Gonzalo Lira On The Coming Middle-Class Anarchy

Tyler Durden's picture

Submitted by Gonzalo Lira

The Coming Middle-Class Anarchy

True story: A retired couple I know, Brian and Ilsa, own a home in the Southwest. It’s a pretty house, right on the manicured golf course of their gated community (they’re crazy about golf).

The only problem is, they bought the house near the top of the market in 2005, and now find themselves underwater.
They’ve never missed a mortgage payment—Brian and Ilsa are the kind upright, not to say uptight 60-ish white semi-upper-middle-class couple who follow every rule, fill out every form, comply with every norm. In short, they are the backbone of America.
Even after the Global Financial Crisis had seriously hurt their retirement nest egg—and therefore their monthly income—and even fully aware that they would probably not live to see their house regain the value it has lost since they bought it, they kept up the mortgage payments. The idea of them strategically defaulting is as absurd as them sprouting wings.
When HAMP—the Home Affordable Modification Program—was unveiled, they applied, because they qualified: Every single one of the conditions applied to them, so there was no question that they would be approved—at least in theory.

Applying for HAMP was quite a struggle: Go here, go there, talk to this person, that person, et cetera, et cetera, et cetera. “It’s like they didn’t want us to qualify,” Ilsa told me, as she recounted their mind-numbing travails.
It was a months-long struggle—but finally, they were approved for HAMP: Their mortgage period was extended, and the interest rate was lowered. Even though their home was still underwater, and even though they still owed the same principal to their bank, Brian and Ilsa were very happy: Their mortgage payments had gone down by 40%. This was equivalent to about 15% of their retirement income. So of course they were happy.
However, three months later, out of the blue, they got a letter from their bank, Wells Fargo: It said that, after further review, Brian and Ilsa had in fact not qualified for HAMP. Therefore, their mortgage would go back to the old rate. Not only that, they now owed the difference for the three months when they had paid the lowered mortgage—and to add insult to injury, they were assessed a “penalty for non-payment”.
Brian and Ilsa were furious—a fury which soon turned to dour depression: They tried contacting Wells Fargo, to straighten this out. Of course, they were given the run-around once again.
They kept insisting that they qualified—they qualified! But of course, that didn’t help at all—like a football, they were punted around the inner working of the Mortgage Mess, with no answers and no accountability.
Finally, exhausted, Brian and Ilsa sat down, looked at the last letter—which had no signature, and no contact name or number—and wondered what to do.
On television, the news was talking about “robo-signatures” and “foreclosure mills”, and rank illegalities—illegalities which it seemed everyone was getting away with. To top it off, foreclosures have been suspended by the largest of the banks for 90 days—which to Brian and Ilsa meant that people who weren’t paying their mortgages got to live rent free for another quarter, while they were being squeezed out of a stimulus program that had been designed—tailor made—precisely for them.
Brian and Ilsa are salt-of-the-earth people: They put four kids through college, they always paid their taxes. The last time Brian broke the law was in 1998: An illegal U-turn on a suburban street.
“We’ve done everything right, we’ve always paid on time, and this program is supposed to help us,” said Brian. “We follow the rules—but people who bought homes they couldn’t afford get to squat in those McMansions rent free. It would have been smarter if we’d been crooks.”
Now, up to this point, this is just another sob story of the Mortgage Mess—and as sob stories go, up to this point, it’s no big deal.
But here’s where the story gets ominous—here’s where the Jaws soundtrack kicks in:
Brian and Ilsa—the nice upper-middle-class retired couple, who always follow the rules, and never ever break the law—who don’t even cheat on their golf scores—even when they’re playing alone (“Because if you cheat at golf, you’re only cheating yourself”)—have decided to give their bank the middle finger.
They have essentially said, Fuckit.
They haven’t defaulted—not yet. They’re paying the lower mortgage rate. That they’re making payments is because of Brian: He is insisting that they pay something—Ilsa is of the opinion that they should forget about paying the mortgage at all.
