Rolling Jubilee: Proclaim Liberty Throughout all the Land

Ezra Klein describes a scene from the documentary The Queen of Versailles:

David Siegel, CEO of Westgate Resorts, the largest time-share company in the world, is hosting a party. The party is in his huge mansion. But it’s not in his hugest mansion — the 90,000 square foot, still under-construction “Versailles” — which is, at that moment, falling into foreclosure because Siegel can’t keep up on the payments.

Siegel, slumped in a ratty armchair, is regaling some friends with a tale that is, simultaneously, a sob-story about the desperate state of his finances and an extended boast about his skill at financial engineering. As Siegel tells it, he owes the bank $18.5 million, and he can’t pay. But the bank won’t write down the loan. So Siegel tapped a third-party to approach the bank about buying the loan, which they were able to do, for a mere $3.5 million. And then Siegel bought his $18.5 million loan back from the third-party at barely more than a sixth of its original value.

It’s nice to be rich. Millionaires like Siegel, being millionaires, don’t usually have to worry about being trapped by crippling debt, but even if they find themselves in that unusual situation, they have neat little tricks like that to liberate themselves from debt for a fraction of the cost. Matt Yglesias describes how Siegel’s little scheme worked:

All kinds of debt gets “securitized” these days. Instead of a bank just lending money and collecting interest, it sells the rights to that income stream as an Asset Backed Security. By buying up a diverse array of ABS you can end up with less exposure to idiosyncratic risk than if you’re just lending. But what happens when securitized loans go bad? Well they become “distressed debt” that can be purchased for pennies on the dollar.

That’s what Siegel’s “third party” friend did. Unfortunately, that’s not a solution available to most of us — or to the people who really need it. A time-share mogul who makes a string of bad bets during a bubble can slip away from $18.5 million in debt. But a working-class family hit by job loss or injury can be permanently impoverished by an $18.5 thousand debt, with no means of escape.

Until now.

Because the merry mischief-makers of Occupy have come up with a scheme to help free working-class families from enslavement to debt by using the same tricks employed by the Siegels and Trumps of the 1 percent.

They call it Rolling Jubilee:

Rolling Jubilee is a Strike Debt project that buys debt for pennies on the dollar, but instead of collecting it, abolishes it. Together we can liberate debtors at random through a campaign of mutual support, good will, and collective refusal. Debt resistance is just the beginning. Join us as we imagine and create a new world based on the common good, not Wall Street profits.

(Thanks to lonespark and alienbooknose and others who alerted me to this very cool idea.) So far, according to the Rolling Jubilee site, they’ve raised a little over $100,000 and used it to abolish about $2.2 million in debt — which is an even better return on investment than Siegel got. Here’s their video explaining the idea in simple terms:

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Patrick Nielsen Hayden cuts to the core of what this means:

That this isn’t just an attempt to render charity to the needy; it’s an attempt to undermine a specific kind of power relationship. As understood and practiced today, debt is a kind of servitude. If you have to take on unsustainable debts — or if you have the misfortune to live in a country that took on unsustainable debts — you’re just supposed to quietly accept that your life is permanently f–ked, and that your creditors get to dictate its terms.

That’ll preach. That’s exactly what Jubilee — the biblical, theological Jubilee — is all about. It means liberation from debt — liberation from having “to quietly accept that your life is permanently f–ked.”

The quote in the title of this post is from the Jubilee passage in Leviticus 25 — the one engraved on the Liberty Bell. But it’s a mistake to think that because the biblical Jubilee first appears in Leviticus and Deuteronomy it must be some obscure and ancient law — something akin to dietary rules or sacrificial prescriptions. Jubilee is woven throughout the whole of the Bible. It’s a refrain that echoes all through Isaiah and the other prophets. Jesus announced his ministry by declaring himself the fulfillment of Jubilee. It pervades his parables. And, as Richard Beck notes, the Lord’s Prayer is a Jubilee prayer.

