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?
 
Fuckit.
 
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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Observer's picture

you(tmosley) beat me(my post)to the punch!

Founders Keeper's picture

[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.]

Good post, tmosley.

 

Unfortunately, the meaning of Capitalism has changed to greed, selfishness, corruption, and destruction.  

Capitalism used to mean personal freedom, security(emotional) in one's private property, fairness, balance, creativity, and hope.  Capitalism and the U.S. Constitution go hand in hand.  Capitalism is the economic expression of individual liberty.

I'm afraid the American citizen's perception of the meaning of Capitalism is now too far removed from the original meaning.  A lot of damage has been done.   Very likely beyond repair.

fiftybagger's picture

The term capitalism was coined by Marx.  Think about that one....

Observer's picture

capitalism is the freedom to choose my way of life and live by it and pay for it myself without 'bailouts'. how many truly caplitalist societies have we had in history? none! that is because it is human nature to grab and keep power and concentrated power and capitalism don't exist together. either we live as libertarians with a capitalist economy or we live as minions in a totalitarian regime of varying degrees. Even when America was expanding rapidly in the late 19th century Americans of African descent hardly had any rights. if and when we live as free beings we will have a truly capitalist economy

nuinut's picture

 if and when we live as free beings we will have a truly capitalist economy

We'll get there. 

Be a little collateral damage on the way, but if you want an omelette...

VWbug's picture

leonard peikoff wrote an unfortunately prescient book about this called the Ominous Parallels.

Of course left and right are misleading terms.

The concise way to put it is 'collectivists' vs 'individualists' but a lot of people don't have a clue what either of those mean.

So the best way i can think of is to say the totalitarian, religous extremist, racists are a much bigger threat in the USA than their near cousins the totalitarian marxists/socialists.

Al Gorerhythm's picture

LEFT, RIGHT, LEFT, RIGHT, LEFT, RIGHT, LEFT!

SQUAD, HALT!

LEFT FACE!

SHOULDER ARMS!

TAKE AIM!

FIRE!!!!

This is like a dems / repub argument.

 

ISEEIT's picture

Marx is in office now. The trouble seems to be that his teleprompter isn't sufficient to establish absolute control. It would seem that the followers haven't quite the skills of the leader. This Internet thing to is a player not properly recognized and "priced in" when the plan was hatched.

The war rages on.

brodix's picture

Get your history straight. Marx couldn't organize his own family. It's Lenin you have to worry about. Marx thought that if the lines between personal and private property were eliminated, the rich would take their corrupt monarchies with them and the state would wither away. Lenin filled the vacuum by making everything the state.

DosZap's picture

Both were  Satanic bastards, which one murdered more of HIS own people after WWII, than the other?.

Between Marx,Mao, and Polpot, and asst others, over 100 million innocents have been murdered at the hands of their OWN, in just the last 100yrs.( Not even counting Hitler).

ISEEIT's picture

"progressive' explained. Thanks.

firstdivision's picture

Really, please tell me what country Marx was the leader of again.  My leftist shool history classes all taught me he was a philosopher, not how he rose to power.

ISEEIT's picture

Good point. Should have mentioned Lenin/Castro/LBJ/Chavez/Mao/? 'It's the philoshopy stupid!'

Does that work?

firstdivision's picture

How many died under the rule of the Pope?  How many in the name of Islam?  How about Judaism?  As I recall, the Tzar of Russia wasn't exactly nice to his own people as well.  I still agree with the statement that religion killed more than any politics.  Left/Right was just created to distract the public from the flogging we are all truely taking.  The true political sides in this country are only the classes of seperation by income. 

scaleindependent's picture

As entropy increases... As social cohesion deteriorates and trust and collegiality give way to anger, vengeance and scapegoating you would expect that the political process of the USA will also disintegrate into more mudslinging, more backstabbing...  Before it is over I expect assasinations both from the right and the left.

Wynn is not the only one predicting this. Celente and others have also.

So why the junks and the attacks without explanation?