“We follow the rules, and look where that’s gotten us?” she says, furious and depressed. “Nowhere. They run us around, like lab rats in a cage. This HAMP business was supposed to help us. I bet the bank went along with the program for three months, so that they could tell the government that they had complied—and when the government got off their backs, they turned around and raised the mortgage back up again!”
“And charged us a penalty,” Brian chimes in. The non-payment penalty was only $84—but it might as well been $84 million, for all the outrage they feel. “A penalty for non-payment!”
Nevertheless, Brian is insisting that they continue paying the mortgage—albeit the lower monthly payment—because he’s still under the atavistic sway of his law-abiding-ness.
But Ilsa is quietly, constantly insisting that they stop paying the mortgage altogether: “Everybody else is doing it—so why shouldn’t we?”
A terrible sentence, when a law-abiding citizen speaks it: Everybody else is doing it—so why don’t we?
I’m like Wayne Gretsky: I don’t concern myself with where the puck has been—I look for where the puck is going to be.
Right now, people are having a little hissy-fit over the robo-signing scandal, and the double-booking scandal (where the same mortgage was signed over to two different bonds), and the little fights between junior tranches and senior tranches and the servicer, in the MBS mess.
But none of that shit is important.
What’s really important is Brian and Ilsa: What’s really important is that law-abiding middle-class citizens are deciding that playing by the rules is nothing but a sucker’s game.
Just like the poker player who’s been fleeced by all the other players, and gets one mean attitude once he finally wakes up to the con? I’m betting that more and more of the solid American middle-class will begin saying what Brian and Ilsa said: Fuckit.
Fuck the rules. Fuck playing the game the banksters want you to play. Fuck being the good citizen. Fuck filling out every form, fuck paying every tax. Fuck the government, fuck the banks who own them. Fuck the free-loaders, living rent-free while we pay. Fuck the legal process, a game which only works if you’ve got the money to pay for the parasite lawyers. Fuck being a chump. Fuck being a stooge. Fuck trying to do the right thing—what good does that get you? What good is coming your way?
When the backbone of a country starts thinking that laws and rules are not worth following, it’s just a hop, skip and a jump to anarchy.
TV has given us the illusion that anarchy is people rioting in the streets, smashing car windows and looting every store in sight. But there’s also the polite, quiet, far deadlier anarchy of the core citizenry—the upright citizenry—throwing in the towel and deciding it’s just not worth it anymore.
If a big enough proportion of the populace—not even a majority, just a largish chunk—decides that it’s just not worth following the rules anymore, then that society’s days are numbered: Not even a police-state with an armed Marine at every corner with Shoot-to-Kill orders can stop such middle-class anarchy.
Brian and Ilsa are such anarchists—grey-haired, well-dressed, golf-loving, well-to-do, exceedingly polite anarchists: But anarchists nevertheless. They are not important, or powerful, or influential: They are average—that’s why they’re so deadly: Their numbers are millions. And they are slowly, painfully coming to the conclusion that it’s just not worth it anymore.
Once enough of these J. Crew Anarchists decide they no longer give a fuck, it’s over for America—because they are America.
Update I:
The Center for Public Integrity has a story, written by Michael Hudson this past August 6, that shines a light on the issue of perverse incentives of the HAMP program. These perverse incentives came to light because of a whistleblower, a former employee of Fannie Mae, filing a lawsuit. Fannie Mae was so keen on being perceived as a money-maker, after the Federal government bailout, that the aid programs passed by the Congress and signed by the President were turned into profit centers.
The former executive, Caroline Herron, recounts:

    “It appeared that Fannie Mae officers were focused on maximizing incentive payments available to Fannie Mae under various federal programs – even if this meant wasting taxpayer money and delaying the implementation of high-priority Treasury programs,” she claims in the lawsuit. 

    Herron alleges that Fannie Mae officials terminated her $200-an-hour consulting work in January because she raised questions about how it was administering the federal government’s push to help homeowners avoid foreclosure, known as the Home Affordable Modification Program, or HAMP.

