student loans." (http://interactivist.autonomedia.org/node/33998)