The Sausage of Justice

by Ben Carter

The Network Center for Community Change pays me (yes, it is a great job) to train attorneys attorneys to defend homeowners facing foreclosure and work with courts to implement processes that ensure everyone is getting a fair shake during a foreclosure. This is a presentation from last fall at the Kentucky Bar Association's Kentucky Law Update in Covington, Kentucky in which I explain to attorneys how they can profitably incorporate foreclosure defense into their practice, how loan modifications work and don't work, and why the court system needs to change how it handles foreclosure proceedings. Somehow, I also talk about the Sausage of Justice.

Read more about the Network Center for Community Change:

Read more about my law practice:

Foreign Workers, Domestic Help

by Ben Carter

At night in Palau, Japanese businessmen sing karaoke. They go to bars where Filipina and Chinese women and girls serve them drinks. The businessmen laugh; they are rich. The girls laugh; they are paid to laugh. A skirted girl sits on a man’s lap, he rubs his hand on her thigh. Later, he will pay the owner of the bar and take the girl back to his hotel room.

Nancy learned English by listening to a “English for Businessmen” cassette. I never asked Nancy whether this is true, but it has to be.

“Nancy, can you hem these pants? The cuff is dragging.”

“It is really no problem!” This is Nancy’s enthusiastic mantra. Nancy has rehearsed it in front of mirrors. Nancy’s smile is simultaneously practiced and genuine.

I met Nancy near the end of our year in Palau. We had heard that the tailors from the Philippines on the island did amazing work and were incredibly affordable.

“Go see Nancy,” we kept hearing.

So, one day after work Erin and I drove over to Dress X-Press after getting another recommendation for Nancy from one of the Supreme Court justices Erin worked for. Two things were immediately obvious when we entered the shop:

1) Nancy was a man.

2) Nancy really, really loved his job.

He set about showing us rolls of fabric, examining the shirts and dresses we had brought as templates for future shirts and dresses.

“Do you think you can copy this pattern?”

“It’s really no problem!”

The shop was not Nancy’s. By law, nothing in Palau is ever owned by anyone other than a Palauan. That includes businesses and land. So, Nancy worked for a Palauan who actually owned the shop. I never asked how much Nancy got paid, whether he got a commission. I never asked him how long he had been in Palau, whether his employer had ever exploited the enormous power advantage she enjoyed in the relationship: Nancy depended on the Palauan employer to renew his work visa and his ability to stay in Palau. How incurious.

A lot of work gets done in Palau by foreign workers. The men working on the gym’s roof as I drove home from work–the ones that were there on my way to work ten hours earlier–are Filipino. The women doing the laundry by hand are Filipina. The guys on the roadside digging drainage canals, pouring the concrete that would line those canals are Bangladeshi, Chinese, and Filipino. Of the 20,000 people in Palau, about 6,000 are foreign workers. While we lived there, we were two among that number, though admittedly practicing law is not the typical work of foreign workers in Palau. Cutting hair, fixing cars, construction, food service, housekeeping–these are what foreign workers are for.

We paid Lori, a Filipina who used to be a nurse in South Africa, $20 bucks to come over once a week and do laundry and clean the house. She spent the entire day there. Palauans chastised us: this was an exorbitant amount of money to pay a DH, “domestic help”. We paid Nur similarly to occasionally “sweep” the yard. Sweeping the yard meant mowing the grass by hand with a machete. Our yard was not small.

Palauans are smart. They have figured out that the amount of money that people in Palau are willing to pay for a service is greater than the amount they would need to pay a foreign worker to do the work. The difference is theirs.

This is not to say that Palauans themselves are not hard workers, but rather to say that you won’t see a Palauan doing work they can pay someone less to do for them. That’s not laziness, that’s economics. Rich people don’t mow their own lawns, hang their Christmas lights–they hire that job out. And the fact is that Palauans are relatively rich[1] compared with their Filipino and Bangladeshi neighbors.

That the market supports this labor arrangement doesn’t mean I’m comfortable with it; like many Palauans, I have mixed feelings about the country’s easy reliance on foreign workers. Yes, foreign workers have an opportunity to earn more money than they would in their home country. The opportunity to work for a few bucks is better than the opportunity to work for almost nothing. (And, who knows, you might find a side job with a young American couple who will pay you in a day more money that you could have made in a month in Bangladesh or the Philippines.)

Yet, there is something deeply unseemly about a system in which Palauans are allowed to prosper on the labor of others simply by being Palauan. Palauans have the exclusive right to own businesses and secure work visas for employees. Often, it doesn’t seem like Palauans have done enough work to justify the cut they take.

It’s not just their tightfisted grip on the means of production. I understand and laud Palauans’ prevailing impulse to retain tight, local control over the economy. Doing otherwise would undoubtedly rearrange the existing power structures in Palau. This rearrangement would be swift and likely irreversible, so I appreciate the caution with which Palauans proceed.

So, while a hyper-nationalistic position creates the potential for Palauans to profit beyond their contribution, that alone does not trouble me. Rather, like the treatment of undocumented workers in America, the problem is one of humans failing to treat people like they were human beings. The system of foreign workers in Palau looks a lot like indentured servitude and is tinged with racism. The foreign worker’s dependence on the employer for renewing the worker’s visa distorts the normal employer/employee relationship by giving the employer a shocking amount of power over the destiny of the employee’s life.

As one of two Public Defenders in Palau, I got a chance to see the institutionalized racism of police officers up close. I was in charge of the misdemeanor charges. Lots of citations for driving with a brakelight out or failing to use a turn signal came across my desk. Very few were for Palauan drivers. Driving While Filipino is a real thing in Palau. After practicing for almost a year, I was confronted with a citation I’d never seen before: riding a bicycle without a headlight. The time of the citation was a 5:35 p.m. It wasn’t even dark. My client was Bangladeshi.

I looked at the statute and, sure enough, each bicycle is required by law to be outfitted with a lamp for nighttime illumination. I took the citation and my client downstairs for the Wednesday afternoon traffic docket and summoned my deepest indignation: “You Honor,” I told Justice Lourdes Materne, “I don’t have a light on my bike. I’ve been on island for almost a year and I don’t know anyone who has a light on their bike. This ticket is absurd.” She agreed. Judge Materne saw right through the technical violation and recognized the ugly truth behind the ticket. She apologized to my client for having to miss an afternoon of work.

It’s just pure harassment. Officers cite foreign workers because they can, because they need to. You’ve got to remind them who’s boss.

One afternoon, Nur visited me at the office. Nur has skin the color of coffee beans, a strong, square jaw, perfectly straight, perfectly white teeth. He has a luminous presence. He belongs in magazines–he is the most handsome landscaper I’ll ever employ. He knocked on my open door and bowed slightly while smiling deferentially. He did not want to disturb me.

“I have a problem,” he said.

He had ben arrested the day before while riding a bicycle down Main Road that he had recently purchased from some neighborhood kids for $25. The bike was stolen and he was charged with the felony of receiving stolen property worth more than $300.

I saw the bike. It was a piece of shit worth $25, not $300. So, there was that fact issue. Then, under the statute, the state would have to prove that Nur knew the bike was stolen. The prosecutor was adamant–she would not dismiss the charge. We could either 1) accept an offer to amend the charge to a misdemeanor spend two weekends in jail or 2) go to trial on the felony. This case was made for a trial. We had two great issues to tell the judge about. (When I was in Palau, there were no jury trials. This part of the Constitution has since been amended.)

Instead, we accepted the offer and Nur spent two days in jail. Here’s why: if we had gone to trial and lost–a remote yet possible outcome–Nur’s punishment would have included a longer jail sentence, but also deportation following his time in jail. This was an unacceptable risk. Nur had a hard life in Palau, but no life in Bangladesh. So, Nur took the deal and served his bullshit time. Nur was not the only foreign worker who took deals that my Palauan clients would never have accepted; deportation was not part of the potential punishments for my Palauan clients and the prosecutors knew it.

The economic freeloading does not disturb me.[2] The racism, the paranoia, the exploitation, the meanness–the detritus of lopsided economic power–does. Differences in economic power are inevitable. But, the ugly side of the power differential is not. That it so often exists is deeply saddening. Differences in economic power do not automatically instill in a person or populace a sense of moral superiority to those less powerful, yet the transference occurs more often than not. The human psyche, apparently, cannot acknowledge disparate economic power and accept that this power is derived from a strictly-enforced system of laws that seeks to preserve the powerfuls’ power.

Rather, humans–especially the powerful–must also tell ourselves stories about us and about them that justify the status quo for reasons beyond (or instead) of the simple and obvious fact that the powerful are powerful because the powerful wrote the laws from which they derive their power. Perhaps this truth is too bareknuckled. Perhaps part of the job of the stories about Filipinos‘ deceitfulness or Mexicans’ laziness is to wrap the bareknuckled truth in something softer. Something on which we can lay our heads at night, something in which to swaddle our babies, something with which to line our coffins.

These stories are not true. These stories insulate the rich and divide the poor by ethnicities, geographies, nations. They prevent us from seeing each other for what we are: delicate, vulnerable, full of love and fear, here only now.

I’m on a plane. I’m going back to Palau. I hope desperately that I see Nur riding a bicycle down Main Road. I hope to see my friend, Nancy, while I’m there. I hope he is still there. These people are people. I so often forget that. I tell myself stories to help myself forget that. I’ve heard them my whole life.

Growing up has meant learning different stories, real stories, about real people. Learning new stories is hard, but not impossible. My hope for us rests in our ability to learn and tell new stories. We can learn new stories, stitch together new patterns.

It’s really no problem.


  1. Palau enjoys a longstanding relationship with the United States that makes Palau relatively prosperous. The first Compact of Free Association involved an agreement to provide $300,000,000 in U.S. foreign aid to the Palauan government in exchange for an agreement that the U.S. could park its nuclear submarines in Palau’s waters, if necessary. It’s more involved than that, but for purposes of this essay, it’s enough to know that this country of 15,000 has received $300,000,000 over the last 15 years.

  2. This is an overstatement. It does disturb me, but it is not the most disturbing aspect of what foreign worker’s confront in Palau. If it disturbs you, that’s cool. I get it.


Open Letter to Kentucky Judges Regarding the Ongoing Foreclosure Crisis

by Ben Carter

Cross-posted from Ben Carter Law...

This essay is deeply indebted to two articles: "Defending Mortgage Foreclosures: Seeking a Role for Equity" by law professor David Super and a National Consumer Law Center report: "Servicer's Failure to Engage in Appropriate Loss Mitigation as a Foreclosure Defense. The NCLC article does not appear to be available online, but many other resources from the amazing National Consumer Law Center are available

Dear Judge,

I’m writing today because it is down to you. You are the last, best hope for Kentucky’s homeowners–both those facing foreclosure and their neighbors.

Our neighbors’ homes are on fire. The foreclosure crisis blazes through our neighborhoods and continues to grow. One in four Kentucky homeowners owe more on their house than it is currently worth. One in ten is more than thirty days behind on their home loan.

Foreclosure is too expensive, too extreme, to be granted as a matter of routine—each sale adds fuel to the raging fire. Foreclosure devastates homeowners, destabilizes financial institutions, degrades neighborhoods, and impoverishes communities.

Kentucky faces a situation in which homeowners facing foreclosure are clueless, powerless, and unrepresented by counsel. The federal program designed to encourage banks[1] to modify homeowners’ loans (HAMP) is a colossal failure. Reckless banks pursue foreclosure even to their own (and everyone else’s) detriment. Worse, problems with the banks’ own loan documents abound; their right to foreclose at all is deeply suspect.

The federal government first failed to adequately regulate mortgage lending. Now, it is failing to address the fallout. State and local government’s efforts to mitigate the losses have been similarly watered-down and ineffective. Frankfort lacks the political resources and local governments lack the financial resources to address a crisis of this proportion. Banks can walk all over a local government.

But, they can’t walk over you.

