[Plura-list] Wall Street Journal goes to bat for the vultures who want to steal your house

Mon Jun 5 05:13:38 EDT 2023

Read today's issue online at: https://pluralistic.net/2023/06/04/vulture-capitalism/

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Tonight (June 5) at 7:15PM, I'm in London at the British Library with my book *Red Team Blues* for an event hosted by Martha Lane Fox:

https://www.bl.uk/events/an-evening-with-cory-doctorow-techno-thriller

Tomorrow, June 6, I'm doing a remote panel on interoperability for Rightscon:

https://www.eff.org/deeplinks/2023/05/eff-rightscon-2023

On Wednesday, June 7, I'm keynoting Re:publica in Berlin:

https://re-publica.com/de/news/rp23-keynote-von-cory-doctorow-rebecca-giblin-kreative-arbeitsmaerkte-und-monopole

On Thursday, June 8, I'm at Berlin's Otherlands books:

https://www.otherland-berlin.de/de/event-details/cory-doctorow-autorenabend.html

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Today's links

* Wall Street Journal goes to bat for the vultures who want to steal your house: When the editorial page leaks into the news.

* Hey look at this: Delights to delectate.

* This day in history: 2003, 2008, 2013, 2018, 2022

* Colophon: Recent publications, upcoming/recent appearances, current writing projects, current reading

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👅 Wall Street Journal goes to bat for the vultures who want to steal your house

The tacit social contract between the *Wall Street Journal* and its readers is this: the editorial page is for ideology, and the news section is for reality. Money talks and bullshit walks - and reality's well-known anticapitalist bias means that hewing too closely to ideology will make you broke, and thus unable to push your ideology.

That's why the editorial page will rail against "printing money" while the news section will confine itself to asking which kinds of federal spending competes with the private sector (creating a bidding war that drives up prices) and which kinds are not. If you want frothing takes about how covid relief checks will create "debt for our grandchildren," seek it on the editorial page. For sober recognition that giving small amounts of money to working people will simply go to reducing consumer and student debt, look to the news.

But *WSJ* reporters haven't had their corpus colossi severed: the brain-lobe that understand economic reality crosstalks with the lobe that worship the idea of a class hierarchy with capital on top and workers tugging their forelacks. When that happens, the coverage gets *weird*.

Take this weekend's massive feature on "zombie mortgages," long-written-off second mortgages that have been bought by pennies for vultures who are now trying to call them in:

https://www.wsj.com/articles/zombie-mortgages-could-force-some-homeowners-into-foreclosure-e615ab2a

These second mortgages - often in the form of home equity lines of credit (HELOCs) - date back to the subprime bubble of the early 2000s. As housing prices spiked to obscene levels and banks figured out how to issue risky mortgages and sell them off to suckers, everyday people were encouraged - and often tricked - into borrowing heavily against their houses, on complicated terms that could see their payments skyrocket down the road.

Once the bubble popped in 2008, the value of these houses crashed, and the mortgages fell "underwater" - meaning that market value of the homes was less than the amount outstanding on the mortgage. This triggered the foreclosure crisis, where banks that had received billions in public money forced their borrowers out of their homes. This was official policy: Obama's Treasury Secretary Timothy Geithner boasted that forcing Americans out of their homes would "foam the runways" for the banks and give them a soft landing;

https://pluralistic.net/2023/03/06/personnel-are-policy/#janice-eberly

With so many homes underwater on their first mortgages, the holders of those second mortgages wrote them off. They had bought high-risk, high reward debt, the kind whose claims come *after* the other creditors have been paid off. As prices collapsed, it became clear that there wouldn't be anything left over after those higher-priority loans were paid off.

The lenders (or the bag-holders the lenders sold the loans to) gave up. They stopped sending borrowers notices, stopped trying to collect. That's the way markets work, after all - win some, lose some.

But then something funny happened: private equity firms, flush with cash from an increasingly wealthy caste of one percenters, went on a buying spree, snapping up every home they could lay hands on, becoming America's foremost slumlords, presiding over an inventory of badly maintained homes whose tenants are drowned in junk fees before being evicted:

https://pluralistic.net/2022/02/08/wall-street-landlords/#the-new-slumlords

This drove a new real estate bubble, as PE companies engaged in bidding wars, confident that they could recoup high one-time payments by charging working people half their incomes in rent on homes they rented by the room. The "recovery" of real estate property brought those second mortgages back from the dead, creating the "zombie mortgages" the *WSJ* writes about.