And spare me any bloody penal substitutionary horror scenarios, Jubilee is the essence of atonement. Jubilee is who Christ was and Jubilee is what Christ did.

All of which is to say that Jubilee is pretty important for us Christian types. And I think Bethany Keeley-Jonker is right to call the Rolling Jubilee a “beautiful step” and a reflection of “God’s economy.”

The Rolling Jubilee is limited, small and quixotic. It can’t address government-backed student loans. And, unlike Siegel’s buddy, it’s not set up in a way that lets it choose — or even know — who will benefit from its random compounding Jubilee.

Natasha Lennard also describes and anticipates some of the ways that creditors may push back to make this effort more difficult. She notes that the Rolling Jubilee is “just one tactic” but “quite a clever one”:

It might erase some crippling debts; it might forge new networks and affinities. It’s certainly an intriguing experiment.

  • Kirala

    I like this idea. How does one check accountability for this organization? And how does it select whose debt to eradicate?

  • AnonaMiss

    The debt is chosen basically randomly – whatever’s on the market at the time they’re buying. Remember, the debt market is based on bundles of debt which aren’t necessarily related, so it would be nearly impossible to know for certain whose debt you were buying ahead of time. (Siegel, up top, had his friends buy up his debt before it hit the market.)

    As for accountability, I’m still searching for that.

  • xytl

    I thought this a good idea, but the ‘rolling’ part I doubt. The idea as I understand it is that the beneficiaries will contribute to the next round of the operation. So if we spend $100 to cancel a debt of $2000, surely the person thus benefited will be willing to put $105 into the kitty for others in the same situation?

    Well, that’s the debt collector’s reasoning too. The debt is priced at $100 because even by sending around the intimidating letters and then the bailiffs, the debt collectors don’t get back much more than that on average. Asking nicely won’t even come close.

    Still, as a way of multiplying the effectiveness of donated money from ordinary fundraising, I like it. Shame it can’t be better targeted – I’d like to be able to knock out some of the endlessly rolled-over payday loans, which should make a big difference for a small initial investment.

  • AndrewSshi

    Back during the Sudanese civil war (the Muslim-Christian/Animist one, not the Muslim-Muslim one), a lot of Christian groups would buy slaves taken by the Muslims and free them. This was great for the individual slaves, but didn’t do a lot about the underlying structures that led to the brisk market in slaves to begin with.

  • EllieMurasaki

    I love this idea but I’m waiting to contribute to it until I see some of its transparency reports. Which won’t be for a while yet. The site’s only been live for a day or two, I believe–they may have raised a hundred thousand dollars but they can’t possibly have had time to buy any debt with it, let alone notify the people whose debts they’ve cancelled.

    Also between Giftmas and that one last class I need for my associate’s, my money is all tied up for the foreseeable future. But the last tuition payment is due in March, and I’ll be out from under my car loan in May, and the part of my paycheck that’s currently being saved for tuition or paid to the car loan I need at least most of to snowball down my other debts, but that doesn’t mean I can’t take $25 a month to help erase other people’s debts. And six months from now there ought to be five or six monthly transparency reports up.

  • http://apocalypsereview.wordpress.com/ Invisible Neutrino

    Any Canadian version of this?

  • http://twitter.com/shutsumon Becka Sutton

    I’m still twitching from reading the New York Times  Article  linked from Making Light. Right now my brain is going “Never mind Rolling Jubilee yes it’s a good cause but where can I donate money to help pay for drugs for the unemployed sick Greeks?”

    This article if you missed it. Warning – it’s heart breaking. http://www.nytimes.com/2012/10/25/world/europe/greek-unemployed-cut-off-from-medical-treatment.html?smid=pl-share

  • http://www.facebook.com/ericrboersma Eric Boersma

    I donated a few bucks. This is an amazing idea.

  • http://apocalypsereview.wordpress.com/ Invisible Neutrino

    If ever we needed proof that the EU and IMF are bound and determined to push countries into effective third-world status to pay off rentiers, this is it.