Kentucky, thank God, is a state that requires banks to seek judicial approval before taking a homeowner’s house. Some states don’t. I’m writing today to encourage you to apply much stricter scrutiny–both legal and equitable–on foreclosure proceedings than has traditionally been applied. I’m writing to ask you to incorporate alternative dispute resolution in your foreclosure cases that will ensure that the parties have explored in good faith every alternative to foreclosure before granting judgment in favor of foreclosing Plaintiffs. I’m writing to ask you to ensure that the foreclosures inflicted upon the community are only those that are absolutely necessary.

What is happening is not traditional; it’s extraordinary. It’s time to start treating it extraordinarily.

How We Got Here

Later in this letter, I will urge you to evaluate and question whether equity will permit the foreclosure the bank is asking you to grant. I will encourage you to aggressively apply equitable remedies in Kentucky foreclosure proceedings. To evaluate the equity of the situation, you need to know how all of these loans that are now in default came to exist in the first place.

In the past decade, the system set up by federal regulators, banks, and investors to finance home loans incentivized originating exotic, risky, and unsustainable loan products to Americans unlikely to appreciate the complex terms contained in their loan.[2] Fraud and unconscionable practices pervaded the mortgage lending landscape. Lenders qualified borrowers for unaffordable mortgages by offering initially-low interest rates that obscured the true cost of the loan. Many homebuyers never knew their house payments would increase dramatically a few years into the loan. Borrowers who were savvy enough express concern about these “teaser rates” were told not to worry about the adjustable rate, that they would refinance the homeowner into a fixed rate before the rate adjusted. Banks paid mortgage brokers a “Yield-Spread Premium”—often thousands of dollars—to place homebuyers in loans with higher interest rates than the rate for which the homeowner’s credit history and income actually qualified them.

Not surprisingly, the victims of these lending abuses were often the very people who could least afford it: poor people and minorities.[3] Often, these loans were written at 100% of loan-to-value,[4] leaving homeowners trapped and unable to refinance out of spiraling interest rates once housing prices plummeted in the wake of the subprime mortgage meltdown.

After mortgage brokers and lenders placed homeowners in risky loans, they sold the right to collect payments on those loans to investment firms who then pooled those loans with thousands of other loans. Investors—from school boards in Iowa to the government of Iceland—bought the right to be paid proceeds from the revenue the pooled loans generated. Investment firms who purchased individual mortgages and created residential mortgage-backed securities grossly underestimated the riskiness of the loans they were purchasing and credit rating agencies likewise gave the securities the safest (“triple-A”) rating that many institutional investors required.

Because this system sold not only the right to collect mortgage payments, but also the risk of a defaulting loan, it removed any incentive from the loan originator to exercise due diligence, verify income, ensure sustainability, or prevent appraisal fraud. The system of securitization designed by Wall Street investment firms rewarded lenders who could originate as many loans as quickly as possible.

As is obvious in hindsight, the incentives surrounding this entire scheme of financing loans are exactly backwards. Mortgage brokers are rewarded not for finding homeowners the most affordable loan, but the most expensive. Originating lenders have no interest in the long-term sustainability of the loan, and investment firms only care that there are investors for the securities they’re creating. Credit rating agencies are paid by the very firms that they’re grading.

Before the housing bubble, lenders and the eventual investor (usually FannieMae or Freddie Mac) cared whether an individual homeowner could pay their mortgage payment. Suddenly, no one did. It was a system for financing home loans that did everything wrong. It was destined to collapse.

Foreclosure Hurts Everyone

Now that the collapse has happened, the mortgage meltdown and the broader economic downturn have introduced into the public conscience the ravages of foreclosure on individuals and communities. No one wins when a house is sold at a foreclosure auction.[5]

Homeowners lose their home. They always lose the emotional equity they’ve invested into their home, and often any financial equity, as well. They lose the stability that homeownership provides. Their world suddenly uncertain, homeowners bear the cost of moving and reestablishing housing in another neighborhood, sometimes another city or state.

Lenders lose money along every step of a foreclosure sale. A 2008 paper by the Mortgage Bankers Association acknowledges lenders often lose in excess of $50,000 in each foreclosure, or 30–60% of the outstanding loan balance.[6]

From the moment a homeowner stops paying their mortgage, lenders lose money. While the loan is delinquent, lenders lose principle and interest payments, as well as taxes and insurance payments. They must maintain the property, if necessary, and invest in trying to collect the on the loan. Once the home is in foreclosure, lenders must hire lawyers, pay court costs, and administrative fees. Then, they then must hire a company to maintain the property and secure the property. Finally, after the home is sold in foreclosure, the lender often must restore the property before selling it and hire a realtor.[7] If the lender is lucky, the property will sell at a deeply discounted rate, if it sells at all.[8]

Beyond the parties to the contract—the homeowner and lender—foreclosure hurts innocent neighbors and plagues communities with a vicious cycle of depreciation and degradation.

Because houses sold at a foreclosure auction are eventually sold for a fraction of what they otherwise would have, foreclosures damage the value of neighboring homes. When a neighborhood’s homes begin to depreciate, many innocent homeowners find themselves “upside-down” on their own loans. That is, they suddenly owe more on their homes than they are worth.[9] When a family needs to move or refinance, they find doing so next to impossible. Even for those hoping to remain in the neighborhood, a foreclosure sale on a neighbor’s property, over which they have no control, strips them of equity and reduces the value of their investment.

This collateral damage (literally and figuratively) is exacerbated by the fact that many foreclosed properties are not properly maintained and remain vacant or abandoned for months or years.[10] Researchers in Philadelphia have determined that properties within 150 feet of an abandoned property lose $7,627 in value. Those within 300–450 feet lose $3,542. Properties on a block with an abandoned house sell for $6,715 less than those without a vacant property. Metropolitan Housing Coalition, 2009 State of Metropolitan Housing Report 16 (2009). Louisville currently has between 7000 and 8000 vacant properties—a number that has doubled in the past six years—and the roughly 250 foreclosure sales scheduled each month continue to grow the number of vacant properties. The Center for Responsible Lending anticipates that Kentucky will lose $2.2 billion in home equity due to nearby foreclosures between 2009 and 2012. That’s an average loss of $2,610 per home.

Because of foreclosure sales, deeply discounted REO properties, and the glut of vacant and abandoned properties depress property values, ordering a foreclosure sale will reduce the local government’s property tax revenues–the lifeblood of municipal budgets. Not only will it reduce the money local governments bring in, foreclosures require the government to spend up to $34,000 per foreclosure on “inspections, court actions, police and fire department efforts, potential demolition, unpaid water and sewage, and trash removal.”[11] All told, the Joint Economic Committee of the U.S. Congress estimates that each foreclosure costs all parties $80,000.[12]

Kentucky Judges Should Consider Equity and Equitable Remedies

Five hundred years ago, England developed equitable proceedings for cases in which the strict enforcement of rigid legal principles made the attainment of justice unlikely. Our own legal system, descended from the English system, requires courts to exercise both legal and equitable jurisdiction. Modern practice in Kentucky merges the two systems of law and equity. Ford v. Gilbert, 397 S.W.2d 41 (1965). The Kentucky Constitution “imbues the circuit courts with the general power to determine all matters of controversy arising under common law or equity.” Hisle v. Lexington-Fayette Urban County Government, 258 S.W.3d 422, 432 (Ky. App. 2008).

In Hisle, the Court notes that “[a]lthough modern partition proceedings generally involve statutory provisions, the jurisdiction of equity courts to partition real property is very ancient and has existed in common law both in England and this country since its founding.” Hisle at 431. Therefore, statutes that govern partition of land “supplement, or are supplemented by, the traditional jurisdiction of equity courts to decree partition.” Hisle at 432 quoting Atkinson v. Kish, 420 S.W.2d 104, 110 (Ky. 1967).

Similarly, in a foreclosure proceeding, the statutory provisions intersect with equitable considerations. Equitable relief is available in states, like Kentucky, where foreclosure is a statutory action. Union National Bank of Little Rock v. Cobbs, 509 A.2d 719, 721 (Pa.Super. 1989). “Foreclosure is peculiarly an equitable action, and the court may entertain such questions as are necessary to be determined in order that complete justice may be done.” Morgera v. Chiappardi, 813 A.2d 89, 98 (Conn. App. 2003) quoting Hartford Federal Savings & Loan Assn. v. Lenczyk, 217 A.2d 694 (1966). Emphasis in original. “The determination of what equity requires in a particular case, the balancing of the equities, is a matter for the discretion of the trial court.” LaSalle National Bank v. Freshfield Meadows, LLC., 798 A.2d 445 (Conn.,2002).

Today, Kentucky courts [13] have the ancient opportunity and duty to weigh the equities present in each foreclosure case. To evaluate the equity of the situation, the Court should ask itself two questions:

  1. Does the bank deserve the right to foreclose on this particular homeowner?
  2. Should the Court allow the bank to inflict a foreclosure on the community?

Does the Bank Deserve the Right to Foreclose on This Particular Homeowner?

As an initial matter, the court should examine the Plaintiff’s own conduct and its relationship to the homeowner. “Equitable defenses invite the court to consider only the plaintiff’s ethical standing and to deny all remedies if the plaintiff does not meet equity’s standards.” Dan B. Dobbs, Dobbs Law of Remedies § 2.3(3) at 80 (2d ed. 1993). Courts can examine the behavior of the parties over the life of the loan: from the origination of both the note and mortgage, to their validity, to their enforcement. Bank of New York v. Conway, 916 A.2d 130 (Conn. Supp. 2006).

For example, when a “mortgagor is prevented by accident, mistake or fraud, from fulfilling a condition of the mortgage, foreclosure cannot be had.” New Haven Sav. Bank v. LaPlace, 783 A.2d 1174, 1180 (Conn. App.,2001). Courts have also recognized other equitable defenses to foreclosure: unconscionability, abandonment of security, usury, accident, fraud, equitable estoppel, laches, breach of implied covenant of good faith and fair dealing, tender of deed in lieu of foreclosure, a refusal to agree to a favorable sale to a third party, and violations of state consumer protection laws. Id.

What is the Plaintiff and What Has It Done to Avoid Foreclosure?

In the context of a foreclosure on a person’s home, a constellation of considerations often undermines the Plaintiff’s equitable standing to pursue a forfeiture of that home. From the origination of home loans, to their securitization, to their servicing, and finally to the treatment of defaulting homeowners, the mortgage brokers, appraisers, realtors, banks, investment firms, and investors purposefully and profitably participated in a tremendously flawed lending system. These flaws erode the Plaintiff’s equitable standing to now insist on the drastic remedy that requires a family to forfeit their home.

Failing to consider origination abuses would encourage the kind of schemes constructed within the last decade in which each party to the loan, from origination to securitization, sought and profited from plausible deniability of such abuses. The Plaintiff in most cases will not have originated the loan. It may not have been there when the appraisal was massaged. It may not have paid the broker for placing the homeowner in a more expensive loan than was justified by the homeowner’s credit score. It may not have written risky loans to people who didn’t understand the loan’s terms. But, it intentionally chose to participate in the system by purchasing those loans from the originating lender. It sought to profit from the fraud and unconscionable actions perpetrated by mortgage brokers, realtors, appraisers, and lenders. The Plaintiff’s hands became unclean when it shook the dirty hands of the loan’s originators.

Plaintiff’s willingness to participate in a reckless lending environment fraught with fraud, unconscionable lending practices, and bad faith impacts its equitable standing to now seek the extreme remedy of foreclosure. But the inquiry into equitable standing does not end there. The Court must inquire into any servicing abuses, as well as whether and how diligently the Plaintiff has pursued other, less drastic, loss mitigation options in the face of the homeowner’s alleged default.

*When the homeowner began struggling with the mortgage payments, did the Plaintiff consider a forbearance agreement in cases of temporary hardship? *Did it offer to modify the homeowner’s interest rate as it was spiraling out of control? *Did it structure its loss mitigation and loan modification departments in ways that encouraged participation by homeowners? [14]

*Did it consider accepting a deed in lieu of foreclosure or the sale of the property to a third party? *Did the Plaintiff insist on pursuing foreclosure even while telling the homeowner it was considering him or her for a loan modification?

Failure to provide meaningful loss mitigation options to struggling homeowners damages the Plaintiff’s equitable standing to now seek a forfeiture of the Defendant’s home.

