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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Misstrial's picture

Love it Pond. Thanks for posting.

"We have become one of them."

Not me, though. I haven't been infected by blood-thirsty zombies:



Bolweevil's picture

I too was asked to 'slow it down' because I was making the ones with seniority look bad. Whomever is responsible for our current demise, be it by design, coercion or ineptitude, is now indebted to society. Those who have played by the rules must now realize the rules have changed. The only guide is your personal moral compass. Keep your head on a swivel. Travel in groups.

RockyRacoon's picture

I spent 4 years in the Air Force, got out in 1973.  I would have stayed but the difference between "career airman" and "lifer" became obvious.  My love of what I was doing was getting in the way of my fellows and I could see a career of conflict coming my way.

Got the hell out.  Never looked back, and have never had a job that depended on signing the back of the check since then.  I've always signed the front of the check.

I'm now 62 and social security is pocket change for me.  Take it away and I could not care less.  I still have a career that I love doing and can't ever see stopping -- until you know when.

akak's picture

Rocky, I have a friend, a West Point graduate, whose experience in the army mirrored yours in the air force.  To say that he could not wait until his mandatory seven years were up would be an understatement.  He refuses to this day to talk about his time in the US Army, so disillusioned and embittered did his time with it make him. 

I only hope that your career (and I know what it is) remains as lucrative and as secure as your (or anyone's) Social (In)Security payments are not.

RockyRacoon's picture

Thanks.   I have had some varied careers and started a number of businesses.  All of them small, one-man operations for the most part.   I sold the last one and am still getting monthly payments from that.  Turned a hobby into my current business but started building that 15 years ago.   Selling coins and stamps is a hoot.  I meet some interesting people to say the least.    I've taken nearly all the PM coins down from my website since I'm buying, not selling.  Still make a few deals but only when I can step up from silver to gold or finesse the deal somehow.  I don't ever see stopping that.  I applied for social security the second I was eligible but don't really care if the first check (deposit) ever shows up.  Don't care one way or the other.   Life's good.

hayleecomet's picture

Don't get tired, Pondmaster.  You have dignity and integrity, and there are many of us in your situation.  There will be a time when people with your work ethic will be needed to rebuild this horror of a world.

I wish I could believe what I just stated.  However the future unfolds, dignity should always be held in the forefront.


WaterWings's picture


Pond, "Regroup!"

Other producers out there also seek mutual safety - proactive, synergistic protection. Give in to the chumps and they will still be prancing and laughing on your grave.

“Justice is conscience, not a personal conscience but the conscience of the whole of humanity. Those who clearly recognize the voice of their own conscience usually recognize also the voice of justice.”


      “Even the most rational approach to ethics is defenseless if there isn't the will to do what is right” 

Alexander Solzhenitsyn (Russian novelist, Nobel Prize for Literature (1970), b.1918)

Pining for the Fjords's picture

Water, I completely agree but would add a twist.  Keep being productive, working hard, and being honest- but do it in a manner that DOES NOT SUPPORT THE CRIMINALS AT THE TOP!  What do I mean?  I have my normal job, but used to 1. do outside consulting for extra $, 2. spent a great deal of time investing in the stock market (and for a small fish I was pretty good- beat SP500 returns for 10 years running) and 3. purchased and refurbished rental properties, also on my time away outside the office.  In 2008 I saw what was going to happen to producers, so I deployed my energy and capital elsewhere. 

Sold all my stocks and bought gold (outside the rigged system, nobody elses liability) and some farmland, which I have been gardening the hell out of. No outside paycheck now, but I am working harder than ever and have a boatload of food stored away.  Much less cash for groceries, and far fewer taxes paid into a corrupt and dying system. I am just as hardworking and productive as before, but the products of my labor are going straight to my family, no middlemen. Let’s see them try to tax those potatoes between my plot and my dinner table.

My point?  Be as productive as possible, be honest and hardworking, but do so, to the greatest possible extent, outside a corrupted system designed to fleece you.  Honestly, my last year of going Galt was the best of my life- there is nothing like doing a hard days work and knowing that every last thing you produce goes straight to you and your family.  It was the first time in my life I have ever experienced this. 

WaterWings's picture

I bow to you. The lovely withdrawal.

Folks, go out swinging.

"Many of you have already found out, and others will find out in the course of their lives, that truth eludes us if we do not concentrate our attention totally on it's pursuit. But even while it eludes us, the illusion of knowing it still lingers and leads to many misunderstandings. Also, truth seldom is pleasant; it is almost invariably bitter."


"Do not pursue what is illusory - property and position: all that is gained at the expense of your nerves decade after decade and can be confiscated in one fell night. Live with a steady superiority over life - don't be afraid of misfortune, and do not yearn after happiness; it is after all, all the same: the bitter doesn't last forever, and the sweet never fills the cup to overflowing."