    Now maybe the Greeks will reinstate the drachma and give the finger to those who need it. :(

  • Scott Baxter

    The US version is less than a week old, so I’m going to guess there’s no Canadian version yet. I expect there will be fairly soon, given the way Occupy concepts cross-pollinate.

    Although Canada does have much saner bankruptcy laws than the US, so the need probably isn’t as strong. In general, the people in Canada most in need of help are the ones for whom simple debt forgiveness won’t be enough – their financial problems are ongoing. Still a good idea, just not necessarily enough.

  • WalterC

    I guess that’s really the only issue that concerns me about this. For a lot of people, their debt isn’t as a result of a one-time necessity or a mistake that they made that won’t be repeated. If you got into debt because of a chronic illness, it’s  undoubtedly a good thing to erase that medical debt, but if you still have that chronic illness and your circumstances aren’t significantly better, the debt’s just going to come back.

    But I can’t really blame that on the Jubilee. Even before taking into account underlying circumstances, easing the burden on others is a good thing and worthy of support.

  • http://www.facebook.com/people/Alan-Alexander/502988241 Alan Alexander

    I have asked this question four different times on four different message boards and no one seems to know. Are there any protections in place to ensure that debt forgiven by  Rolling Jubilee is not treated as taxable phantom income by the IRS? I had a bankruptcy client this past year who was stunned to get a tax bill for $100,000 because the bank which had previously foreclosed on their home eventually forgave the debt and then sent a nice letter to the IRS informing them that it had forgiven the debt which the IRS considered to be a six-figure gift to the debtors. I don’t know enough about this issue but I am concerned that Rolling Jubilee may be taking some unsecured debts which would otherwise be uncollectable and inadvertently converting them into non-dischargeable tax debts. Does anyone know enough about the issue to put my fears to bed?

  • http://www.facebook.com/ericrboersma Eric Boersma

    Yeah, it’s not going to fix everyone’s problems everywhere, but that’s not a mark against the program in my book.

  • http://twitter.com/shutsumon Becka Sutton

     Unfortunately reinstating the drachma would quite possibly make things worse at this point as this article from May indicates – http://www.guardian.co.uk/business/2012/may/13/greece-must-stay-eurozone

    Greece is rather stuck can’t default and stay in the euro, can’t afford to leave the euro.

    What’s really needed here is Jubilee as well but the idea that Justice is “not letting them get away with it no matter who suffers” retribution is so entrenched in modern society that getting the creditors to do this would be almost impossible.

  • Mira

    According to a columnist at Forbes, the IRS has a  gift loophole for forgiven debt. I’m not sure which “gifts” are eligible and which are not, the IRS page literally only has one sentence saying “Generally, you do not have income from canceled debt if the cancellation or forgiveness of the debt is a gift.” The Forbes columnist implies that this works if the gift is individual and/or third party rather than from the creditor company, and that this is the angle OWS is coming from.

    http://www.forbes.com/sites/timworstall/2012/11/10/links-10-nov-finally-an-occupy-wall-street-idea-we-can-all-get-behind-the-rolling-jubilee/
    http://www.irs.gov/publications/p4681/ch01.html#en_US_publink100080240

  • vsm

    The Black Panther Party’s breakfast program didn’t end racism, but it gave them plenty of influence and potential new members. This could work the same way for the Occupy movement.

  • Lunch Meat

    Are there any protections in place to ensure that debt forgiven by 
    Rolling Jubilee is not treated as taxable phantom income by the IRS?

    This Forbes article explains how they’re getting around it: http://www.forbes.com/sites/timworstall/2012/11/10/links-10-nov-finally-an-occupy-wall-street-idea-we-can-all-get-behind-the-rolling-jubilee/

  • http://twitter.com/shutsumon Becka Sutton

     Don’t know US Law so I don’t know but I’ve tweeted a link to your comment at Strike Debt. Hopefully they’ll be able to answer.