Has the Servicer Participated in HAMP in Good Faith?

The existence of a federal program that is designed to encourage services to modify struggling homeowners’ loans adds an additional layer to the Court’s analysis of the Plaintiff’s equitable standing.[15]

After creating an incredibly risky and ultimately disastrous system for financing home purchases, banks and investment firms received $700 billion of taxpayer money as part of the Troubled Asset Relief Program (TARP). As part of that program, lenders and servicers of home loans could opt in to the Home Affordable Modification Program (HAMP), allowing them to access $50 billion in taxpayer money. The federal government intended HAMP to “help up to 7 to 9 million families restructure or refinance their mortgages to avoid foreclosure. Home Affordable Modification Program, Supplemental Directive 09–01 1 (April 6, 2009). Under HAMP, a lender or servicer receives cash payments for modifying loans in its portfolio according to the requirements of the program. Once it has opted in to the program, a lender or servicer is obliged to review all of its loans for eligibility under HAMP.

Participation in this program is optional, compliance with its regulations is not. Numerous state and federal courts have found that a lender’s violation of a federal law designed to prevent foreclosure should be raised by the borrower in state court as an equitable defense in a foreclosure proceeding, instead of as a private cause of action.[16] Similarly, state courts also have found that a lender’s non-compliance with federal FHA, HUD, or VA guidelines designed to prevent foreclosure may be raised by the borrower as an equitable defense in a foreclosure proceeding.[17]

Resolving how and whether a servicer has complied with the HAMP regulations require courts to both enforce legal rights and weigh equitable considerations. Like the facts surrounding the origination and servicing of the loan, a servicer’s compliance with HAMP will affect their equitable standing to pursue a foreclosure action.

How HAMP Works

Broadly speaking, HAMP requires the lender or servicer to ask itself, “Would modifying this loan under the terms of HAMP yield a loan that is more or less profitable than foreclosing on the property?” If modification is more profitable, the participating entity must offer the homeowner a conforming loan modification. If foreclosure is more profitable, the lender can proceed with foreclosure.[18] This analysis is called a “Net Present Value” (NPV) calculation. Many courts have held that a servicer’s failure to comply with similar loss mitigation requirements in the FHA loan program was a defense to foreclosure.

To appreciate the importance and difficulty of doing a proper NPV analysis, it is critical to understand what variables go into a Net Present Value calculation. To properly perform an NPV, banks must compare the value of the income from a foreclosure sale to the value to the investors of a modified loan. Many variables go into calculating the potential loss from a foreclosure sale. Unfortunately, the participating lenders claim their NPV models are “proprietary,” so we cannot be entirely certain what variables lenders consider. However, the FDIC provides their “Mod in a Box” calculator to the public and it provides the masses an idea of what the calculation involves.[19]

To calculate the value of the income from a foreclosure sale, the bank must consider variables like the likelihood that the homeowner will “cure” the deficiency, making foreclosure unnecessary. Further, the lender must anticipate the amount for which the property can be resold in a post-foreclosure sale, how long such a sale would take, and what costs would be involved (including maintenance, taxes, legal fees, court costs, inspections, etc.).

With so many variables to consider, participating servicers can make mistakes in their Net Present Value analyses. Sometimes, the value of the property (a consideration in its potential resale value) has declined without the servicer’s knowledge. Sometimes, the homeowner has significant defenses to the foreclosure that need to be litigated prior to foreclosure, increasing both the time and cost of foreclosure.

Without production of the NPV analyses, the court and homeowners have no way of verifying the accuracy or veracity of the foreclosing parties’ analyses. Without a court order, homeowners have no assurances that the servicer or bank has done the math properly and according to the HAMP’s requirements. This math will determine the homeowner’s fate and whether or not the homeowner will, in fact, remain a homeowner. This lack of transparency violates public policy and is especially disturbing in light of the recent economic crisis. The banks and servicers entrusted to perform the NPV analyses are the same banks whose math counseled for the origination of risky adjustable rate mortgages written at 100% loan-to-value. Their math assured investors that securitizing subprime loan products was a safe bet, that housing prices would continue to climb. That banks and servicers now expect homeowners, courts, and communities to trust them to do the math correctly behind closed doors strains credulity and demonstrates, still, the height of hubris.

To ensure participating lenders are complying with their obligation to accurately perform a Net Present Value analysis and to ensure taxpayers are getting value for their investment in the HAMP program, this Court, operating in equity, should order participating lenders to produce their NPV analyses prior to ordering a foreclosure sale. The stakes are too high for everyone—banks, homeowners, neighbors, and communities—to not get this right.

How HAMP Doesn’t Work

A homeowner is extremely lucky if the only shortcoming in the process of applying to HAMP is their bank’s failure to “show their work” on their Net Present Value analysis. So much pain exists in the process before the bank ever has the chance to do the math wrong. As has been well-documented elsewhere (LINK), servicers routinely *lose homeowners’ paperwork *ask for additional paperwork *ask for duplicative paperwork *encourage homeowners to miss a payment “in order to be eligible” for a loan modification *say one thing on the phone and another in paperwork *misapply payments *extend three-month trial modifications for 8, 10, 12, 15 months *deny modifications they had previously accepted.

Plaintiffs will characterize their actions in court—filing foreclosures and pursuing judgments and sales—as innocent and harmless steps designed to protect its legal rights. They are not. Plaintiff’s actions actually damage the homeowners’ ability to get a loan modification, contrary to the goals of HAMP, the purpose of servicers’ voluntary participation in the program, and the requirement to participate in good faith.

One of the variables banks and servicers include in their NPV analysis is the cost of successfully taking a piece of property through a foreclosure sale; these costs include legal fees and court costs. Typically, banks pass along these costs to the homeowner in a modification, adjusting the unpaid balance upwards by thousands of dollars. By increasing the unpaid balance of the loan, modifying that loan so that the monthly payment is 31% of the homeowner’s gross monthly income (a requirement under HAMP) appears less palatable. The higher those foreclosure fees (and ultimately the unpaid balance of the loan) are, the less likely a homeowner is to receive a modification.

Similarly, another variable banks estimate when deciding whether to modify a homeowner’s loan is the months to a foreclosure sale. The more months before achieving a foreclosure sale, the more expensive the foreclosure becomes and the longer it will be before the house is ultimately resold by the bank to recoup its investment. As the months to a foreclosure sale rise, modification becomes an increasingly profitable alternative under a NPV analysis. By aggressively pursuing legal claims, banks are taking affirmative actions to keep the months to a foreclosure sale low and decreasing the homeowner’s likelihood of receiving a loan modification. Thus, by pursuing foreclosure even while considering a homeowner for modification, banks and servicers are undermining the taxpayer-funded program in which they chose to participate and that program’s stated goals.

Even if the Plaintiff’s own equitable standing is impeccable, the Court’s inquiry into the equities of the case does not end there. Given taxpayers’ significant investment into this program and its goal of drastically reducing the number of foreclosures, the community has a broader equitable interest in ensuring its success.

Should the Court Allow the Bank to Inflict a Foreclosure on the Community?

While courts will inquire into the behavior of the Plaintiff and the circumstances surrounding the origination, servicing, and enforcement of the note and mortgage, a foreclosure involves broader equitable considerations. Courts not only consider strict equitable defenses, but also “balance hardships that the parties, other affected persons, and the public would face under various possible outcomes.” Handbook of Modern Equity, de Funiak, William Q., 42–46 (2d ed. 1956). Again, trial courts “may examine all relevant factors to ensure that complete justice is done.” Johnnycake Mountain Associates v. Ochs, 932 A.2d 472 (Conn. App. 2007). Here, this examination requires inquiry into the devastating impact of foreclosures on the parties and the community. Furthermore, courts must consider the hardships caused by securitized loans, as well as Plaintiff’s compliance with federal efforts to stabilize the housing market and end the foreclosure crisis.

Kentucky courts have long-recognized the doctrine of equitable waste to prevent parties from abusing their own rights to the detriment of others. The Kentucky Court of Appeals, then the Commonwealth’s highest court, held in 1912 that:

[E]quity will sometimes restrain equitable waste. Equitable waste is defined by Mr. Justice Story to consist of ‘such acts as at law would not be esteemed to be waste under the circumstances of the case, but which, in the view of a court of equity, are so esteemed from their manifest injury to the inheritance, although they are not inconsistent with the legal rights of the party committing them.’ The same author further says: ‘In all such cases the party is deemed guilty of a wanton and unconscientious abuse of his rights, ruinous to the interests of other parties.’ Lord Chancellor Campbell defines equitable waste to be ‘that which a prudent man would not do with his own property.’ Landers v. Landers, 151 S.W. 386, 391 (Ky.App. 1912). Internal citations omitted.

When operating in equity, then, courts will intervene to avert financial ruin, even if a party may be legally entitled to ruin either itself or others.

In foreclosure cases, courts should undertake a complete inventory of the cost of the foreclosure to both the parties and the larger community. “Balancing … public interest and third person rights … admits a modicum of economic analysis into the equity case.” Dobbs at § 2.4(6) at 112. When the court weighs the equities in a foreclosure proceeding, it must consider the effect a foreclosure sale will have on innocent homeowners in the neighboring area.[20]

As discussed above, lost equity, maintaining and reselling foreclosed property, lost investment, depreciation of nearby properties, and lost tax revenue add up quickly to make foreclosure an exceptionally costly remedy. Unfortunately, due to perverse incentives for servicers in Pooling and Servicing Agreements, lenders cannot be relied upon to manage their interest in the property “as a prudent man would” as required by the Court in Landry. Instead, lenders pursue foreclosure to their own detriment and the detriment of the homeowner, neighbors, and the larger community. In these cases, the court is required to consider the public interest and third party rights in an economic analysis of the equities in a foreclosure case. The high cost of foreclosure to all involved make it a remedy that should only be granted when all other options have been exhausted and other equities compel it.

Beyond the barrier posed by the servicers’ warped incentives, securitization creates another barrier to a mutually beneficial settlement. Stock, called "certificates, in residential mortgage-backed securities are divided into tranches; investors in various tranches can have very different financial incentives. Investors in a RMBS receive different returns on their investment and receive payment in different orders of seniority. So, even when these notes were effectively securitized, the certificateholders of the security have very different interests. Some (those with the most seniority) will prefer pursuing foreclosure, while investors in more junior tranches will profit by a mortgage reformation. In this situation, many servicers will decline to act to modify a home loan, citing either the constraints of the Pooling and Servicing Agreement or exposure to potential liability to one investor or another.

This situation is inequitable. Foreclosures devastate homeowners, neighborhoods, and communities while servicers and their investors fail to pursue alternatives to foreclosure. Kentucky courts, operating in equity, should require both parties to a note secured by real estate to negotiate in good faith before pursuing the drastic and costly remedy of forfeiture through a foreclosure sale.

When a homeowner has applied for a HAMP modification, the securitization of the homeowners loan can prevent modification. Under HAMP, if a loan has been securitized (and 85% of outstanding home loans have), the servicer must get approval from the trustee of the residential mortgage-backed security–approval the investor is not obligated to give. Many homeowners go through months of heartache and hassle trying to get their loan modified only to be told, simply, “the investor is not participating.” When this occurs, Courts must be deeply skeptical of the Plaintiff’s equitable standing to pursue foreclosure. If a servicer has asked an investor’s permission to modify a loan, it’s because the servicer has already calculated that EVERYONE, including the investors, will lose less money modifying a homeowner’s loan than by foreclosing on the home. The investor’s non-participation in this situation is profoundly inequitable.

Kentucky courts already recognize that when the state seeks to condemn property under its power of eminent domain cases that the condemning authority has the “additional duty … to negotiate in good faith for the acquisition of property prior to initiating condemnation proceedings.” Golden Foods, LLC v. Louisville & Jefferson County Metropolitan Sewer Dist., 2005 WL 1049388, 3 (Ky. App., 2005). The two situations—eminent domain and foreclosure—are similar. Both involve parties with radically different levels of bargaining power. Both involve the forfeiture of real estate to the party of greater power. In foreclosure suits, courts should exercise their equitable jurisdiction and withhold foreclosure until the party seeking to foreclose can offer convincing evidence of having negotiated in good faith and can demonstrate that no other alternative to foreclosure exists.