Herron further alleged that “trial mods” were implemented regardless of eligibility of applicants, so that Fannie Mae would be eligible for Federal government bonuses.
Ms. Herron’s testimony in fact proves Ilsa’s suspicion that there was a scam at bottom. As Mr. Hudson writes, “Herron charges that Fannie Mae continued in headlong pursuit of ‘trial mods’ even though it knew that many had little chance of becoming permanent. [. . .] Fannie preferred doing trials, Herron alleges, because it was eligible to receive incentive payments from the Treasury Department.”
So in the pursuit of these perverse incentives, people who did not qualify for HAMP were enrolled in the program. And when their “trial mods” were up after 90 days, they would be notified that they didn’t qualify—regardless of whether they in fact did qualify, as in the case of Brian and Ilsa.
All so as to be perceived as a profitable operation, worth having been bailed out. All so as to be perceived as “returning America’s money”.
As of February, 2010, of the over one million homeowners’ mortgages under HAMP auspices, 83% were “trial mods”. One would assume that those 850,000 homeowners would also be assessed an $84 penalty for non-payment.
$84 times over 850,000? You do the math.

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jeff montanye's picture

they didn't jump, mostly, because they were decent.  they jumped because they were ruined.  this time around, not so much.  yet.

FEDbuster's picture

They landed in the government safety net, food stamps for bankstas.

Attitude_Check's picture

Sadly we will only find justice "across the 5th domension"

tip e. canoe's picture

all the more reason to learn to build hyperspheres

jeff montanye's picture

and surrey down to a stoned soul picnic.

Catullus's picture

Agreed.  That's why it's not enough to just be pissed off.  It's important to explain to people why they should be pissed.  Understanding the why will help them identify the cranks and snake oil salesmen. 

I think Lira makes the great point: people who are the backbone of society, who are really trying to play be the rules, are starting to say "fuck'em".  This was the moral hazard that anyone in 2007 and 2008 screamed about when the first bailouts occurred.  It would necessarily degrade to this and it has. 

B9K9's picture

Hasn't anyone here read Upton Sinclair's "The Jungle"? The process of setting up and destroying rubes & taking advantage of the clueless is an age old tradition. There are passages in the book that read identical to GL's portrayal of this couple ie the protagonists trying to do the 'right thing' and getting hosed by operators. (In fact, the 'victims' stand out in such stark relief to 'spotters' that they could have brands on their foreheads.) Sinclair thought he could gin up all sorts of sympathy for the downtrodden, but the book's true effect was the creation of the FDA so everyone could go back to eating steak with confidence.

Now, let us pull away and view the situation as illustrated in The Jungle from a wider macro perspective. What critical incipient trends were just beginning to take hold at the time of the book's publication (1906)? Large scale automobile manufacture anyone? And what about all the major oil discoveries yet to be made, both domestically (TX) and overseas? Think radical economic growth had anything to do with papering over these prior class conflicts?

Ok, fast forward to today. I keep trying to tell everyone that only fools & chronic complainers would be wasting their time @ ZH if there was any inkling of potential economic growth. That is, this shit would all be long forgotten if there was some new glorious path to riches. If we don't come up with something quick, and I believe the event horizon is now long past, then we not only have to deal with the current manifestation of the collapsed bubble as represented by housing/mortgage fraud, but the roll-back of the entire ponzi that began in 1694.

For 316 years there has always been an out by reflating bubbles to cover up the sins of fathers ad infinitum. First, wiping out the inhabitants of continents & re-populating them subject to charters, contracts, loans & investments (all tremendously inflationary). Secondly, leveraging the utilization of vast virgin resources via the slave trade. Then, for the grand finale, the whole enchilada was capped off by the kingpin, fossil fuels (first coal, then oil).

If this is really it, and I'm pretty sure it is, then it doesn't seem like there are a lot of options other than getting out now. Because, if you don't think the power-elite also "get it" and have contingency plans well in place, then you're just gonna be nothing more than a stepping stone on their path to survival.

bronzie's picture

what, you don't think the latest version of a cell phone is enough to keep the world economy afloat!?

gotta run, have to trade my iphone for a droid ...

Cognitive Dissonance's picture

A free copy of Upton Sinclair's "The Jungle" for those who wish to read about their own misery, only from the safe distance of 100 years ago.


macholatte's picture


A terriffic link.