Cow's picture

Godwins Law regarding mentioning Hitler

http://www.wimp.com/godwinslaw/

 

Missing_Link's picture

Thanks, David!  Good show.  I love Gonzalo's articles -- he's an incredibly bright and articulate speaker.  A bit of a shame to watch him on the Keiser show; Keiser really doesn't have the eloquence or dignity for a show like that, but at least Gonzalo makes up for it.

Rusty Shorts's picture

You really are Missing_a_Link.

WaterWings's picture

Max has me laughing in an angry way each show - brilliant. Ye know not of what ye speak.

ATG's picture

GL on MK:

More costly gold infinity dollar zero hyperinflation sheer nonsense.

Just because it happened in Chile or Argentina or a thousand banana republics does not guarantee it will happen in the USA where the dollar is global defacto reserve currency, military rules, USA #1 prisoners, #1 gold in world.

QEII a Fed poker bluff fantasy to kick the can down the road until the elections, not reflected by actual Fed stats, falling bank earnings, foreclosures and falling collateral assets.

Rising interest rates reflected by gold strengthen dollars and weaken all other markets.

Real 40% rates of -35% falling collateral assets plus 5% nominal equipment leases, loans and mortgages guarantee deflation with a stronger dollar.

Companies issuing 100 year bonds at what they think are low rates may rue the day.

Janice's picture

Basterz, Bitchez!

Fearless Rick's picture

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”.

Memo to Brian: Listen to your wife. Stop paying. Hire a good lawyer and buy silver and gold and with what would be the mortgage payment. Your money is better invested that way.

Kaiser Sousa's picture

Fearless -

precisely...ur prescription is a double fisted way to fuck the bankers who deserve just that...

take away their usory revenues & dump their debt coupon currency  for real money...

The battle cry "fuckit"....

RockyRacoon's picture

I smell blood (money) in the water.  States could use the extra income from some fraud cases.

States Attorneys General are girding for the long battle.

Up to 40 States Plan Inquiry Into Foreclosure Data Associated Press

Chandos's picture

"fuck it"  will no doubt be one of the dominating memes to come...fuck it as personal mantra...this time hopefully not to be recuperated and sold back to the masses as cheap merchandise, like No future has....The thing is though, we must stop losing precious time writing about it and congratulating ourselves for "getting it" - or inversly, chastising others that don't - .....For the PTB the Internet is both an incredible foe and a godsend; it creates a possibly critical mass of people who know what they're up to, but binds them to their screens......What to do?

DaveyJones's picture

A few months back I saw a new case in the system. John and Mary were in their mid fifties. Mary lost her job first and along with it her medical benefits. Then John's hours got cut. Mary had a serious ongoing medical conditon. John's job did not have benefits. John got another job at Starbucks. The medical bills started to pile up. John started stealing coffee and was trying to resell it to individual street vendors. Mary started helping in the scheme. It's been a long time since I've seen a fifty five year old man cry like a juvenile suspect. Neither had broken a law in their life as well. In the meantime, our local prosecutors just announced that due to budget cuts, they are firing twenty prosecutors (never seen that) and will now have to de-emphasize property crimes. Of course one on the fastest growing areas is identity theft. We are also seeing an increase in domestic violence and theft between child and parent as many are moving back in or staying longer. This is not going to end well  

MsCreant's picture

Thanks for that Davey. Wow.

minus dog's picture

No shit on the ID theft, I live in the middle of nowhere and regularly catch people trying to steal anything and everything... bills, DVD's, junkmail, etc.

Everyman's picture

IF this is the way it's gonna be, then FINE, we did make these "rules" anyway.  The mantra for our next 2 decades:

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?

Kaiser Sousa's picture

i love it...gotta share this...

please title this mantra...i would like to see it everywhere...

until things r set right - Fuck it...