Remedies Available in Equity

Sitting in equity, the Court has broad discretion to fashion a remedy that does justice in a particular case. It can refuse to grant a foreclosure sale: “[w]here the Plaintiff’s conduct is inequitable, a court may withhold foreclosure on equitable considerations and principles.” Morgera v. Chiappardi, 813 A.2d 89, 91 (Conn. App. 2003).[21] In cases in which the alleged delinquency is caused by unemployment, disability, or other loss of income, the Court may stay a foreclosure to provide the Defendant time to find employment, apply for benefits, or otherwise remedy the loss of income. When a homeowner has applied for a loan modification, the Court may dismiss premature suits for foreclosure when the Plaintiff has not finished evaluating that homeowner for a loan modification. Similarly, the Court may stay a foreclosure proceeding until a servicer or bank gives convincing evidence of having negotiated in good faith with a homeowner. Negotiating in good faith will include exploring less-costly alternatives to foreclosure like short sales, deeds-in-lieu of foreclosure, reasonable payment plans to erase the arrearage. Courts may modify mortgage payments as required by the demands of equity.[22]

A bank’s failure to explore all options to avoid inflicting a foreclosure will impact their standing to pursue a foreclosure. Courts do not need to wait on homeowners attorneys to make these arguments or question the bank’s equitable standing. As a judge in Kentucky, you can inquire sua sponte into the parties’ standing, as standing impacts the court’s subject matter jurisdiction. Kentucky Employers Mutual Insurance v. Coleman, 236 S.W.3d 9, 15 (2007). If a bank is behaving recklessly, the Court may dismiss the case for lack of subject matter jurisdiction because the bank’s bad acts rob it of the equitable standing it needs to pursue foreclosure in our courts.

Alternative Dispute Resolution in Foreclosure Cases

Courts across the country are changing their judicial processes to ensure that the parties have exhausted all alternatives to foreclosure, bargained in good faith, and deserve to proceed with a foreclosure sale.

Right now, we have a situation in which clueless homeowners lack information about the civil process and the resources available in the community to assist them in responding to the complaint and exploring alternatives to foreclosure. More than 80% of all homeowners facing foreclosure will lack the benefit of legal counsel. In an adversarial system of justice, this virtually guarantees that the homeowner will be steamrolled in a proceeding in which our system of justice has broken down.

The failure of our system to efficiently assist clueless homeowners in finding legal counsel should concern each member of the bar. Combine vulnerable homeowners with a failed federal loan modification program and lack of legal counsel and you have a situation that is most easily defined simply as “pain.”

If timely information delivered credibly is combined with the counsel and advocacy of an attorney and a judicial program with teeth, we can enter world that involves less pain, that avoids unnecessary foreclosures, and helps our community recover from the housing crisis as quickly as possible.

The first thing we did in Jefferson County (and, frankly, the most important thing you can do) is attach a Notice to each foreclosure complaint before the Sheriff delivers the complaint and service of summons. The Notice should be full-color (or a least printed on colored paper) and should contain a phone number homeowners can call to receive a referral to an attorney or housing counselor.

You will need to work with your local bar association and legal aid offices to develop a referral system that works for your jurisdiction.

National best practices for these foreclosure mediation programs are emerging and include:

  1. An automatic stay of the foreclosure proceedings until the servicer has established its good faith compliance with its obligations
  2. Transparency from all parties that includes production of net present value calculations and loan documents
  3. Active, neutral oversight from an official with the power to impose sanctions on parties
  4. Requirement to pursue alternatives to foreclosure in good faith
  5. Sustainable funding mechanisms that allow program administrators to be paid
  6. Oversight of attorney’s fees and foreclosure costs

The Franklin County Circuit Court has implemented a program that incorporates many of the emerging national best practices. A copy of the Court’s order is available here.

In Franklin County, the Court issues an automatic stay in every foreclosure case. If the homeowner takes no action within 20 days, that stay is lifted. However if the homeowner is participating in Franklin County’s foreclosure mediation process, the stay will remain in place until the parties agree on an alternative to foreclosure or the servicer can demonstrate that they have analyzed and pursued every other alternative to foreclosure and they are both legally and equitably entitled to the extreme remedy of foreclosure. A mediator oversees this entire process and can report to the Court regarding the efforts both sides are making to avoid a foreclosure.

It’s Down to You

The foreclosure crisis rages across our state. Banks add fuel to the fire with each foreclosure they pursue. with each foreclosure sale, surrounding homes lose value.[23] Despite profiting from their subprime lending spree, the TARP bailout, and the Home Affordable Modification Program, banks are actively seeking to foreclose, adding unnecessary costs to the loan and diminishing homeowners’ chances to qualify for loan modifications. Banks chose to play with fire in the risk-filled world of residential mortgage-backed securities; they now expect the Court to stand aside and watch as our neighborhoods burn.

The Court does not have to stand aside. Rather, the Court has the obligation to weigh the equities in each foreclosure case and decide whether the Plaintiff has the legal and equitable standing to impose the costs of foreclosure on innocent neighbors and the city’s strained coffers. You have the authority to evaluate the equity of the situation and craft equitable solutions unique to each case. Or, you have the authority to order a mediation at which each alternative to foreclosure will be considered and eliminated prior to allowing the Plaintiff the extreme remedy of foreclosure.

Federal and state officials have failed to adopt policies that would reduce the foreclosure crisis and the unemployment crisis. It’s down to you.

It’s up to you.

  1. Throughout this letter, I will use the word “bank” and “servicer” interchangeably. There is a difference. But, when I’m referring to a “bank” pursuing foreclosure, I mean “the entity charged with servicing the loan and exploring loss mitigation options.” This will often, in fact, be a servicer. About 85% of all home loans have been bundled into residential mortgage-backed securities; those lines are usually managed by a “servicer,” not a “bank.” That servicer would often be the entity responsible for collecting and accounting for payments, determining default, initiating and prosecuting the foreclosure, and exploring alternatives to foreclosure.  ↩

  2. For a general overview of the risks of adjustable rate, interest-only, and payment-option mortgages, see Mark Zandi, Financial Shock: A 360° Look at the Subprime Mortgage Implosion and How to Avoid the Next Financial Crisis 35–38 (FT Press 2009). Zandi reports that the lending industry regarded payments scheduled to “rise substantially” as “a problem for another day.” He also notes that because ARMs “shift substantial risk to borrowers when rates fluctuate…the delinquency rate on ARM loans is 50% greater than on fixed-rate loans.”  ↩

  3. While some unqualified borrowers received loans, other borrowers received high-cost loans when the borrower’s income and credit history qualified them for more traditional, affordable loans. The National Community Reinvestment Coalition issued a report, “Income is No Shield” in 2008 describing in detail the disparate impact the lending environment had on minorities, regardless of income or credit score. In Louisville, specifically, the report found that low-to-middle income African-Americans were 2.3 times more likely to receive a high-cost home loan than their low-to-middle income white counterparts. Even middle-to-upper income African-Americans were 1.3 times more likely to receive high-cost home loans than their white counterparts. Again, this report is adjusted for traditional lending risk factors such as income and credit score and reflects the likelihood of receiving high-cost (and therefore high-risk) loan products by race. The report suggests that, reprehensibly, in recent years lending institutions have regarded race as a risk factor when originating loans.  ↩

  4. Often the true loan-to-value was even greater than 100% when one considers that many of the loans were justified based on inflated appraisals.  ↩

  5. To say that “no one wins” is not entirely accurate when a loan is serviced by a company that is not the owner of the note. A third party often services the loan when the loan has been securitized into a REMIC (Real Estate Mortgage Investment Conduit). In these cases, the trust will hire a third party to collect payments from the thousands of loans pooled in the security and divide the proceeds according to various investors’ rights under the Pooling and Servicing Agreement (PSA). In many PSAs, the loan servicer is paid a nominal fee for collecting the monthly checks, but gets to keep the proceeds of fees that flow from a homeowner’s default and resulting foreclosure. Thus, PSAs create in servicers the perverse financial incentive to foreclose even when both their investors and the homeowner would benefit from a negotiated settlement or loan modification that kept the homeowner in the home and monthly checks flowing to the investor. Many of the provisions of the President’s Home Affordable Modification Program aim to overcome these misaligned incentives.  ↩

  6. Mortgage Bankers Ass’n, “Lenders’ Cost of Foreclosure” p. 2 (May 2008), available at .  ↩

  7. Id. at 4–5 (May 2008).  ↩

  8. It is worth noting that the MBA acknowledged in 2008 that the current “softness” of the housing market could push the losses investors experience in an REO sale “even higher.” Since that statement, the housing market has not stabilized and remains soft.  ↩

  9. In 2008, “ten million American homeowners, a fifth of all mortgage holders, are now in this untenable financial situation.” Mark Zandi, Financial Shock: A 360° Look at the Subprime Mortgage Implosion and How to Avoid the Next Financial Crisis 44 (FT Press 2009). In Kentucky, 1 in 4 homeowners are underwater.  ↩

  10. Another report from the Metropolitan Housing Coalition notes that “[T]he best defense to a home becoming vacant and abandoned due to foreclosure is quick action by the homeowner to seek assistance from a reliable nonprofit housing counseling program in seeking a loan modification from the creditor. The chance of a property becoming vacant and abandoned is greatly diminished by the owner negotiating new loan arrangements and remaining in the home as long as possible.” Metropolitan Housing Coalition, *Vacant Properties: A Tool to Turn Neighborhood Liabilities into Assets*. Plaintiff’s are far less likely to be guilty of equitable waste if they engage in rigorous good-faith negotiations with homeowners in default.  ↩

  11. David Newton, “Widespread Panic: Why the Mortgage Lending Industry Can Calm Down About Amending Cramdown” 98 Ky. L.J. 155, 159 (2009) quoting NeighborWorks America, Foreclosure Statistics, .  ↩

  12. U.S. Congress, Senate Joint Economic Committee, Sheltering Neighborhoods from the Subprime Foreclosure Storm, Special report by the Joint Economic Committee, 1, 110th Cong., 1st sess. (Washington: GPO 2007) available for download at  ↩

  13. Master Commissioners may also consider arguments based in equity. CR 53.04 notes that courts may “specify or limit [a commissioner’s] powers and may direct [the commissioner] to report only upon particular issues or to do or perform particular acts.” However, the rule is clear that absent such limitations, the commissioner “has and shall exercise the power…to do all acts and take all measures necessary or proper for the efficient performance of his duties.” Without a referral that specifically directs the commissioner to consider only issues of law, the commissioner has the duty to consider issues of equity, as well.  ↩

  14. Consider, for example, the successful loss mitigation efforts of Shiela Bair and the FDIC in their administration of the failed California bank, IndyMac. The FDIC created a loss mitigation program that automatically qualified homeowners for a loan modification rather than placing onerous, opaque, and frustrating requirements on the borrower.  ↩

  15. All of the servicer’s obligations under the Home Affordable Modification Program are outlined in the Handbook for Servicer’s of Non-GSE Mortgages.  ↩

  16. Lillard v. Farm Credit Services of Mid-America, ACA, 831 S.W.2d 626 (Ky. Ct. App. 1992). See also, e.g., Farm Credit Bank of Spokane v. Debuf, 757 F.Supp. 1106 (D. Mont. 1990); Federal Land Bank of St. Paul v. Overboe, 404 N.W.2d 445 (N.D. 1987); Burgmeier v. Farm Credit Bank of St. Paul, 499 N.W.2d 43 (Minn. App. 1993); Western Farm Credit Bank v. Pratt, 860 P.2d 376 (Utah Ct. App. 1993).  ↩