These zombie mortgages were then sold at pennies on the dollar to vulture capitalists - finance firms who make a bet that they can convince the debtors to cough up on these old debts. This "distressed debt investing" is a scam that will be familiar to anyone who spends any time watching "finance influencers" - like forex trading and real estate flipping, it's a favorite get-rich-quick scheme peddled to desperate people seeking "passive income."

Like all get-rich-quick schemes, distressed debt investing is too good to be true. These ancient debts are generally past the statute of limitations and have been zeroed out by law. Even "good" debts generally lack any kind of paper-trail, having been traded from one aspiring arm-breaker to another so many times that the receipts are long gone.

Ultimately, distressed debt "investing" is a form of fraud, in which the "investor" has to master a social engineering patter in which they convince the putative debtor to pay debts they don't actually owe, either by shading the truth or lying outright, generally salted with threats of civil and criminal penalties for a failure to pay.

That certainly goes for zombie mortgages. Writing about the *WSJ*'s coverage on Naked Capitalism, Yves Smith reminds readers not to "pay these extortionists a dime" without consulting a lawyer or a nonprofit debt counsellor, because any payment "vitiates" (revives) an otherwise dead loan:

https://www.nakedcapitalism.com/2023/06/wall-street-journal-aids-vulture-investors-threatening-second-mortgage-borrowers-with-foreclosure-on-nearly-always-legally-unenforceable-debt.html

But the *WSJ*'s 35-paragraph story somehow finds little room to advise readers on how to handle these shakedowns. Instead, it lionizes the arm-breakers who are chasing these debts as "investors...[who] make mortgage lending work." The *Journal* even repeats - without commentary - the that these so-called investors' "goal is to positively impact homeowners’ lives by helping them resolve past debt."

This is where the *Journal's* ideology bleeds off the editorial page into the news section. There is no credible theory that says that mortgage markets are improved by safeguarding the rights of vulture capitalists who buy old, forgotten second mortgages over reckless lenders who wrote them off a decade ago.

Doubtless there's some version of the Hayek Mind-Virus that says that upholding the claims of lenders - even after those claims have been forgotten, revived and sold off - will give "capital allocators" the "confidence" they need to make loans in the future, which will improve the ability of everyday people to afford to buy houses, incentivizing developers to build houses, etc, etc.

But this is an ideological fairy-tale. As Michael Hudson describes in his brilliant histories of jubilee - debt cancellation - through history, societies that unfailingly prioritize the claims of lenders over borrowers eventually collapse:

https://pluralistic.net/2022/07/08/jubilant/#construire-des-passerelles

Foundationally, debts are amassed by producers who need to borrow capital to make the things that we all need. A farmer needs to borrow for seed and equipment and labor in order to sow and reap the harvest. If the harvest comes in, the farmer pays their debts. But not every harvest comes in - blight, storms, war or sickness - will eventually cause a failure and a default.

In those bad years, farmers don't pay their debts, and then they add to them, borrowing for the next year. Even if that year's harvest is good, some debt remains. Gradually, over time, farmers catch enough bad beats that they end up hopelessly mired in debt - debt that is passed on to their kids, just as the right to collect the debts are passed on to the lenders' kids.

Left on its own, this splits society into hereditary creditors who get to dictate the conduct of hereditary debtors. Run things this way long enough and every farmer finds themselves obliged to grow ornamental flowers and dainties for their creditors' dinner tables, while everyone else goes hungry - and society collapses.

The answer is jubilee: periodically zeroing out creditors' claims by wiping all debts away. Jubilees were declared when a new king took the throne, or at set intervals, or whenever things got too lopsided. The point of capital allocation is efficiency and thus shared prosperity, not enriching capital allocators. That enrichment is merely an incentive, not the goal.

For generations, American policy has been to make housing asset appreciation the primary means by which families amass and pass on wealth; this is in contrast to, say, labor rights, which produce wealth by rewarding work with more pay and benefits. The American vision is that workers don't need rights as workers, they need rights as *owners* - of homes, which will always increase in value.