"Own only what you can always carry with you: know languages, know countries, know people. Let your memory be your travel bag." 

"And how we burned in the camps later, thinking: What would things have been like if every Security operative, when he went out at night to make an arrest, had been uncertain whether he would return alive and had to say good-bye to his family? Or if, during periods of mass arrests, as for example in Leningrad, when they arrested a quarter of the entire city, people had not simply sat there in their lairs, paling with terror at every bang of the downstairs door and at every step on the staircase, but had understood they had nothing left to lose and had boldly set up in the downstairs hall an ambush of half a dozen people with axes, hammers, pokers, or whatever else was at hand?... The Organs would very quickly have suffered a shortage of officers and transport and, notwithstanding all of Stalin's thirst, the cursed machine would have ground to a halt! If...if...We didn't love freedom enough. And even more – we had no awareness of the real situation.... We purely and simply deserved everything that happened afterward."


"This it is that we always pay dearly for chasing after what is cheap." 
— Aleksandr I. Solzhenitsyn

nuinut's picture



The return of personal responsibility and integrity cannot be charted in financial terms.

This is TRUE wealth.

My vision of our post-consolidation future is overwhelmingly positive.

In real terms.


Al Gorerhythm's picture

Pondmaster, your moral compass is in fine order. However, I think that your course bearing needs to take into account the magnetic deviation of the "Financial" juggernaut. There be rocks and reefs ahead, matey, and Sirens to lure you. Keep a weather eye!

tip e. canoe's picture

rode by a piece of graffiti today:


...even if it's now the most undervalued.  stay long & strong PM.

scaleindependent's picture



Thank you for the reminder.

Real Estate Geek's picture

You apparently live in a better neighborhood than mine.

midtowng's picture

I totally agree. Americans are more likely to surrender their liberties (what remains of them) in exchange for a military strongman who promises the moon, creates scapegoats, and has no respect for the Constitution. In the end, the strongman will always embrace the wealthy elite, just like the corrupt bastards before him.

Psquared's picture

This is beginning to sound Biblical.

RockyRacoon's picture

Ye doth not thiketh for naught!

macholatte's picture


...even though mightily pissed off, would rather follow someone promising them justice (unpleasant consequences to follow later), than conduct a passive revolution.


The "passive revolution" should be first and, as we shall see on the first Tuesday of this November, it will be as limp as Alan Greenspan's dick.  Then you get to test your theory, and that of many here, and my bet is that the sheeple will go bah-bah-bah all the way back to their TV's and beer.

How many people here have sent money to Ran Paul (son of Ron), Sharon Angle (running against Reid) and John Dennis (running against Pelosi)? Less than 5% I'll wager. How many here tried to help Peter Schiff?

Revoluton? Not here at ZH and not here in Amerika.  Dream on.


tmosley's picture

And how many millions or billions have the people here and the readers saved for themselves and denied to the banksters and government from what they have learned here?  Never underestimate the power of words.

The American Revolution was certainly never won by donations to members of Parliament.  It was, however, funded by money that was denied to the tax collectors.  We might not be tarring and feathering them yet, but that day isn't too far away.

ZH is the modern day equivalent of the pubs where the ideals of the Revolution spread, and where plans were made.  If the last revolution was born in a pub, the next one will be known to have been founded online.

DudleyDoRight's picture

Mr. Lira has it absolutely right.  Brian and Lisa and many, many others will start repeating in a major, major way the refrain starting at 4:07: http://www.youtube.com/watch?v=MzBA15lQFl8

ertyqway's picture

We've finally reached the point where the low-impact option to get us out of this mess is a military coup.

DavidC's picture

Thanks Tyler and Gonzalo.

For those who missed it or aren't aware of it, Gonzalo appeared on Max Keiser the other day.



ISEEIT's picture

Only a moron conspiracy theory believing dupe would ever imagine current events thru the lens of Cloward/Piven strategy? I mean come on, that idea is just batshit crazy right?

The far left would surely never aim to topple a society in order to perform a coup that would result in the establishment of a soviet style prison? Right?

I mean the far left just wouldn't do that, not in America, right?

It's not actually happening, right?

New_Meat's picture

Nope, never happened in New York City, right Mayor Lindsay?

- Ned

Wynn's picture

What's worse; the far left or the far right? Both blame their problems on the other side, and both are inflexible to compromise, so both sides will pull farther and farther apart. Expect to see Hitler or Marx types crop up in the near future.

Wynn's picture

  ... on second thought

The far right is the most dangerous force in the world today, bar none.


Cow's picture

yea.  because everyone knows Hitler was far right.  right?  right?  WTF did "Nazi" stand for anyway?


macholatte's picture

Abe Lincoln was considered far right.

The Obama taught Alynski at Columbia and is considered an Alynski expert. His specialty was as a community organizer.