  17. See, e.g., Williams v. Nat’l Sch. Of Health Tech., Inc., 836 F.Supp. 273, 283 (E.D. Pa. 1993), aff’d, 37 F.3d 1491 (3d Cir. 1994); Fed. Nat’l Mortg. Ass’n v. Moore, 609 F.Supp. 194, 196 (N.D. Ill. 1985); Wells Fargo Home Mortg., Inc. v. Neal, 922 A.2d 538 (Md. 2007); Union National Bank of Little Rock v. Cobbs, 567 A.2d 719 (Pa. Super. Ct. 1989); Fleet Real Estate Funding Corp. v. Smith, 530 A.2d 919 (Pa. Super. Ct. 1987); Hayes v. M & T Mortg. Corp., 906 N.E.2d 638 (Ill. App. Ct. 2009); Countrywide Home Loans, Inc. v. Wilkerson, 2004 WL 539983 (N.D. Ill.); ABN AMRO Mortg. Group, Inc., 2009 WL 1066511 (Iowa Ct. App.); Ghervescu v. Wells Fargo Home Mortg., 2008 WL 660248 (Cal. Ct. App.).  ↩

  18. There will be instances in which even when the NPV calculation demonstrates that foreclosure is more profitable that equity will demand some alternative other than foreclosure. Under HAMP, homeowners who have significant equity in their homes will be the least likely to qualify for a loan modification. The cruel irony of the program is that homeowners who have invested most in their homes and made payments most regularly and over the longest period of time will be the most likely to lose their homes because lenders are more likely to recoup the full Note value of the loan in foreclosure. Equity will require some solution other than foreclosure in these cases.  ↩

  19. Maine has established the FDIC’s program as the NPV analysis standard at court-ordered mediations. “Mediations conducted pursuant to the program must use the calculations, assumptions and forms that are established by the Federal Deposit Insurance Corporation and published in the Federal Deposit Insurance Corporation Loan Modification Program Guide as set out on the Federal Deposit Insurance Corporation’s publicly accessible website.” 14 M.R.S.A. § 6321-A . An overview of the program and how the Excel spreadsheet operates is available here. The Net Present Value test is available as an Excel spreadsheet.  ↩

  20. This abandonment of property becomes even more inequitable when one considers the bank’s active contribution to neighborhood disintegration. Judge Boyko notes that while “financial institutions or successors/assignees rush to foreclose [and] obtain a default judgment,” the bank will then “sit on the deed, avoiding responsibility for maintaining the property while reaping the financial benefits of interest running on a judgment. The financial institutions know the law charges the one with title (still the homeowner) with maintaining the property.”  ↩

  21. See also Bank of New York v. Conway, 916 A.2d 130 (Conn. Supp. 2006).  ↩

  22. In times of economic crisis, the state has the power to alter the terms of contracts between private parties to protect the vital public interests. “The reservation of state power appropriate to such extraordinary conditions may be deemed to be as much a part of all contracts as is the reservation of state power to protect the public interest in the other situations to which we have referred. And, if state power exists to give temporary relief from the enforcement of contracts in the presence of disasters due to physical causes such as fire, flood, or earthquake, that power cannot be said to be nonexistent when the urgent public need demanding such relief is produced by other and economic causes.” Home Bldg. & Loan Ass’n v. Blaisdell, 290 U.S. 398, 439–40 (1934).  ↩

  23. The Center for Responsible Lending [estimates] that over 800,000 Kentucky homes will lose an average of $1,800 in equity due to nearby foreclosures between 2009 and 2012. That’s $2.2 billion in lost equity statewide.  ↩

Gold in the Water, Gold in the Bank

by Ben Carter

The Indigo Girls and their Boy

I was 12 when I first heard the Indigo Girls. I know it’s probably the worst cliché to begin an essay about the need for equal rights for gay and lesbian Americans by talking about the Indigo Girls, but dammit that’s where the story begins for me. I came to know about gay and lesbian people like most other sensitive kids who were into sensitive folk rock and came of age in the early 90s: through Emily Saliers and Amy Ray.

My cabin’s counselor was an undergrad at University of Georgia in Athens. It was 1990, and the Indigo Girls were touring the South while using Athens as their base. Each night, counselors were supposed to give devotionals to the campers before bed—a time for reflection. Ed, our counselor, mostly just played us Indigo Girls songs. The first song he played us was “Prince of Darkness.” Penned by Amy, it’s a song about deciding to use your life for something beneficial. It’s an obvious choice for a devotional.

My place is of the sun and this place is of the dark.

By grace, my sight grows stronger.

I do not feel the romance. I do not catch the spark.

By grace, my sight grows stronger.

And I will not be a pawn for the Prince of Darkness any longer.

Damn, that’s pure.

When you’re twelve, each day is a revelation; the world as you know it changes almost daily. I remember laying in my cot under the stairs of Pine Lodge, listening to their harmonies in the dark, flooded with their earnestness, thinking, “This changes everything.”

And, in some ways, it did.

On my way home from camp, I made my mom stop at a CD store (remember those?) and I bought the album for myself. I have bought every one of their 17 albums in the 21 years since then. It’s not overstating things to explain that the Indigo Girls have had more of an influence on my politics and worldview than any other band. I should probably explain that this is a high bar: if a band is not singing about current events, our shared obligations to one another, love, or politics, I’m not interested. In fourth grade, (my mom and) I did a report on musicians with social consciences. This is what happens when “We are the World” is one of the first songs a boy falls in love with. In high school, I was the guy listening to Woody Guthrie and Cisco Houston.

I don’t remember anyone explaining to me that the Indigo Girls were lesbians for a few years after I started listening to them. I can’t remember, but I don’t think Ed framed their music that way. I think I told someone they were my favorite band and they mentioned something about them being lesbians because I remember thinking, “WHAT? How did I not know that? I’m like their number one fan!” By the time I learned Amy and Emily were lesbians, they were too important to me to care whether they swung this way or that way. If liking, accepting, and admiring lesbians was wrong, I didn’t want to be right.

I grew up in Ashland, Kentucky. It’s not a backwards place, but it’s also not kind of place where a 12-year-old would know a bunch of gay and lesbian people in 1990. Not because there weren’t gay and lesbian people in my life; looking back, it’s obvious to me that I knew bunch of gay and lesbian adults. They just were never going to be out of the closet in Ashland, Kentucky in 1990.

Even though I didn’t know any gay or lesbian people personally, by the time I was in high school I knew enough (thanks to the Indigo Girls) to know bigotry and stand up to it. Our newspaper, the Ashland Daily Independent, often ran these “Heard on the Street” columns where reporters would go down to the Ashland Town Center Mall and ask regular people what they thought about an event in the news. Somehow, this counted as journalism. One time they asked people whether homosexuals should have the right to marry. I don’t remember all the responses, but I don’t think they were able to find someone who answered in the affirmative. I do remember one woman’s answer: she didn’t agree with gay marriage because if you allowed gays to marry each other, pretty soon people would be marrying their dogs.

(My mom and) I wrote a letter to the editor. I tried explaining that heterosexuals had proved to be pretty rotten at marriage (domestic violence, divorce rates, etc.) and speculated that it was time to give somebody else a shot. I tried explaining the logical fallacy in the woman’s opinion. And, I said I would much rather have a loving gay couple is my neighbor than a guy who beats his wife. Fifteen years later, I’m still proud of writing that letter.

A Jethro and his Boy

Jethro Nededog (his real name) was the first openly gay person I ever knew. After my freshman year in college, I studied Spanish at a New York University program in Madrid. Jethro was an NYU student who needed foreign language credits to graduate. I think I told Jethro he was my first gay friend. I think he took it upon himself to show me how ordinary gay people were. I think that’s why when I suggested camping out in an olive grove above Toledo, Jethro was the only one of my friends who took the bait.

For anyone considering camping out in Spain, here’s what you need to know: it gets ass-cold at night. Jethro and I were woefully—woefully—unprepared and it was all my fault. We had a couple of thin foam camp pads and a couple sheets. It must have been fifty degrees by 10 o’clock. This is how a kid from eastern Kentucky ends up spooning with a heavy set Californian of Guamanian/Filipino descent under an olive tree in Spain. To add to the absurdity, at around midnight, a discotheque just over the hill from us started bumping, so we shivered the night away to “Dancing Queen” and the medley from “Grease.” Amazingly, Jethro remained my friend after that disaster and we keep in touch through the magic of Twitter.

People like Jethro are the reason Republicans and social conservatives will lose. Jethro is funny, kind, up for any adventure, and quick to laugh; he’s a great storyteller and he listens well. In short, he’s exactly the kind of guy you want as a friend. As Jethro’s friend, I want him to enjoy the same rights and share the same obligations as I do in America. As more and more gay people become openly gay in America, more straight people like me realize just how many of their friends’ lives are affected by institutionalized, systematic inequality.

The Price of Being Gay

The ways in which our systems treat gays and lesbians as second-class citizens have been well-documented elsewhere. They are not allowed to visit ailing partners in hospitals. They are not allowed to adopt children. Their marriages are not recognized in most jurisdictions and are not recognized by the federal government. They pay more for health insurance for their partners. They pay more in taxes. Until recently, they were not allowed to serve openly in our armed forces. This is how we treated men and women who are willing to die for a country that treats them like inferiors.

Each person is chafed by different aspects of the existing inequality. For me, it’s in the tax code. Erin and I paid $1,825 less in taxes last year because we filed as a married couple.

One-thousand, eight-hundred, and twenty-five dollars.

Just for being straight and getting hitched.

A gay couple, whose union is not recognized by the IRS, will pay a Gay Tax every year when they file their tax returns separately. Chuck Hendrix—the guy who prepares our taxes each year—has been filing separately from his partner for 27 years. I think this chafes me so badly because this Gay Tax is quantifiable. There it is: $1,825—the value the federal government places on me being straight and suave enough to get a girl. Over the next 35 years, if I invested $1,825 at 7% (the average rate of return of the S&P 500 since 1950), I would have an additional $289,000 in my retirement account. Just for being straight. No telling how much less Chuck has in his retirement account because he can't file jointly with his partner. 

Preposterous. Outrageous.

"Today, this is news. One day, it won't be."

Because our government treats homosexual couples differently than heterosexual couples, the ministers (Derek and Ryan) at my church asked the congregation’s blessing to stop signing civil marriage licenses until they could sign civil marriage licenses for couples regardless of their sexuality. The church Erin and I go to is an Open and Affirming Church in the Disciples of Christ denomination. It was one of the reasons we joined. [1]

As an Open and Affirming community of faith, we believe God calls all people, regardless of sexuality, into communion with God and welcomes them into a life of discipleship. Christianity has been used to exclude, marginalize, and oppress for centuries and we think it’s time that stopped. Erin and I think the Bible is pretty clear on that point.

So, one afternoon after church our congregation voted to endorse our ministers’ decisions not to participate in a secular system of marriage that is only available to some of our members. If we can’t confer the civil benefits of being married on all our members, we won’t confer them on anyone. We’ll marry anyone in the eyes of God, but straight people can go to the courthouse to get their civil marriage licenses.

We voted and we wrote a press release. The Courier-Journal wrote an article. The LEO (Louisville Eccentric Observer) wrote about it. A local TV station interviewed our ministers. And then the story hit the wires. Emails of support and gratitude came in from around the world. Think Progress wrote a nice article. And then MSNBC called. Five days after we voted, Contessa Brewer interviewed our minister on her daytime show. As I told my minister, “Today, this is news. One day, it won’t be.”

I believe that. I believe that one day—hopefully one day soon—the fact that a church treats everyone the same regardless of their sexual orientation will not be newsworthy.

But, it’s not guaranteed. That’s what’s hard for me to remember. Too hard for me to remember.

Not There Yet

The long march toward equality for homosexuals can seem almost inexorable, inevitable. Polling among young people shows that it is apparently only a matter of time before bigotry becomes politically untenable. When a Republican (admittedly, a Republican from New York, so not really a Republican) says something like this, it feels like victory is assured:

You get to the point where you evolve in your life where everything isn’t black and white, good and bad, and you try to do the right thing. You might not like that. You might be very cynical about that. Well, fuck it, I don’t care what you think. I’m trying to do the right thing. I’m tired of Republican-Democrat politics. They can take the job and shove it. I come from a blue-collar background. I’m trying to do the right thing, and that’s where I’m going with this.