Paul E. Math's picture

Please note the similarity in overall tone to Irvine Welsh's verbalization of the ethos of the heroin addict.  This is moral decay, not in a subtle, creeping, subconscious fashion but purposefull, overt and pragmatically chosen:

"Choose life. Choose a job. Choose a career. Choose a family. Choose a fucking big television, Choose washing machines, cars, compact disc players, and electrical tin openers. Choose good health, low cholesterol and dental insurance. Choose fixed-interest mortgage repayments. Choose a starter home. Choose your friends. Choose leisure wear and matching luggage. Choose a three piece suite on hire purchase in a range of fucking fabrics. Choose DIY and wondering who you are on a Sunday morning. Choose sitting on that couch watching mind-numbing sprit-crushing game shows, stuffing fucking junk food into your mouth. Choose rotting away at the end of it all, pishing your last in a miserable home, nothing more than an embarrassment to the selfish, fucked-up brats you have spawned to replace yourself. Choose your future. Choose life... But why would I want to do a thing like that?"

Fuckit.

Everyman's picture

This is just FULL of great quotes:

 

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.

enobittep's picture

You bet.  Make no mistake about it.  This is exactly how lunitics like Hitler get into power.

 

Dismal Scientist's picture

See my comment at top of thread. Couldn't agree more.

Cistercian's picture

And the question that keeps me up at night is this:was it engineered precisely to put a dictatorship into effect?I think the answer has to be yes...it makes so much more sense in explaining events of the last 10 years.

Bananamerican's picture

"was it engineered precisely to put a dictatorship into effect?"

rest easy Cister....

IT was engineered simply to put money, lots and lots of money, into the pockets of vain and greedy men.

TBT or not TBT's picture

It wasn't engineered.   This clusterscenario is an emergent one, not the doing of masterminds.

DosZap's picture

Well, your # 2 here, that get's the PLAN.

macholatte's picture

...was it engineered precisely to put a dictatorship into effect?I think the answer has to be yes...it makes so much more sense in explaining events of the last 10 years.

 

If you look at history, and I mean going back a bit farther than Bush 2 as the MSM would have it, then a pattern does appear. Perhaps the analogy could be like 4 college guys in a bus deciding to drive from LA to New York but without a map. They know where they want to go, East, have the equipment to get there, in no hurry and will welcome hichhikers with gas money. Along the way they have a few flat tires, some die, new people take the wheel, they try different things, but they stay the course.

So what are they going to do once they get to New York?

 

blunderdog's picture

There is no "New York."

There is no conspiracy.

Just for discussion's sake, say there are 100,000 people who wield control of vast resources.  They're not a team.  They don't have the same agenda or the same interests.  When individual interests happen to align, they work with each other, and when they don't, they work against each other.

There are a few interests which are highly prevalent, and they are fundamentally dependent on maintaining existing wealth structures, because today, wealth is power.

Put Rupert Murdoch, George Soros, David Rene de Rothschild, Hugo Chavez, Prince Charles, and Bill Gates in the same room and they'd probably hate each other.  They might disagree on any given policy or idea about "the right thing to do."

But they would definitely AGREE that the existing system of distribution of resources should remain in place.  International financial exchanges, trade agreements, protection of property from sovereigns, etc.  The majority of the population cannot be permitted free and clear ownership of their means of survival because it threatens existing power structures.

There's no plan.  It's just an agreed-upon set of rules.

To stretch your analogy, the four guys are all trying to get to different destinations, and they'll fight like cats and dogs over where they're going.  But they definitely aren't getting out of the car.

blunderdog's picture

I find it fascinating to see which posts collect junks.

C'mon, guys.  No actual criticism of CONTENT?

I confess to being a bit surprised: it just seems like basic common-sense to me.

nevadan's picture

DC is full of lunatics now.

Rainman's picture

Crony capitalism eventually converts its victims to lawlessness and irresponsibility. TARP was the kickoff to a long game. We're still in the first quarter.

bugs_'s picture

"60-ish white"  Ooops. They should have known the program wasn't there for them.  Wells Fargo didn't tell them the real reason they were slow to approve and they didn't tell them exactly why they were un-approved 90 days later by some anonymous back-room staffer.  The program wasn't for them and they should have known not to apply, to keep their mouth shut, and to pay.  The program wasn't for them.

bronzie's picture

"imagine if you can an unemployed black man sitting on a crumbling porch somewhere in Alabama in his string vest"

Bird and Fortune on the subprime crisis

http://www.youtube.com/watch?v=mzJmTCYmo9g

hilarious video - subprime starts around 3:00