  • Buck_Eschaton

    Yes, I do believe Jubilee is the essence of the Gospel. That is what the Gospels are about, the forgiveness of debts. Jubilee is the Good News. In the ancient world people who fell into debt and lost their land and to avoid having themselves and/or their sons/daughters fall into the horrors of slavery escaped to the Wilderness. I do not think it is coincidental that John the Baptist was the voice crying in the Wilderness. He was preaching to the debtors who had escaped to the Wilderness. He was saying “Return” (the word for repent also means return), because the Lord is coming the Jubilee will be inaugurated. You can go back to your homes and your communities your debts will be forgiven.

  • EllieMurasaki

    That Forbes article also explains that it is a conservative idea.

    What definition of ‘conservative’ is the author using? Because by all the definitions I’ve ever heard, people are required to pay their own debt. Anything else would be a failure of personal responsibility.

  • cjmr

    It’s a ‘conservative’ idea because it allows ‘the market’ to solve a problem rather than resorting to ‘big government intervention’.  

    (The fact that it will probably be primarily liberals who are using the market to solve the problem has nothing to do with it.)

  • LMM22

    God, that Forbes article is irritating. Yes, it contains the IRS info, but it also contains the author claiming that their idea isn’t “liberal” … because it involves individual actions. Also, that Occupy is somehow ignorant of economic reality. (1)

    He does mention that he’s donated money to the cause, though.

    (1) FWIW, there’s a solid case to be made that modern economic theory is founded on sand. The most *terrifying* editorial I have ever seen out of the NYTimes was describing a theory of economic gardening, in which regulations serve not to inhibit the system (as they might in a machine) but to select for the desired products.

    Which makes sense, except for one thing: When you are re-thinking the policy recommendations of your entire discipline based not upon reasoning from empirical evidence but upon designing a new model … you are not a science. You’re not even a social science. That’s a cargo cult.

  • LMM22

    What I’d like to know is, how do the people whose debt gets relieved find out about it? Do they get a phone call? A letter? Or is it just missing one day?

  • EllieMurasaki

    And the fact that the problem could be solved much more efficiently by the government (simply require banks who want to sell debt they no longer think they’ll collect to the government, then have the government wipe it off the books as a tax-free gift to the debtor), also irrelevant, I’m sure.

  • EllieMurasaki

    Debt collection agencies have to notify the people whose debts they’ve just purchased. I believe snail-mail and telephone are the usual methods. I assume the same would apply to Rolling Jubilee.

  • http://apocalypsereview.wordpress.com/ Invisible Neutrino

    Did you read the last paragraph?

    But a new government in Greece will, in exchange, have to commit to
    shrinking its bureaucratic state sector, open up its markets, eliminate
    corruption and reform its antiquated labour laws. This has been resisted
    until now but the prospect of renewed growth might be enough to
    persuade it to back reform. And the Greek people have shown through
    their votes that they no longer want to live in a country run for the
    interests of a small political and economic elite to the detriment of
    its long term prosperity.

    This is just the same tired old right-wing dogma parroted since time immemorial by the people who like to tut-tut over how those silly third world nations just have to do more ‘retrenchment’ and the magic of capitalist investment will cure everything.

    The writer has an agenda in insisting that Greece not reinstate the drachma.

  • Buck_Eschaton

    Wall Street and the 1% got their Jubilee. They got and are continuing to be issued brand new fiat currency by the United States Federal Government. They didn’t have to wait for the hand of charity. The rich can get the Government to give them money, because they own the printing press. The rest of us don’t control the printing press of our sovereign, unlimited fiat currency. We have to wait for charity, for the condescension of the wealthy. To beg and to plead and tell them all how great they are.
    So I love this Rolling Jubilee, I don’t really care how successful it will be in forgiving the trillions of dollars of debt, it’s impossible. The Fed itself can’t really do much a against a tsunami of a Quadrillion dollars of derivatives, so you can’t really expect much in a measurable way from the poor among us. But symbolically this is huge, this is awesome. It’s like hearing a Thunderclap of the Gospel, with lightning across the sky. Maybe next we can start an Occupy the Bible and start communicating the Word of Lord to the Evangelicals who may have never heard it before.