Small victories are all around us—but big injustices still exist. Ironically and inappropriately, instead of being emboldened to become more active in the gay rights movement, I find myself reacting to the movement’s small victories by adopting a mindset that says it’s only a matter of time until everyone in America enjoys equal justice under the law. Seeing progress as inevitable is seeing myself as unnecessary. Seeing progress as inevitable justifies my own inaction.

In many ways, it feels like we’ve already won.

We haven’t. I find myself needing to remind myself that progress is not guaranteed. Human societies often take a leap forward in the expansiveness of their thinking, adopting new understandings of community, family, and the role of government, only to fall backwards for decades or centuries. I know that the arc of the moral universe is long and that it bends toward justice, but it’s the humans that do that bending. That’s what I have to remember to remember.

That’s what this essay is for. This essay is to remind myself of the gays and lesbians I have loved and still love and to remind myself that my love for them is not enough. America and Kentucky still treat them with distain, still codify their difference, still tax them for who they love. And, this essay is to remind myself that despite America’s great strides forward, continued progress forward is not guaranteed but is my (our) responsibility.

So, what am I going to do?

1) I’m going to publish this essay.

2) I’m going to keep going to an Open and Affirming church.

3) Each year, I’m going to ask my tax guy how much Erin and I saved by filing as a married couple and I’m going to donate that money to organizations (like Fairness Campaign) and churches (like Douglass Boulevard Christian Church) and politicians (like John Yarmuth) who support equal treatment for all Americans, regardless of their sexuality.

I’ll go to marches. I’ll lobby in Frankfort. But, money matters. Money allows Fairness to hire more full-time staff; money allows Douglass to continue to minister (both to people and other Disciples of Christ churches); money allows John Yarmuth to stay in Washington, ready to vote to repeal DOMA when the votes are finally there.

The $1,825 Erin and I saved last year for being straight is ill-gotten gains. It’s a kickback from an unjust system. If every straight person who supports the equality of their lesbian and gay sisters and brothers gave this money to like-minded organizations and politicians, we would rapidly expand our capacity to extend justice to gay and lesbian Americans. We would make bigotry politically untenable much more quickly.

The day can’t come soon enough. Not just for gay and lesbian people, but for straight people, as well. The persistence of injustice reduces us all.

The Power of Two

Erin and I recently attended a wedding on the top floor of the Muhammad Ali Center. Today, Muhammad Ali is remembered in his hometown as much for his peacemaking work and his attempts to make America confront its unjust and oppressive systems as he is for his fighting. Before the ceremony, Erin and I were enjoying the sunset on the balcony overlooking the Ohio River. Somewhere in the muddy foundation of the river was Muhammad Ali’s gold medal. Perched above Louisville, an orange light, a warm breeze, my wife: the scene was perfect.


Except six stories below, gays, lesbians, and their allies had gathered for their annual Pride Festival. As Mark and Sarah swore their life-long commitment to one another, thousands of gays and lesbians stood, literally, in the background hoping one day for the same opportunity. I felt like a rich man in a developing country must as he stands at his penthouse balcony and looks across his city at the oppressive slums below.

For me, Erin’s love and our marriage is a daily miracle. It is my only wealth.

I know that some opponents of marriage equality say that gay marriage will destroy the value of their marriage. I feel the same way, except opposite. That I enjoy socially-conferred and state-sponsored benefits that my gay and lesbian friends cannot diminishes my marriage. As I survey the landscape from my penthouse of privilege, I want to see opportunity, not oppression.

We will not end the government-sanctioned marginalization of gays and lesbians without pain and effort. More gold medals need to hit the water and more gold coins need to hit the coffers of those organizations that support equal rights for all.

It is clear that we are turning the tide—quickly—in this fight. Much of it is due to the bravery of gays and lesbians who live their lives and love openly. Knowing that you have a friend or family member being directly harmed by the government’s unjust policies forces people to reconsider their apathy or antipathy.

More and more, people are beginning to see the moral poverty of the current arrangement and longing for justice for their co-workers, friends, and loved ones. Life, we know, is hard enough without unfair tax structures and government-sanctioned marginalization. Everyone should have a partner to help bear their burdens and magnify their joys. Everyone should be able to multiply life by the power of two.

  1. Footnote: We agree with the Iowa legislator who asked, “How many more gay people does God have to create before we ask ourselves if He wants them around?”


Showing Up

by Ben Carter



At work, I feel like a fraud. Five years after passing the bar, the civil justice process is still daunting, and each decision–no matter how minor–seems fraught with peril. Should I call or should I email? What if they ask a question I don’t know the answer to? Do I need to comply with this request for production of documents?

This is why jobs are awesome: they make us do things that terrify us. I swear, if I didn’t have a mortgage payment and too many animals to feed, I would not get anything accomplished. The only reason I’m going to build up any competency and expertise as a lawyer is because I have to. I have to show up every day. I have to take the depostion. I have to do the research and write the brief. I have to negotiate and settle my client’s claim. I have to go to trial.

Look, I would love to be the guy who said, “I don’t have to go to work, I get to.” “Every day is a joy.” And, to a large extent, that’s true. I have been very, very fortunate to have only law jobs that I thought were important jobs, worthy of my time and attention. They were fun–interesting, not drudgetastic–and I got to work with really, really smart people.

But, those jobs were also terrifying. More often than not, I had no idea what I was doing.

I had to do it.

I didn’t want to do it. I wanted to run away. I wanted to scream that I didn’t pay attention in law school, that I’m really not as smart as you think I am, that I shouldn’t be trusted with X1.

If I didn’t have to show up every day, I wouldn’t. I would seek the comfort of things I know I’m good at: laundry and petting animals.

I think God understands this about us. I think God knows that if we didn’t have to work, we probably wouldn’t ever be worth a damn. 2

Work is showing up every day.

If you want to get good at something, it has to be your job. You have to do it every day. Have to.

If I got to wait around for inspiration and expertise and confidence… Well, I guess that’s what purgatory must feel like.

I think this is what Wendell Berry’s character, Jack Beechum, meant when he said “If you’re not in debt, you’ll never be worth anything” in The Memory of Old Jack. 3 He meant that we are weak. We are fearful; and the only way we’re going to do something–something amazing, something worthwhile, something that risks failure–is if we have to.

In some ways, I think our challenge is figuring out ways to make what we want to do well what we have to do every day. Some feel-good thinkers will give you the exact opposite career advice: Find a job you want to go to every day. Follow your bliss. That’s fru-fru hogwash.

You know where my bliss leads me? To a living room filled with laundry that needs to be folded and a big TV broadcasting the NFL.

In retrospect, I think this is one of my best skills: finding work that scares the crap out of me. Deep down, when I am most honest with myself I will admit: I want to become a great attorney. That only happens if I go to work every day and risk failure. I have learned that expertise is not magic. It’s showing up and risking failure. Again and again and again.

It’s not pleasant, it’s terrifying.

It’s the only way.

It’s not what I want to do, it’s what I have to do.

Every day is a new day. To fall on my face.

This is how you get good. 

  1. Where “X” is an opinion on the constitutionality of Kentucky’s educational system, a reckless driving trial of a Palauan cement truck driver, negotiating a plea deal for a Bangladeshi (falsely) accused of receiving stolen property so that he could remain in Palau rather than face deportation, a constitutional challenge to Palau’s prison conditions, a multi-agency, county-wide response to the foreclosure crisis, a legal brief in a multimillion dollar suit alleging negligence on the part of Kentucky’s largest law firm, a presentation about foreclosure defense to 250 skeptical attorneys. ↩

  2. This phrasing is fraught with potential misunderstanding. I am not saying that our worth in God’s eyes is tied to the work we do on Earth. I think God has made it abundantly clear that our worth is our worth, no matter what. Whether we like it or not. Further, the phrase “worth a damn” is not meant to imply that God finds inaction or laziness damn-worthy. Rather, all of this is to say that my utility to others on this Earth, my ability to seek justice for them in our civil justice system, is directly related to being compelled to show up every day whether I want to or not.  ↩

  3. Not an exact quote. If you know the real quote or can find it, please use the “Contact” page to help me correct this. ↩

Eat the Young: Our Politics and the War on My Generation

by Ben Carter in

The recent debate over the debt ceiling has highlighted a broader theme in American politics, one that I don’t hear a lot of other people talking about. Republicans accuse Democrats of attempting to wage class warfare (poor versus rich) while Democrats accuse Republicans of attempting (to my mind, more successfully) to wage class warfare (rich versus poor). What is happening in America today, however, is not a war between the classes, but rather a war between the generations.

So far, old people have been dominating this war, mostly, I think, because young people don’t realize they’re at war.

The Old Rich

That America is engaged in generational warfare should surprise no one. Old people disproportionately occupy our positions of power. The average age of a member of the House of Representatives is 57.2; Senators average 63.1 years. Policies created by old people for old people are not new. After all, Congress has always been older than the voting public. But, what seems to be new is how exclusively those policies benefit old people and how that benefit comes at a direct and enduring cost to the young.

The reason we don’t tax the rich is because it is the rich doing the taxing. Forty-four percent of our congress members are millionaires (about forty-four times the national average of 1%). Fifty (of the 535) members have a personal fortune of more than $10,000,000.

Where Congress is both old and rich, it can be difficult to determine whether it’s waging a class war with its policies or a generational war. The confusion arises because the rich are also the old—people who have been around long enough to benefit from the miracle of compound interest and pyramid schemes like law firm partnerships. The rich are the old. The old are the rich.

Nothing demonstrates the cravenness of our elders like deficit spending. Baby boomers have been writing checks for years that my generation’s collective ass will have to cash. What did we spend our money on while we were running up these deficits? We blew our wad on the Bush tax cuts (benefitting primarily the rich/old), two wars (in which young people died), and a prescription drug benefit for Medicare (which, by definition, benefits only the old). The prescription drug benefit alone will cost us more than $727,000,000,000 between 2009 and 2018.

I know Keynes. I understand that, at times, the cost of interest on our debt is worth the benefit of injecting additional demand into the economy. Dick Cheney wasn’t entirely wrong when he proclaimed, “Deficits don’t matter.” (Remember that, Tea Party?) But, the deficit spending shouldn’t be any larger than required. The deficits our country is running are larger than they need to be because we don’t tax the rich nearly enough in this country. Currently, individuals in the top income bracket are purportedly taxed at 39%. I say “purportedly” because we all know they actually pay far less. Warren Buffet, one of the richest old people in the country, has famously calculated that he pays less tax (as a percentage of his annual income) than his almost certainly younger secretary.

I’m with Robert Reich: we should raise the taxes of those making more than $15,000,000 to 70%. This is 20 percentage points less than what those in the top tax bracket paid under Republican Eisenhower. Those making between 5 and 15 million would pay 60% and those making between 500,000 and 5 million would pay a patriotic 50%. This plan would generate additional revenue each year while allowing a significant cut in the taxes paid by those making less than $100,000 (a demographic in which most young people find themselves).

I’m not the only person who believes various revenue-raising measures are the best way to get our fiscal house in order. I’m not even in the minority on this issue. 72% of all Americans believe we should reduce the national debt by raising taxes on those raising more than $250,000.

While deficit spending is the most obvious example of generational warfare, the ruling generation’s failure to address the unemployment crisis is causing the most immediate damage to younger generation’s ranks. 23.1% of 18–19 year olds are unemployed. Those are the people with a high school education (or less) who are not attending college. Among those between 20 and 24, the rate is still 14.6%. Young people can’t find their first job. They can’t begin to build the skills they need to find their second, better job. And, when they do find a job, it’s almost certainly not at a factory with a strong wage and a pension plan. It’s at the mall. Selling shoes. Selling Chinese-made shoes.

Despite the private-sector’s failure to create jobs and opportunities for young people, the government has not passed any meaningful legislation that would either a) provide those jobs through a WPA or CCC-like program or b) incentivize employers to hire people, especially young people.


If Congress were committed to preserving tax breaks for the super-wealthy while we only wage two wars and unemployment hovers around 9%, I might agree that this is a straightforward case of class warfare.[1] But, that’s not what’s happening. While the rich and old tax themselves at fantastically low rates, our government is failing at its most basic duties to the next generation: educating them and providing them with the infrastructure (technological, economic, and physical) they need to continue to innovate and create. That’s generational warfare.