There's an obvious flaw in this logic: houses are *necessities*, as well as assets. You need a place to live in order to raise a family, do a job, found a business, get an education, recover from sickness or live out your retirement. Making houses monotonically more expensive benefits the people who get in early, but everyone else ends up crushed when their human necessity is treated as an asset:

https://gen.medium.com/the-rents-too-damned-high-520f958d5ec5

Worse: without a strong labor sector to provide countervailing force for capital, US politics has become increasingly friendly to rent-seekers of all kinds, who have increased the cost of health-care, education, and long-term care to eye-watering heights, forcing workers to remortgage, or sell off, the homes that were meant to be the source of their family's long-term prosperity:

https://doctorow.medium.com/the-end-of-the-road-to-serfdom-bfad6f3b35a9

Today, reality's leftist bias is getting harder and harder to ignore. The idea that people who buy debt at pennies on the dollar should be cheered on as they drain the bank-accounts - or seize the homes - of people who do productive work is pure ideology, the kind of thing you'd expect to see on the *WSJ*'s editorial page, but which sticks out like a sore thumb in the news pages.

Thankfully, the Consumer Finance Protection Bureau is on the case. Director Rohit Chopra has warned the arm-breakers chasing payments on zombie mortgages that it's illegal for them to "threaten judicial actions, such as foreclosures, for debts that are past a state’s statute of limitations."

But there's still plenty of room for more action. As Smith notes, the 2012 National Mortgage Settlement - a "get out of jail for almost free" card for the big banks - enticed lots of banks to discharge those second mortgages. Per Smith: "if any servicer sold a second mortgage to a vulture lender that it had charged off and used for credit in the National Mortgage Settlement, it defrauded the Feds and applicable state."

Maybe some hungry state attorney general could go after the banks pulling these fast ones and hit them for millions in fines - and then use the money to build public housing.

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👅 Hey look at this

* Undetectable Watermarks for Language Models https://eprint.iacr.org/2023/763 (h/t Naked Capitalism)

* The Best Snack for Ginger Lovers Is Inna’s Super Spicy Ginger https://www.eater.com/23719817/best-ginger-snack-inna-super-spicy (h/t Robin Sloan)

* Street Fighter II, paper trails https://fabiensanglard.net/sf2_sheets/index.html (h/t Robin Sloan)

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👅 This day in history

#20yrsago A librarian on the PATRIOT Act https://www.latimes.com/archives/la-xpm-2003-may-31-vo-mcgrorty31-story.html

#20yrsago Willful Infringement — illegal copyright documentary https://web.archive.org/web/20030611035010/http://willfulinfringement.com/

#15yrsago Sequoia voting machines debacle in New Jersey: unguarded machines and broken tildes https://freedom-to-tinker.com/2008/06/03/nj-election-day-voting-machine-status/

#15yrsago Industry Canada involved in Wikipedia edit-war over Canadian DMCA https://www.michaelgeist.ca/2008/06/prentice-scrubbing-wikipedia/

#15yrsago Photographers aren’t terrorists and vice-versa https://www.schneier.com/blog/archives/2008/06/the_war_on_phot.html

#15yrsago British Telecom’s eavesdropping software crashed browsers https://www.wired.com/2008/06/isp-spying-made/

#15yrsago Entertainment industry accuses campus laser-printers of downloading Indiana Jones https://archive.nytimes.com/bits.blogs.nytimes.com/2008/06/05/the-inexact-science-behind-dmca-takedown-notices/

#10yrsago Scenes from #OccupyGezi https://occupygezipics.tumblr.com/post/52217650905/a-young-girl-sells-anonymous-masks-in-taksim

#10yrsago Anonymizing is really hard really, so why is the EU acting like it’s easy? https://www.theguardian.com/technology/blog/2013/jun/05/data-protection-eu-anonymous

#10yrsago Beast Academy: grade three math textbooks in monster comics form https://memex.craphound.com/2013/06/05/beast-academy-grade-three-math-textbooks-in-monster-comics-form/