  • Carstonio

    Why stop there? Defining the free market in Just World Fallacy terms is simply theodicy with the names changed. The folks who argue against regulation often seem to be describing free will.

  • Mark Z.

    simply require banks who want to sell debt they no longer think they’ll collect to the government, then have the government wipe it off the books as a tax-free gift to the debtor

    Yes, simply pass legislation requiring the banks to settle those debts on terms that favor the debtor. And the banks will just sit on their hands while Congress cuts off their revenue stream, right?

    One real advantage of the free market is that if you have a good idea you can just go and try it. Holding public meetings where everyone can have their voice heard is not always a good thing. It privileges people and institutions with the resources to show up at all of those meetings and expertise in manipulating the decision-making process.

  • Buck_Eschaton

     I think if Greece reinstates the Drachma they’ll be essentially saying “We ain’t payin’ those debts. You aren’t taking our infrastructure. You aren’t going to exploit us, we know what you’re up to, those were fraudulently-induced debts, and we ain’t paying.” We’re going to reintroduce our own fiat currency just like the United States. We’re not going to have some bankers in other countries controlling our destiny and telling us how to run our government.

  • Mark Z.

    Gandhi missed a step.

    First they ignore you, then they laugh at you, then they fight you, then they claim it was their idea all along, then you win.

  • LMM22

    And the fact that the problem could be solved much more efficiently by the government

    I have an idea: Debt relief + immigration reform == Jubilee for everyone!

    I’m not sure people could be sold on it (it’s very hard to make thematic connections for policy purposes), but I think it works.

  • Buck_Eschaton

     I would go so far as to say there should be direct injections of cash into the bank accounts of the 99% to pay off debts first of all and then whatever is left can be used to invest in their communities. Like injections of $50K per person or even more, for every man, woman and child. Of course we’d have to deal with the Banks, very severely, like nationalizing them, breaking them up and prosecuting banking crimes.

  • Mark Z.

    (Which is to say that if you need to have your achievements recognized, you shouldn’t be in the saving-the-world business, because all the credit for your work will be stolen by the same jerks who created the problem in the first place. If you want recognition, my advice is to build yourself a pyramid. Pyramids are hard to steal, and nobody else is going to say “See that pyramid? I’m entombed there.”)

  • MaryKaye

    The price at which a financial institution will sell distressed debt depends on who is out there willing to pay for it and how much they are willing to pay.  The  financial institution would always like to get more.  So it’s up to the buyers not to offer too much.

    This could work for Jubilee as a private operation because it’s not huge.  But if the government started saying “We will buy *all* the distressed debt”–well, at what price?  Having a guaranteed buyer will certainly encourage the financial institutions to ask for more.  So the government would have to name a price it’s willing to pay. I am not an economist but that step sounds tricky to me.  If you offer too much you enrich financial institutions by handing tax money over to them–not the goal at all.  If you offer too little you may be outbid by private collections agencies.  You  need to figure out what the distressed debt is actually worth–in a market being influenced by your purchases, and the US Govt. is such a big purchaser in this scenario that I’m not sure the rest of the market will be able to price distressed debt at all accurately anymore.

    I guess you could say, “We have $X to spend and will buy the most distressed debt first, working our way upward until the $X is gone.”  But I suspect this creates massively perverse incentives in the financial industry; and it gives me no faith that the debt being canceled will be the most harmful debt.

  • vsm

    Would it really matter to the banks? They’re the ones who decide if the debt is bad. All the law would do is force them to sell it to the government instead of some private investor. It would be off their hands in any case.

  • EllieMurasaki

    Yes, simply pass legislation requiring the banks to settle those debts on terms that favor the debtor. And the banks will just sit on their hands while Congress cuts off their revenue stream, right?

