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Rolling Jubilee: Debt or Democracy?

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  • kaizengunn
    As you may know, Rolling Jubilee (http://rollingjubilee.org/) was recently initiated by Occupy Wall Street and its primary activity is to buy up consumer debt
    Message 1 of 1 , Dec 8, 2012
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      As you may know, Rolling Jubilee (http://rollingjubilee.org/) was recently initiated by Occupy Wall Street and its primary activity is to buy up consumer debt and then cancel that debt without collecting on it from the borrowers. Rolling Jubilee is one of two OWS "projects" being undertaken by a related entity called "Strike Debt" (http://strikedebt.org/) that also created something called the Debt Resistors Operations Manual (http://strikedebt.org/The-Debt-Resistors-Operations-Manual.pdf). This long and intriguing document runs to 124 pages and is well worth consulting.

      Here is some basic information about Rolling Jubilee in case you are interested in learning more:

      Form of organization: Rolling Jubilee Fund is "a non-profit 501(c)(4) organization with the exclusive mission of buying and abolishing debt. 100% of the money raised will go to the process of buying and abolishing debt." The 501(c)(4) organizational form is non profit, being a vehicle typically used by civic leagues, social welfare organizations and local associations "operated exclusively for the promotion of social welfare if ... primarily engaged in promoting in some way the common good and general welfare of the community." [IRS Regulation 1. 501(c)(4)-1(a)(2)(i)] However, unlike the better known 501(c)(3), donations to 501(c)(4) nonprofits are NOT tax deductible to the donor. Thus, donations to Rolling Jubilee are NOT tax deductible. Why Rolling Jubilee decided to adopt this form rather than the more familiar 501(c)(3) form is unclear but the nature of Rolling Jubilee's activity may simply have precluded it from doing that.

      Leadership and staff: Not disclosed. Some of the professionals involved may receive compensation, and other people involved are volunteers. The expenses associated with the effort and who gets what are not specified on the website. The Debt Resistors Operations Manual says that it was "written by an anonymous collective of resistors, defaulters and allies from Strike Debt and Occupy Wall Street." I presume the same is true for Rolling Jubilee, but have no further information on this important point.

      Mailing address: The Rolling Jubilee Fund's mailing address is c/o Occupy Wall Street Radio WBAI, 120 Wall Street, 10th Floor, NY, NY 10005.

      Rationale: Rolling Jubilee believes that "people should not go into debt for basic necessities like education, healthcare and housing....Our network has the goal of building a broad movement, with more effective ways of resisting debt, and with the ultimate goal of creating an alternative economy that benefits us all and not just the 1%."

      Funding to date: A benefit was held a few weeks back (the night that Roshi held her mondo at the Zendo on Hurricane Sandy, as it happens) which raised nearly $350,000. The total amount raised stood at $408,000 about a week later, and now two weeks after the benefit the total raised is nearly $436,000. According to the website, this effort cancels consumer debt at the rate of $20 of debt for each dollar of funding. Thus, the $435,834 raised so far is said to have translated into to the cancellation of $8,721,504 in debt.

      Primary activity: Rolling Jubilee buys "charged-off," i.e., distressed, debt -- debt upon whose payments the borrower has defaulted -- and which is then put up for sale by the lender "for pennies on the dollar in a shadowy speculative market of debt buyers who then turn around and try to collect the full amount from debtors." Quite atypically for this debt market, Rolling Jubilee cancels any debt it buys without trying to collect anything from the borrower and at no profit.

      The debt being canceled is primarily credit card debt, medical debt and mortgage debt that is deemed probably uncollectible but that nonetheless hangs over the heads of the various borrowers. Note, however, that the types of debt bought do not include student loans -- this form of debt has special attributes that make it unsuited to this sort of non-profit debt cancellation. The $20 debt purchased to $1 "invested" ratio includes various legal, accounting and administrative costs, the magnitude of which are unspecified on the website.

      The debt bought is not that of any one identifiable person. According to the website, "Anonymous accounts are bundled together and sold as a whole. Before purchasing debt, there is only limited information as to whose debt we are buying. These peculiarities are part of the scandal that we are trying to highlight."

      Analysis:
      Rolling Jubilee seems like a very creative tactic to both provide genuine relief to an anonymous population of debtors and to also send a powerful message that the debt market can be turned on its head by a new model of direct community action within that market.

      That said, there are some pitfalls, among which are the lack of transparency as to who is managing and executing the debt repurchase/cancelation transactions and what sorts of costs or fees are generated by the process. Basically, if you give money to Rolling Jubilee you are trusting that the vast majority of your donation will cancel a high multiple of debt with relatively minimal overhead/administrative costs. That seems to be a reasonable expectation but it would be better if financial reports with more detail were provided to prospective donors.

      The larger question that I have about Rolling Jubilee is its assertion that "people should not go into debt for basic necessities like education, healthcare and housing." That sounds nice to my liberal sensibilities, but the implication of this statement is that if people cannot afford the cost of housing, health care and education then someone else should pay for those costs. Our tax rates and government policies are predicated on the idea that those with more money should pay more to keep society running for the benefit of all. But where "should" we draw the line between personal responsibility and collective responsibility? Our political parties and candidates -- and, indeed, Rolling Jubilee itself -- pretend that answering this question is much simpler than it really is.

      My feelings about this question are complex but here is a brief thought on the narrow issue of debt: if a borrower with limited financial literacy and modest means is tricked by a financial institution into taking on debt whose amount or whose repayment terms/structure are too burdensome for that borrower then the lender in that scenario should be prosecuted and the borrower excused from his/her obligations. But a borrower who understands what he/she is doing and borrows money with the intention of repaying it -- and who later does not repay that debt -- is quite another matter. If this latter type of borrower cannot repay what he/she borrowed, the responsibility for that situation seems much more to be that of the borrower than the lender. The borrower who understands what he/she is doing and then has financial problems can elicit our sympathy, but is that person to be let off the hook simply because things did not work out as planned? So many issues feed into this question of debt, including our society's encouragement of addictive patterns of consumption and waste... I could go on and on about it, but I won't.

      I found a couple of quotes on the websites of Rolling Jubilee/Strikedebt that are interesting (see below). They posit an "us" versus "them" mentality with which I do not agree. They also imply that people can simply borrow money and then not repay it if they don't want to repay it and I do not agree with that either. In my view, we are all participating in a system that needs to be reformed from the bottom up. My feelings about the financial system are very much like my feelings about Sing Sing -- the guards (lenders) and the inmates (borrowers) are all trapped -- they are all victims looking at their shared problem from different angles. Or, to quote Andre Malraux, "il n'y a que des innocents coupables" (there are only guilty innocents).

      Interesting Rolling Jubilee/Strikedebt quotes:
      "We've come to the point where we, as a civilization, need to make a choice: debt, or democracy? Which side are you on? strikedebt.org" and
      "To the financial establishment of the world, we have only one thing to say: we owe you nothing."
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