We are not doing what we need to do. We are not doing what we need to do because we don’t have the money to do it. And, the things we are not doing are largely those things that hurt young people. Everybody should be taxed as little as possible. But, everyone should be taxed as much as necessary.

A Pocketful of Lint

One fall, when I was a kid, I found a $10 bill in the pocket of my winter jacket. Six months earlier, I had forgotten it there and discovering it felt like winning the lottery. I liked the feeling so much that I still put money in my winter coat before storing it for the summer.

The gifts we leave for future generations are not much different. When the Baby Boomers came into power, they found the Hoover Dam, the Interstate Highway system, and a vibrant system of public education in the pocket of their winter jacket. Gifts from their parents.

When it’s my generation’s turn to govern, we will find in our pocket some lint and a receipt from our parents’ bar tab charged to our credit card.

The current government’s failure in education is the most salient example of generational warfare. Where I live, 25% of the students who enter high school will not graduate. In other words, 25% of the young people will not have even the most basic skills needed to work, earn, or think critically as a citizen. Until our dropout rate falls dramatically, I think we should be talking about tax increases, not tax decreases. Anything less is generational warfare.

The government’s treatment of college students isn’t any better.

We just emerged, barely and temporarily, from a manufactured crisis over the previously-routine decision to raise the country’s debt ceiling. I am all for reducing the deficit—I get that I am going to have to repay the money my parents’ generation is borrowing. I am offended, however, by Congress’s approach. Republicans refused to entertain any “revenue raising” measures as a part of a negotiated plan to reduce the deficit.

Instead of reducing the deficit by raising rates on the mega-rich, Tea Party members of Congress hoped to reduce the deficit by cutting $17,000,000,000 in Pell Grants to low-income, mostly minority college students. They ultimately did not cut Pell Grants (this time), opting instead to just eliminate federally-subsidized student loans for America’s six million graduate students.

The federal government is cutting student aid for a generation of students while most lawmakers were happy to benefit from previous generations’ generous support of higher education. Just 25 years ago in Kentucky, a resident could go to UK for $1,228 a semester ($2,408 adjusted for inflation).[2] Today’s student pays 89% more per semester ($4,564). A law student in 1986 paid $1,645 a semester ($3,226 adjusted for inflation); today, that student pays $16,021—a 400% increase.


Declining support from the government for public education.

In other words, Baby Boomers don’t want to tax themselves enough to keep prices for public education stable and affordable in Kentucky. They would rather burden their children’s generation with more and larger student loan debt. The University of Louisville just raised tuition 6%. In the past 11 years, Frankfort has cut Louisville’s budget 11 times with cuts totaling $150,000,000. That’s money Frankfort didn’t want to tax and that young people will now have to pay (with interest). That’s generational warfare.


It shouldn’t surprise anyone to learn that with rising tuition and a poorer job market, default rates on (non-discharageable, mind you) student loans has doubled recently to almost 9%.

Predatory Parenting

In a new and diabolical twist to generational warfare, old people have figured out a way to charge young people even more for higher education and sell stock in their student debt. Most students who graduate from proprietary schools (for-profit schools) will emerge with a debt load ($30,000) more than three times larger than a student who went to a public institution. Almost 90% of the revenue from these profit-seeking, publicly-traded companies comes from student loans. The percentage would be higher except for a federal law mandating that at least 10% of the tuition come from private sources. So, most of these institutions make private loans to its students for the final 10%, often at high interest rates. Said another way, in proprietary schools old people (investors) have found a way to capitalize, literally, on the loans young people take out. Remember: these schools exist because old people have failed to adequately support a public system of higher education system that includes community colleges. This profiteering is sinful—there are other words I could use, but none more accurate.

(For the full skinny on the evils of proprietary schools, here is the National Consumer Law Center’s report: “Piling It On: The Growth of Proprietary School Loans and the Consequences for Students.” NCLC is the best.)

The existence of for-profit schools is the best and most depressing evidence of generational warfare. These schools cost multiples more than their state-supported counterparts and graduate their students at a much lower rate than their state-supported counterparts. Contrasting proprietary schools with their “state-supported counterparts” is not even accurate, however, for these proprietary schools depend on public support in the form of federal student loans for almost 90% of their budgets. That is, these for-profit institutions are far more dependent upon state support then their state-supported counterparts.

According to the Government Accountability Office, after four years, 23.3% of students who attended a proprietary school are in default on their student loans. Compare this to 9.5% for public school students and 6.5% for students who attended private, non-profit institutions student. In other words, a student is between two and four times more likely to default on her loans if she gets suckered into going to a proprietary school. Our government’s continued tolerance of support for proprietary schools is a new form of equity-stripping, except, amazingly, old people have devised a way to divest my generation of our equity before we even have any. Parents are not stripping equity, but rather debt from their children.

Proprietary schools exist primarily as a front to shovel our tax revenue ( in the form of federal student aid) into the hands of investors (and by “investors” I mean rich people and by “rich people” I mean old people.) According to the NCLC report, one of the country’s largest for-profit education companies, Education Management Corporation (EDMC), is owned by Goldman Sachs, the company that has raised funneling tax dollars into its bottom line into an art form. Goldman Sachs took EDMC public in 2009. It has a market cap of 2.3 billion dollars and is currently trading at 17 bucks a share.

It’s not just federal money going into proprietary schools; it’s also the student’s own money—often money the student doesn’t yet have in the form of privately-funded (generously provided by the school itself) student loans. These loans, along with the federal student loans, are generally not dischargeable in bankruptcy. No matter what, these young people will be saddled with this debt forever.

Our officials (and by “officials” I mean old people) have failed to support higher education despite having benefited themselves from previous generations’s generous support of higher education. Worse, they have allowed a dysfunctional, predatory system of for-profit education to capitalize, literally, on their own failure. As a result, many students today emerge from college today as little more than indentured servants. For European immigrants during colonial times, a period of indentured servanthood typically lasted 7 years. For people in my generation, it could last a lifetime. 

This is What Happens

The generational warfare is not just limited to dismantling public education and capitalizing on student debt. It extends to the ruling generation’s failure to invest in new sources of energy, failure to maintain and expand the infrastructure we need for a 21st century economic revival, failure to pass the DREAM Act (a bill which only affects young people), and their failure to pass a jobs bill (any jobs bill) despite an unemployment rate of 23% for 18–19 year olds and 14.6% for 20–24 year olds. (Compare these double-digits to unemployment rates of 7.3% and 6.9% for Americans 45–54 and 55–64, respectively.) It is evident in their willingness to reform entitlements such that younger generations get less while their generation’s benefits are preserved. I will leave it to other writers to explore the full implications of generational warfare on these fronts.

I want to spend the rest of the essay exploring what to do about this war.

There is really nothing to do but fight.

I don’t have any new solutions or novel advice.

I think the first step is for my generation to recognize that they are under assault. I know that we feel a mounting pressure, a growing sense that our shared future may be growing dimmer. But, this foreboding has remained a nameless and veiled dis-ease. Let’s name it: it’s generational warfare. Naming a thing is the first step of gaining power over it.

Beyond that, ending the generational war is really is as simple and complex as caring a lot, voting, getting other young people to vote, getting involved in local party politics, helping people get elected, and getting elected yourself.

In this fight, the first thing we must recognize is that this is not a partisan war. This is not Democrat v. Republican. It’s young v. old. Both parties, dominated by old people, are waging this war against young people. Just because this is beyond partisan doesn’t mean young people shouldn’t recognize their allies.

My thesis is, given our annual deficits and inability to invest in the next generation, government doesn’t tax the rich (old) enough. Lawmakers (from both sides) would rather write checks my generation will have to cash. All but six federally elected Republicans have signed Grover Norquist’s pledge to never, under any circumstances raise a single dollar of additional revenue; Republicans will be ineffective allies in a generational war. (I recognize that some Republicans have, at times, shown a willingness to break from Norquist’s orthodoxy. Rather, we must acknowledge that the intra-party systems that exist in the Republican Party will make it more difficult for Republican lawmakers to support the kind of tax increases on the old-rich we need.)

In a two-party system, that leaves the Democrats. As a party, Democrats have folded so often on issues critical to the success of the young—from weak-kneed regulations on proprietary schools, to the extension of the Bush tax cuts, to the cuts to federal student aid. More broadly and more catastrophically, Democrats have allowed Republicans to define for the American public the terms of the debate over deficits, taxation, and the proper role of government in vouchsafing our collective future. Democrats’s failure on this front makes any policy change more difficult than it otherwise might be.

But, as much as the Democrats as a party have failed, Democratic officials individually seem to get these issues. Democrats advocated revenue-raising measures in the recent debt ceiling debate; many support the DREAM Act; they are committed to maintaining and expanding public infrastructure. Fundamentally, Democrats view government as having a positive role to play in creating the conditions in young people’s lives for individual and collective achievement.

Democrats have shown a willingness to try and solve the most immediate crisis for young people: the lack of jobs. John Larson (D-CT) wants to create a supercommittee on jobs with the goal of eliminating unemployment by 2021. This probably should have been part of the debt ceiling debate, but late is better than never… . Rep. Jan Schakowsky has introduced legislation that proposes to create 2.3 million jobs (teachers, firefighters, police, health care, housing rehab, etc.). She pays for the $227 billion bill by raising taxes on millionaires and billionaires and oil and gas corporations. This is what I am talking about. This is what punching back in the generational war looks like.

The ruling class has spent their time in power frittering away the gifts of previous generations. They seem content to eat the seed corn. When I say “seed corn,” you should know by now I mean “the young.” The rich-old are maintaining their power and standard of living by eating their young. No examples exist in nature of a species that eats its own offspring—those species extincted themselves long ago—but that’s what’s happening in American politics today. It’s unnatural, it’s cannibalism, it’s disgusting.

We, the young, need to stop them. Now.

  1. This is not to say that the rich are not also and simultaneously waging a two-front war against both the young and the poor. This is not an either-or proposition. I am not naive enough to underestimate the ruling class’s ability to wage both a generational war and a class war. Conveniently, the young are often the poor; this fact makes a war against both more straightforward. To some extent, a generational war is a class war.


  2. Excel spreadsheets for these numbers can be found here.


A Few Words for Addison Parker

by Ben Carter in

Because we don’t say enough about people who matter to us, because we don’t celebrate people who live principled lives, because we should praise people like Addison Parker, I’m posting the letter I wrote to support Addison’s nomination for the Kentucky Justice Association’s Consumer Safety Award. The Kentucky Justice Association honored Addison last week with the award. I missed it, but I am told that J.T. Gilbert did a bang-up job describing the importance of Addison’s career to Kentucky consumers.

Dear Chairman Gilbert and the KJA Awards Committee,

I’m writing today to nominate Addison Parker for the Kentucky Consumer Safety Award. Earlier this summer, Addison retired after decades of service to Kentucky’s consumers as an attorney at the Appalachian Research and Defense Fund (AppalReD). During his time at AppleReD, Addison served Kentucky’s most vulnerable citizens at their most vulnerable moments.

I know that the private bar does not always know what is going on with their brothers and sisters in the legal services community; you may not know, for example, that his legal services colleagues from across the state regard Addison as a titan of consumer law. Practicing in all corners of consumer law, Addison assisted debtors in filing Chapter 7 and Chapter 13 bankruptcies, mobile home owners facing abuse, tenants facing eviction, and homeowners facing foreclosure. He has successfully battled zombie debt collectors, tax lien purchasers, and unscrupulous payday lenders. With bold and creative advocacy forged by a combination of hard work, meticulous attention to statutory and jurisprudential detail, and an unrelenting passion for his clients and his causes, Addison has upheld and expanded the rights of consumers across Kentucky.

When we think of “consumer safety”, most of us think first about seatbelts, airbags, salmonella, and flammable pajamas. If we have learned anything from this last decade, it must be that the negligently designed financial products offered to American consumers can cause just as much (if not more) harm to Kentucky families and our community’s well-being than a negligently designed physical product. Addison recognized this principle decades ago and began battling the powerful banks and financiers who seek to profit through recklessness and fraud long before the present meltdown.