    That isn’t what I said. A bank that is selling a debt to a debt collection agency at a nickel on the dollar is doing so because it thinks there is no chance of getting the debtor to pay up the full dollar and the bank would rather get the nickel than nothing. If the bank instead sells the debt to the government at a nickel on the dollar, the bank still has the nickel instead of nothing. The bank’s revenue is unaffected, and the bank is completely uninvolved in the process of erasing the debt, because the bank no longer owns the debt.

    If you want to argue that the debt collection agencies will throw a fit and lobby Congress about it, you go right ahead. That’s actually plausible.

  • http://www.facebook.com/people/Alan-Alexander/502988241 Alan Alexander

     Thanks. That does reassure me a bit. If I have some spare change at the end of the month, I’ll try to send them some.

  • Katie

    I’ll be sending them some money, once all my money is no longer tied up in….paying off debt.  We had a plumbing issue a couple of years ago, and, long story short, ended up taking on a lot of debt to get it fixed, and for other things, like living in a hotel for two weeks while mold got treated.  I know first hand how oppressive debt can be, even in a ‘good’ situation like mine, where we have the money to pay things off at a reasonable rate and still make basic expenses.

  • http://twitter.com/shutsumon Becka Sutton

    She has an agenda certainly but that doesn’t mean her numbers are wrong. It pretty much echoes what I read elsewhere like http://www.bbc.co.uk/news/business-18057232 (which does have a couple more positive views but even they say it would have to be negotiated not unilateral).

  • Twig

    I love the whole concept of the Jubilee.  It’s like God’s version of “It’s not working?  Turn it off and then turn it on again.”

     

  • EllieMurasaki

    I thought that was Noah’s flood.

  • BaseDeltaZero

    Which is another reason it probably won’t work.  When the banks realize what’s happening, they’ll raise the prices in an effort to make it impossible… or at least impractical.  Maybe bundle the debt and refuse to sell in packages of less than a few million.

  • http://lliira.dreamwidth.org/ Lliira

    but it also contains the author claiming that their idea isn’t “liberal” … because it involves individual actions

    So in this person’s mind, nothing is ever liberal? Because collective action, which this is, is a bunch of individuals getting together to do the same thing. Also, since when is individual action not “liberal”? 

  • Buck_Eschaton

     No it’s Creation all over again, it’s re-Creating the world. Setting everything right again. Singing, shouting, trumpets blaring, dancing and happiness all around. Noah’s flood is what happens when you don’t have a Jubilee, a flood of violence and murder consuming the whole world.

  • http://pulse.yahoo.com/_NR2MMC4EJXJWJMLH6IF457XL64 Alex B

    No, silly. An idea is only liberal if it’s a government solution!

  • http://www.facebook.com/jrandyowens Randy Owens

     I can see a different reason for bankers to object to a government debt-buying plan.  Maybe not one they’d bring up openly, but one that would motivate them to work against it.  If there were such a plan, then the debtors would know that once their loan was distressed enough, it would be essentially forgiven, as opposed to the current state of affairs, where it’s going to yet another last-resort collector.  That would remove a lot of the pressure to keep paying the loans before things get that bad, which the banks would presumably rather prefer.

  • Wednesday

     I wonder a little bit how much of the debt on the market is real. A friend of mine cancelled his utilities when he moved out of one apartment building almost a decade ago, but the company goofed and charged him for the first three months of the new resident’s utilities. They agreed to stop trying to pursue it, but last year he started getting harassed by a sketchy debt collection service about it.

  • Rick

    This Forbes article addresses your concern. Search the word “gift” in the article if you are in a hurry.
    http://www.forbes.com/sites/timworstall/2012/11/10/links-10-nov-finally-an-occupy-wall-street-idea-we-can-all-get-behind-the-rolling-jubilee/

  • WalterC

    I think what will happen in a situation like that is that banks will lobby for tougher penalties on people who default on loans, and credit access will be tightened severely. From the perspective of the debtor, a jubilee like that is almost like bankruptcy with fewer strings attached, and while I personally think that most people would rather pay off their debts if possible rather than having them restructured or having to file for bankruptcy.


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