I've noticed that a lot of people think the Occupy movement has simply fallen apart. Absolutely not true: After Hurricane Sandy, they used the contacts with community organizations they've developed on housing issues to help set up a broad range of relief efforts throughout the NY area. And now, it comes out that they're buying up debt. Very interesting:
This time last year, Occupy Wall Street participants were regularly storming through Lower Manhattan, snaking around the financial district and beyond in boisterous marches and defending their Zuccotti Park home base in tense street battles with the NYPD. Twelve months later, Occupy is pouring energy into buying up debt bonds.
It’s not incongruent.
The Rolling Jubilee — borne of Occupy offshoot group, Strike Debt — is best considered one among many Occupy tactics which aim to challenge or disrupt our current socio-politico-economic conditions. And as far as tactics go, this one is pretty clever. The idea is this: Occupy plans to buy up distressed debt — debt which is in default — and then forgive it (or, “abolish” it, as the ever-dramatic Occupy parlance puts it). Banks sell on distressed debts at pennies on the dollar (since the debts are in default, they’re not making money off them and prefer to get rid of them). There are a number of websites where anyone can go and then buy this discharged, cheap debt. So, you, or I, or Occupy, could buy $16,000 worth of debt for just $500, and then either make a profit by recovering the difference or just cancel it. Occupy and Strike Debt plan to do the latter on a large scale.
The Rolling Jubilee campaign, also dubbed “The People’s Bailout,” kicks off with a good-ole-fashioned fundraiser telethon in New York on Nov. 15 with big name musicians including Jeff Mangum performing. Occupy has already started taking donations for the project and Strike Debt announced Friday via Facebook that the effort has already erased $100,000 worth of medical debt. The hope, then, is to get it “rolling” — to create snowballing networks of debtors using what money they can to buy off and cancel more and more debt. Ideally, a pay-it-forward attitude would compel individuals who have their debt forgiven to help buy up and cancel more debt.
The plan is legally sound and has been tested in successful experiments, which included buying and forgiving $14,000 for $466. Discharged credit card debt, but medical debt and private student debt can all be bought (government-backed student loans — since they’re government-backed — don’t get sold on.)
The New Statesman’s Alex Hern noted that despite the “legal mechanics” of the jubilee idea working in Occupy’s favor, the effort may face other obstacles. “Debt collectors really can cancel the debt if they want. The problem is that if you try to actually do that, you may find very quickly that people stop selling you debt.” Hern explained a similar plan concocted by a group called American Homeowner Preservation, in which they would buy a foreclosed house in a short sale at the market price, and then lease the home back to the ousted homeowner until the homeowner had the ability to get a mortgage and buy it back at a pre-set price. Felix Salmon wrote about the effort:
The idea might have been elegant, but it didn’t work in practice, because the banks wouldn’t play ball: they (and Freddie Mac) simply hated the idea of a homeowner being able to stay in their house after a short sale, and often asked for an affidavit from the buyer saying that the former owner would certainly be kicked out.
The banks’ behavior here, as Hern points out, was telling: they have no reason to care what happens to a house once they’ve sold the mortgage, but they did care when it came to the American Homeowner Preservation project. “The best explanation for their stubbornness is that they fear that organizations like American Homeowner Preservation are creating a sort of moral hazard by reducing the penalties for defaulting on mortgages.”
Hahahaha! Moral hazard! I'm laughing so hard, I can barely breathe! Don't you love these amoral creeps?