#10yrsago California wants an end to taxpayer subsidy for WalMart https://www.forbes.com/sites/rickungar/2013/06/03/california-to-wal-mart-enough-no-more-taxpayer-subsidized-profits-for-you/?sh=24939e7a48ba

#10yrsago Porno copyright trolls Prenda: expert says they pirated their own movies to get victims to download https://www.techdirt.com/2013/06/03/new-anti-prenda-court-filing-lays-out-tons-evidence-suggesting-john-steele-uploaded-videos-to-bittorrent-himself/

#10yrsago This American Life on the awful, crooked mess of the patent system https://www.thisamericanlife.org/496/when-patents-attack-part-two

#5yrsago How do we fix IoT security without blocking interoperability and creating monopolies? https://www.nytimes.com/2018/06/03/opinion/westworld-internet-of-things.html

#5yrsago Bavaria says its mandatory crosses aren’t religious, so there should be no problem hanging them upside-down, right? https://www.spellingmistakescostlives.com/kreuzpflicht

#5yrsago Mass protests against IMF austerity force Jordan’s Prime Minister to resign https://www.bbc.com/news/world-middle-east-44358039

#5yrsago Laramie County, Wyoming Sheriffs’ department blocks public records requests for their prison phone monopoly deal https://www.techdirt.com/2018/06/04/sheriffs-are-raking-millions-prison-phone-fees-some-really-dont-want-to-talk-about-it/

#5yrsago Big Tech has established a “kill zone” of business ideas that startups can’t get funded to try https://www.economist.com/business/2018/06/02/american-tech-giants-are-making-life-tough-for-startups

#5yrsago Vintage internal security posters, pried loose from the NSA’s archives https://www.governmentattic.org/28docs/NSAsecurityPosters_1950s-60s.pdf

#5yrsago “Originality” is just filing the serial numbers off of others’ contributions to your ideas https://copy-me.org/2018/06/the-creativity-delusion-part-2-were-all-geniuses/

#5yrsago America: where rising productivity means longer working hours https://jacobin.com/2018/06/working-hours-vacation-productivity-united-states-nordic/

#5yrsago Rob Ford crack-smoking video is “gone” https://www.gawker.com/the-rob-ford-crack-video-might-be-gone-511254183

#5yrsago HOWTO make edible Aliens eggs and chestbursters https://www.youtube.com/watch?v=0bxYD2fF1XA

#5yrsago Facebook is the hub of the global trade in endangered species: can securities law be used to force the company into action? https://www.wired.com/story/tusks-horns-and-claws-inside-the-fight-to-destroy-the-animal-parts-bazaar-on-facebook/

#5yrsago For more than a decade, Facebook shared your friends’ data and other sensitive info with phone makers, even after they claimed not to (they’re still doing it) https://www.nytimes.com/interactive/2018/06/03/technology/facebook-device-partners-users-friends-data.html

#5yrsago Bayer and Monsanto merge into a new company called “Bayer” because Nazis have a better reputation than Big Ag https://www.reuters.com/article/us-monsanto-m-a-bayer-closing/with-deal-to-close-this-week-bayer-to-retire-monsanto-name-idUSKCN1J00IZ

#5yrsago This viral campaign video for a progressive New York Democratic primary challenger cost less than $10K and spread like wildfire https://theintercept.com/2018/06/05/ocasio-cortez-new-york-14th-district-democratic-primary-campaign-video/

#5yrsago It’s really easy to steal your cellphone number, and that’s a gateway to stealing everything else https://www.consumerreports.org/scams-fraud/cell-phone-account-fraud/

#5yrsago Rob Ford’s brother is running for Ontario Premier, but Rob Ford’s widow is suing him for stealing millions from the family https://www.cbc.ca/news/canada/toronto/doug-ford-faces-multimillion-dollar-lawsuit-1.4691378

#1yrago The Big Box of Sparkly Unicorn Magic https://pluralistic.net/2022/06/05/heavenly-nostrils/#better-than-calvin

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👅 Colophon

Currently writing:

* A Little Brother short story about DIY insulin PLANNING

* Picks and Shovels, a Martin Hench noir thriller about the heroic era of the PC. FIRST DRAFT COMPLETE, WAITING FOR EDITORIAL REVIEW