FatFingered's picture

I read all night.  I can not seem to be able to set it down.


thanks, CD

FatFingered's picture

I read all night.  I can not seem to be able to set it down.

thanks, CD

Landrew's picture

Well said, B9K9 "OK, fast forward to today. I keep trying to tell everyone that only fools & chronic complainers would be wasting their time @ ZH if there was any inkling of potential economic growth. That is, this shit would all be long forgotten if there was some new glorious path to riches. " so true, if I had anything other than near at the money put options on banking sector, I would be here myself. I work in energy research ( which truth be told I would work for free) and now and then could treat equity markets like a physics experiment of mass and momentum, now there is zero volume killing the illusion of free markets. My avatar is a production graph of Cantarell oil field in Mexico showing a 8% yr/yr decline. Some people I think are starting to catch on to the declining production volumes of easy cheap crude oil. There is nothing easy or cheap about mining oil sands, mile deep ocean drilling, shale oil with a floor production profit cost of $80 a barrel. Many ask what would be the motivation for such a take-over, energy, population curve, global pollution or sheer greed? CD, has opened the door and now I want to know who is inside?

trav7777's picture

sheesh...if Cantarell only WERE -8% YoY. 

jeff montanye's picture

indeed.  that baby looks like double black diamond going to parachute territory.

AssFire's picture

trav, You forgot to tell us we are idiots and vent about Peak oil.

just a reminder.

hayleecomet's picture

Right on, B9K9!  I love the way you write and always seek out your responses!

doolittlegeorge's picture

ooo.  a fan base.  cool.  i seek haley's comet every night too!

minus dog's picture

If there is a "path to riches", then of course people will ignore things.  Because they CAN ignore things.  If I don't need to worry about food on my plate and a roof over my head, it's a lot easier to deal with other assorted bullshit.

FatFingered's picture

It's called a people bubble.  Central banking created artificial incentives to exploit excessive resources.  It will be the last bubble.  1694 - ????   POP!

ATG's picture

Or Boxer the draft horse in Animal Farm, worked near to death and sent to the knackers by the Pigs.

Very real today:


Island_Dweller's picture

"There is no subtler, or surer means of overturning the existing basis of society than to debase the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which only one man in a million is able to diagnose."

--John Maynard Keynes

nmewn's picture

The moral to the story is beware of Fabian's bearing gifts...LOL.

You Cant Handle the Truth's picture

An interesting bit to point out: that paragraph from Keynes's "The Economic Consequences of the Peace" begins with the words

"Lenin was certainly right There is no subtler . . . "

The preceding paragraph is also very enlightening, btw.

GoinFawr's picture

GL, I love the sentiment, but I can beat your expletive count and succinctly keep the theme of your post with the following song:


Just replace 'Liberty Mutual' with your choice of offending financial institution/insurance broker/political figure (no rhyming necessary) and presto! You have an appropriate outlet for expressing your entirely justified frustration and anger.


Pondmaster's picture

FWIW - Where I work ( and work hard ) two of the laziest guys there "showed me down" a few months ago . Sneeringly and arrogantly stating " Those who work hard get screwed by the company , but those that goldbrick and could careless about putting in 40 hrs work for 40 hrs pay get away with it everytime " . They want me to cave and say "fuck it" as well . To become just like them ,a work ethic makes them look bad. In their own consciouses. My thoughts are once you say "F... it" at work , its all over . "They" have won. But seeing the reality of there statement daily since I was confronted makes it very very difficult to continue . I am getting tired , just the the couple in the article above . This is the new America. Not one I am proud of . I don't blame the couple for (wife) for wanting to give up and be given over to the wrong attitude . Her husband is the last bastion in the family finances . Right or wrong morally is not the issue . When he gives in to the Fuck it its all over , they lost . America has lost . What we the majority stand for and beleive in in our country is lost . The criminals and cheaters have won . We have become one of them . Sorry for the ramble , but this article really hit home . I pray for more resolve to do the right next thing daily . For all of us         

citizen2084's picture

Pond - You are spot on with this comment.  Your personal integrity is priceless and we should should think long and hard prior to giving it away.




Reductio ad Absurdum's picture

This was the inevitable outcome of pluralistic democracy, since the lazy, immoral, or incompetent will always be in the vast majority. Glad to see more good people waking up to reality.

vanderrook's picture

Thank You Reductio.

Collectivism at it's finest. One has more than the other nine; they vote themselves the One's property- because it's all legal. It's "democratic."