This is fact! Do an internet search and spend 20 minutes doing some research on the communist in the White House before shooting off your ignorant, partisan mouth.

Cow's picture

Do you understand sarcasm?  Try and keep up.

DosZap's picture

Your really an idiot.

Have you heard ONE Far Right, any RIGHT individual talking about, belieiving in Euthansia?.

Actually condoning it, the need for it?...........

Well fool, you have a CZAR, a MAJOR player in the current admin who have trumpeted this view forever.

He is ONE, of their main cogs.

The Clyde & Piven mantra, and the Alinskityes are breeding in the Peoples House.

Their policies, and plans are right down this alley.........

Although the are fools, and think we are too, and that we are too stupid, illiterate to actually believe that they are serious.........

They are dead serious.

Ignore their kind at your peril.

What party is it that has allowed, 50 million babies to be murdered?.Not the RIGHT..........

You fall into the category of the Useful idiot.

granolageek's picture

No, the far right prefers to drag people away in the middle of the night.

Attitude_Check's picture

Do not confuse the right (far or not) or left for that matter (far or not) with a totatitarian regime.  A totalitarian regime is neither right nor left -- it is just evil.

RockyRacoon's picture

I dunno.  I think the far left koo-aid has a tad bit more sugar in it.

All of it tasing like crap because they both use tainted water.

trav7777's picture

We need to euthanize the banksters.

But, population control at this point is a must.

We have no choice but to transition from a growth-based model to a steady-state one.  A growing population against declining production means an increase in aggregate poverty.

There are continents which will need to rediscover how to feed themselves.  At some point, "land reform" will have to yield to hunger.

Buckaroo Banzai's picture

More people in the history of the earth have been killed in the name of Communism, Marxism, and Socialism, than under any other banner or ideology. Lump in the unborn and the number swells even further.

That is a fact, and its not even close. The murderous left wins over the murderous right by a ratio of ... what? at least 10 to 1. Maybe even more depending on how you count it.

bronzie's picture

"More people in the history of the earth have been killed in the name of Communism, Marxism, and Socialism, than under any other banner or ideology"

even more than in the name of religion?

it's hard to separate the church from govt throughout history so maybe your statement is accurate

Attitude_Check's picture

Comunism and Marxism IS A RELIGION.  That's why most communist countries outlaw any other form of religion - or keep it on a very tight leash.

nmewn's picture

"even more than in the name of religion?"

Way more than religion...by far bronzie...it's not even close.

AnAnonymous's picture

Good propaganda. That is more because of one side bodycounting and the others being unable to do the same.

How many killed for capitalism? My guess is that the official body counts are zero.

Hint: sometimes, in order to build credibility, propaganda has to concede a kind of self admission. 

tmosley's picture

This is among the dumbest things I have ever read.  Name one god damned massacre that was done in the name of capitalism.  It never happened.  It's like crooning about the countless millions killed in the name of pacifism.

Capitalism is a system that relies on money to distribute goods and services.  Socialism relies on force.  By definition, capitalism will not kill any mass of people.  At worst, you might have the occassional murder.  It is only under socialism that you get purges and holocausts.

Take your handwaving bullshit and get out.

MsCreant's picture

What of wars for oil, not declared, but quietly fought to secure the resource in the name of bringing freedom or some such, to the indigenous populations there? Are these done in the name of capitalism, or not. I think technically they have all been done "in the name of capitalism."

Me, I'd like to see us try some capitalism. Might be a cool system.

AnAnonymous's picture

That is exactly what I wrote.

Capitalism hands out a zero list.

Highly credible.

More a matter of recognition or more exactly, being forced to recognize one's crimes.

Jails are full of innocent people, it is well known. Too bad for them they do not have the power to enforce their point of view.

firstdivision's picture

I am amazed that you took out GWB balls out of your mouth long enough to type this.  Ask the people of carpet bombed countries like Vietnam about their body counts from those far right capitalist people.  And as someone pointed out, religion is by far the biggest ideology that has killed more than any political skirmish, espcially when looked at in a percentage per earth's population. 

tmosley's picture

You make a false assumption there.  You think that the United States was capitalist at the time that that war was going on.  It was not, and has not been since 1913.  Since the day that the Federal Reserve was founded, the United States has been a COMMUNIST nation.  The only thing seperating us from the Soviets was that we allowed the pretension of private property and individual rights, but the economy was 100% PLANNED.

It seems to me that the only wars that have ever been fought in the name of capitalism were Revolutions, where the only people killed by capitalists were aggressors coming into secceding terretories (ie the American Revolution and the Civil War).  In the case of the civil war, the link is more tenuous, as the South was slaveholding, and more strongly linked to the system of serfdom than capitalism.

firstdivision's picture

Then you're stating there is no difference between the left nor the right (which I would have to agree with).