* The Bezzle, a Martin Hench noir thriller novel about the prison-tech industry. FIRST DRAFT COMPLETE, WAITING FOR EDITORIAL REVIEW

* Vigilant, Little Brother short story about remote invigilation. ON SUBMISSION

* Moral Hazard, a short story for MIT Tech Review's 12 Tomorrows. FIRST DRAFT COMPLETE, ACCEPTED FOR PUBLICATION

* Spill, a Little Brother short story about pipeline protests. ON SUBMISSION

Latest podcast: The Swivel-Eyed Loons Have a Point https://craphound.com/news/2023/05/14/the-swivel-eyed-loons-have-a-point/

Upcoming appearances:

* Red Team Blues with Martha Lane Fox at the British Library, Jun 5 (London):
https://www.bl.uk/events/an-evening-with-cory-doctorow-techno-thriller

* Rightscon, "Interoperability: from buzzword to a map of solutions," Jun 6 (Costa Rica):
https://www.rightscon.org/program/

* Re:publica keynote, Jun 7 (Berlin)
https://re-publica.com/de/news/rp23-keynote-von-cory-doctorow-rebecca-giblin-kreative-arbeitsmaerkte-und-monopole

* Otherland event for Red Team Blues, Jun 8 (Berlin)
https://www.otherland-berlin.de/de/event-details/cory-doctorow-autorenabend.html

Recent appearances:

* How To Save News Media From Our Tech Overlords (Canadaland)
https://www.canadaland.com/podcast/888-how-to-save-news-media-from-our-tech-overlords/

*  Most AI is not artificial or intelligent (with James Bridle)
https://www.youtube.com/watch?v=VPvHjvZz7l0

* This Machine Kills
https://soundcloud.com/thismachinekillspod/257-red-team-blues-ft-cory-doctorow

Latest books:

* "Red Team Blues": "A grabby, compulsive thriller that will leave you knowing more about how the world works than you did before." Tor Books http://redteamblues.com

* "Chokepoint Capitalism: How to Beat Big Tech, Tame Big Content, and Get Artists Paid, with Rebecca Giblin", on how to unrig the markets for creative labor, Beacon Press/Scribe 2022 https://chokepointcapitalism.com

* "Attack Surface": The third Little Brother novel, a standalone technothriller for adults. The *Washington Post* called it "a political cyberthriller, vigorous, bold and savvy about the limits of revolution and resistance." Order signed, personalized copies from Dark Delicacies https://www.darkdel.com/store/p1840/Available_Now%3A_Attack_Surface.html

* "How to Destroy Surveillance Capitalism": an anti-monopoly pamphlet analyzing the true harms of surveillance capitalism and proposing a solution. https://onezero.medium.com/how-to-destroy-surveillance-capitalism-8135e6744d59 (print edition: https://bookshop.org/books/how-to-destroy-surveillance-capitalism/9781736205907) (signed copies: https://www.darkdel.com/store/p2024/Available_Now%3A__How_to_Destroy_Surveillance_Capitalism.html)

* "Little Brother/Homeland": A reissue omnibus edition with a new introduction by Edward Snowden: https://us.macmillan.com/books/9781250774583; personalized/signed copies here: https://www.darkdel.com/store/p1750/July%3A__Little_Brother_%26_Homeland.html

* "Poesy the Monster Slayer" a picture book about monsters, bedtime, gender, and kicking ass. Order here: https://us.macmillan.com/books/9781626723627. Get a personalized, signed copy here: https://www.darkdel.com/store/p2682/Corey_Doctorow%3A_Poesy_the_Monster_Slayer_HB.html#/.

Upcoming books:

* The Internet Con: A nonfiction book about interoperability and Big Tech, Verso, September 2023

* The Lost Cause: a post-Green New Deal eco-topian novel about truth and reconciliation with white nationalist militias, Tor Books, November 2023

This work - excluding any serialized fiction - is licensed under a Creative Commons Attribution 4.0 license. That means you can use it any way you like, including commercially, provided that you attribute it to me, Cory Doctorow, and include a link to pluralistic.net.

https://creativecommons.org/licenses/by/4.0/

Quotations and images are not included in this license; they are included either under a limitation or exception to copyright, or on the basis of a separate license. Please exercise caution.

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