This article is the most relevant I've seen in months. I'm glad to see that the author understands anarchy: that it isn't necessarily violent chaos.

Anarchy means only "without ruler", that's it.

Democracy (and all the other "isms") lead right here.

chopper read's picture

no more republic protecting individuals, where one has to outright own land to vote.  this is MOB RULES democracy.  the inmates are running the asylum.  

Dan The Man's picture

I think the "Fuckit" attitude is absolutely necessary for revolution.  I'm sorry to have to say this...but a good work ethic and paying your taxes are values that are now just prolonging the agony.  Join the revolt or be run over by it.

Dan The Man's picture

I think the "Fuckit" attitude is absolutely necessary for revolution.  I'm sorry to have to say this...but a good work ethic and paying your taxes are values that are now just prolonging the agony.  Join the revolt or be run over by it.  Real change in our financial structure will not happen without the big "FUCKIT".

RockyRacoon's picture

Look to education as well.  Dropouts, cheaters, and apple polishers will always be with us but we have them now in abundance.  A student who does well is scorned in a lot of school environments.  The high school graduate of today "knows" less than an 8th grade student of the 1950s.  Students entering college have to have remedial courses to bring them up to speed.  That speed being 4 to 6 years behind the curriculum of just 50 to 75 years ago.  Makes this the future:  Idiocracy

Psquared's picture

clap, clap, clap ... I'd rather become bankrupt and live under a bridge than do the immoral and unethical thing. I don't care what everyone else is doing.

Once we start doing what is expedient instead of obeying the law, no matter how burdensome it might be, we have lost.

minus dog's picture

So we're just to follow the law off of a cliff?

At some point you simply have to go your own way.

Milestones's picture

This is a 50-50 deal. First paragraph 100% Second paragraph a 0%. The first should dictate the second; you are believing the law is to be obeyed. I would contend nearly all that passes as law is corupt and by the terms of the first must be set aside.


firstdivision's picture

Well just remember the fact that business and banks all said "fuckit" long ago and you bailed them out so that they could continue their immoral and unethical actions.  I ask you this, would you not consider it immoral/unethical for them to charge them a late fee after approving the lowered payments? They flat out lied to the couple, then charge them extra for the privilege to be lied to.  Everyone in this country needs to stop paying their mortgage and taxes.  Our money has been handed out in bonuses and for unethical business practices, without our say so. 

RockyRacoon's picture

Exactly!  If those who already have most of it were not trying to take the rest of it we might not care so much.  But the bastards are now getting greedy; they want it ALL.

And that will just not do.

chopper read's picture

lying to the police is never wrong. :)

traderjoe's picture

Unless you are Martha Stewart. 

ViewfromUndertheBridge's picture

My sentiments exactly and I put them into action. I sold everything I owned and paid back all loans (with a little left over I gave to my kids) and what I kept I bought physical gold. I work, it all goes into physical.

So, the view from under the bridge ain't so bad...I am not quite there but compared to my former life a lot of people I knew would see it that way. I am fitter, I hardly drink, I buy food and pay rent and that's it. I think more and I am getting my own back by (silently) telling the whole fucking corrupt Powers That Be that me and my gold will be here after they have gone, be it 1,2 or 10 or 20 years....and I get to watch. I feel I have not cheated. To me, important.

Good luck

Anonymouse's picture

Very well said.  I know how you feel.  Hard as it is though, keep doing the right thing.  It is good for the country and good for you.  God sees what we do and what is in our hearts.  In the long run, that is what matters.

Funny that Peggy Noonan (elitist that she is) wrote today about essentially the same thing.  She was speaking about the corruption in Greece, how everyone becomes corrupt as they see it as the only way to keep up with the others that are cheating.  She sees it creeping into America.  We have to fight it every day.

RECISION's picture

Well, that fight is lost...

A long time ago.

snowball777's picture

WTF? Dipshits like Noonan have been enabling said corruption for decades. Get a clue.

Anonymouse's picture

I thought I made it clear.  I'm not a fan of Peggy Noonan (she's a great writer but an elitist).  My point was even the elitists are seeing the change, not just moonbats like ourselves on ZH