While Addison’s laser-like devotion to protecting Kentucky consumers is admirable standing on its own, Addison’s commitment to mentoring and assisting other attorneys makes his contribution to Kentucky’s legal community truly remarkable. Three years ago, I began defending homeowners facing foreclosure at the Legal Aid Society in Louisville. I could not have been more clueless about how to help someone facing foreclosure. I soon met Addison because he chaired the Kentucky Consumer Law Working Group, which meets quarterly to discuss new developments in Kentucky consumer law. Afterwards, Addison generously spent hours on the phone with me discussing case strategy, explaining the nuances of complicated federal statutes like the Truth in Lending Act (TILA), the Real Estate Settlement Procedures Act (HOEPA), and the Home Ownership Equity and Protection Act (HOEPA). Addison traveled around the state to co-counsel cases with public and private attorneys. He provided trainings to any group willing to listen, whether it was the Kentucky Bankers Association or the Kentucky Equal Justice Center.

Unfortunately, clients of legal services organizations often expect that they won’t get a good attorney because they couldn’t afford to pay an attorney. Many of Addison’s clients came to understand that not only did they get a good attorney, they got the best attorney. An attorney that money couldn’t buy—and I mean that literally. Over his career, Addison passed up numerous, more lucrative opportunities to become a law professor, to become in-house counsel at the National Consumer Law Center, to pursue private practice, and to work in other legal services organizations. His devotion to Kentucky and its most vulnerable citizens is as deep as his contributions to them are numerous. I can think of no better or more appropriate way to honor Addison’s career-long commitment to Kentucky than by honoring him with the Kentucky Consumer Safety Award.


Ben Carter

My Fake Law School Commencement Address

by Ben Carter in

Here’s a speech I’ll never be allowed to give, but that law students desperately need to hear:

Good morning, thank you for inviting me to give the commencement address to the University of Kentucky College of Law’s class of 2012. This is going to be a real downer.

I don’t want to be this guy. 90% of this speech is just going to be bleak. I can’t help it. Most of what’s happened to you and most of what you’re facing is bleak. 10% is going to be hopeful. I want you to remember that. Hold on to that 10%, because we’re going to start with the other 90.

Here’s the situation: many of you do not have a job. Many of you have massive debt–hundreds of thousands of dollars of debt. Many of you–most of you–have no marketable skills to speak of, even those of you with jobs have been hired mostly for your potential.

It’s no secret that the prospects for graduating attorneys have never been worse. I have good news and bad news. The good news is: as an attorney, you can employ yourself. The bad news is: nothing in your education has prepared you to employ yourself.

If you’re like me, you went to law school because you graduated from college and didn’t really know what you wanted to do with your life. Law school seemed like a good idea because it would “teach you to think like a lawyer.” I didn’t know what this meant before law school, but I was tired of thinking like a Capitol Hill intern slinging tacos at night. “Thinking like a lawyer” had the added bonus of the tantalizing lure of exclusivity. I could join a club and, once in, the mysteries of society would be revealed to me.

In fact, in my admissions essay, I explained that because our culture is a language I expected to learn its grammar in law school.

I didn’t.

And I didn’t learn how to “think like a lawyer.” I still don’t know what this means. Unless “thinking like a lawyer” means thinking, “Holy crap, I only have one lifetime to pay off this debt. I need to get paid!”

As far as I can tell, law school exists to put future lawyers into debt and give them few practical skills in the process. Under a massive debt load and having little ability to actually practice law, graduating law students have little choice but to apprentice themselves in the highest paying job they can find.

The other function of law school is to make you feel okay about this situation. To make it seem natural, orderly, logical.

It’s not.

Learning to “think like a lawyer” too often means “coming to understand that what you do in this world doesn’t matter.” Law school is a process of divorcing you and your values from what you do professionally. Early on, you learn that you are not your client, that you are not what you do. Law school teaches you to think of yourself as merely a participant in an adversarial system. This is not a valueless position. “Participating in an adversarial system” is framed as a higher good than actual good.

You have been told that representing poor people is good because “everyone needs representation.” The reason poor people need representation, you’re told, is because our system cannot work if both sides are not represented. You are not told that poor people need representation because poor people are vulnerable, because they’re more likely to be preyed upon, because they have blood and sinew, mother and sons.

Maybe things have changed, but during my 3 years of law school I was never once asked to consider the law’s role in keeping people poor. We are rarely asked to look behind the law; rather, we are taught to get the black letter law and get out.

Don’t ask why the law is what it is. Just learn what it is and move on.

For those of you who think that being a good lawyer, that thinking like a lawyer, simply requires you to spot the issue, know the rule, apply the rule, and come to a conclusion, I am truly sorry for you. For those of you who went to law school hoping to learn how to meld your values with the practical skills lawyers need to help their clients, I am truly sorry.

For those of you who came to law school to “make a difference” or “fight the good fight” being told that you are merely a “participant in an adversarial system” is a violent challenge to your worldview. If you were miserable in law school, I want you to consider the possibility that this confrontation with this amoral vision of the lawyer’s role in society is partly to blame for that misery.

Being told that it doesn’t really matter what side you’re on is enough to jade just about anyone.

You are not the same person as the person you were 3 years ago. Ask yourself if you are more jaded now than you were before. Ask yourself if you feel less excited about the work you want to do in the world now than you did before. Ask yourself if you think your estimation of the difference you can make in this world has diminished in the last 3 years.

If you feel jaded, if you feel a lack of enthusiasm for the work you are about to do, I want you to consider the possibility that law school is partly to blame. Your challenge now is to learn how to be yourself. What I really mean is your challenge now is to remember how to be yourself. Remember who you were before you viewed yourself as a participant in an adversarial system, before you were told that what you are is a hired gun, a mercenary.

If it doesn’t matter what side you’re on, then that’s what you are: a mercenary. If you view yourself as merely a participant in an adversarial system, than a rational self-maximizer in that system will side with the moneyed every time. Choosing sides only requires learning which side can pay you the highest hourly rate.

What an awful lesson, but it’s one of law school’s most important lesson. It will provide many of you a lot of comfort.

I am here to tell you that you’re more than a mercenary, that choosing sides because of your values, because it’s “who you are” is okay. It’s more than okay. It’s a sign of being human.

I am here to talk to the people who think it still matters what they do on this Earth.

Before I talk about what to do now–now that you’re in debt and facing uncertain job prospects– I want to talk about what should have happened in law school, what should be happening now.

In law school, you should’ve spent your first year developing the practical skills you will need as a lawyer: writing, yes, speaking, yes, but also the active listening you will need to use with your clients and your partners. You should’ve been taught in contexts that simultaneously taught you the real world effect of civil and criminal procedure, contracts, constitutional law.

You should’ve spent your second year apprenticing with practicing attorneys during the day and learning the nuts and bolts of running a law office (accounting, technology, ethics, advertising, Getting Things Done) in the evening.

In your third year, you should’ve taken jurisprudence, electives, classes that encouraged you to reflect on the sociological forces that mold the law, and classes that asked you to confront emerging challenges to our society in the 21st century. Classes that explore modern problems and the potential for lawyers and the law to be part of a solution: prescription drug abuse, the foreclosure crisis, jail overcrowding, immigration. The solutions to these problems probably won’t come from winning a case in court; they’ll come from focused policy research, community organizing, lobbying, and legislation. Law school did not prepare you for this work.

We’re talking about what should have happened. What should have happened is that you should have spent about one-third what you did on law school. Your law school debt should be 33% of what it is. That’s the way it used to be. College is now 3 times more expensive than it was 30 years ago. It’s more expensive in large part because for decades your parents have tolerated declining support for public education, preferring instead to keep their taxes as low as possible. The debt you will be living with for decades is just a small piece of a larger generational war being waged in America today.

If your mom or dad is an attorney, chances are their debt load was far less than what yours is. A law student in 1986 paid $1,645 a semester ($3,226 adjusted for inflation); today, that student pays $16,021—a 400% increase.

Your debt has real implications for the kind of job you can take after law school and your first job has real implications for the kind of expertise and experience you develop. In other words, your debt will dictate who you are and what work you do.


Unless you commit today to live as frugally as possible for as long as it takes to have the financial freedom to pursue the work to which you feel called. Your job is to get out of debt as quickly as possible. Get out of your job as much learning and experience as possible, but get out.

You are not a mercenary. You choose sides because you care who wins. Because it matters who wins. Because if your client doesn’t win, justice isn’t done. You are not some cog in a justice-dispensing machine. You are a human being. You have values. You know right and wrong. You have a compassion for the dispossessed, the disenfranchised, the marginalized that compels you to act. You have a God whose claims on your life are undeniable.

Law school taught you to forget yourself and ignore others. It encouraged you to divorce yourself from what you do. This is why so many lawyers are unhappy. I believe we are on Earth to do good work, to alleviate suffering, and seek justice for the oppressed. I believe that what we do matters.

The bad news is you are in debt and facing the worst economy in human memory. The good news is that if you can remember yourself and live frugally, there is no limit to the amount of good work you can do with your law degree. Law school was a miserable experience for me, but being a lawyer is more rewarding than I could have ever imagined. And fun!

What a joy, what a blessing it is to be a lawyer, to have the power to bring wrong-doers to court and seek justice for your clients. To have a loving family and meaningful work to do: can we reasonably ask for anything more from life?

Remember who you are. What you do matters.

Withdrawing from JPMorgan Chase: An Exercise

by Ben Carter in

Here’s what I’m ashamed of: Chase Bank. More specifically, I’m ashamed of my continuing relationship with Chase.

When I was sixteen or seventeen, my dad got me a credit card from Bank One to help me “build my credit.” JPMorgan Chase bought Bank One in 2004, which was fine with me, because at that point I already had a mortgage with Chase–all my accounts were now with Chase, which makes online banking a breeze. Oh man, they have good online banking.

Up until a few months ago I had loans on two homes, a home equity line of credit, a business account (with an IOLTA account), a checking account (with sub accounts), a savings account, and two credit cards with Chase. I still have a lot with Chase, which is sort of what I want this essay to be about, but I have refinanced both home loans with local banks: First Citizens Bank and Huntington Bank.

I am uncomfortable with my continuing relationship with Chase; I am ashamed of it.

Idiocy and Hubris

My discomfort first arose when Chase started suing my clients at Legal Aid Society. For two years, I defended homeowners from foreclosure for Legal Aid. We hosted clinics for struggling homeowners twice a week: Tuesdays at 11:00 and Thursdays at 5:00. Each month, I probably talked to thirty or forty homeowners. Sometimes less; often more. Many of these people were also customers at JPMorgan Chase.

And they told awful stories. Stories typical to the foreclosure crisis–JPMorgan Chase is no worse an actor than most big, national banks in the years leading up to the crash and the years following, but its no better, either.

  • Homeowners calling Chase to apply for a loan modification only to be encouraged to miss a payment because you “have to be behind to qualify”. (You don’t.)

  • Chase losing paperwork that was sent certified mail (because the first set had also been lost).

  • Chase telling homeowners to pay a reduced amount for months on end to qualify for a loan modification, then Chase not modifying the loan, then Chase claiming the person was thousands of dollars behind and needed to catch up immediately or face foreclosure.

Defending useless and unnecessary suits brought by Chase took some (all) of the shine off Chase for me. But, it wasn’t just the suits. It was their suit, CEO Jamie Dimon, testifying in front of Congress, without trying to be funny, that financial crises are “the type of thing that happens every five, ten, seven years”.

How’s that for preposterous hubris?[1] Yet, I know that my decision to bank with them is a tacit endorsement of their actions and words. So, for the past three years, I have been squirming about my banking situation.

A Right-Sized Solution

It wasn’t just the suits or their suit. It was their size. Like most Americans, I find the concept of “too big to fail” antithetical to our meritocracy.

In Small is Beautiful: Economics as if People Mattered,[2] E.F. Schumacher discusses the problem of the need for both largeness and smallness in human organizations. His goal is to encourage right-sized organizations for the problem the organization exists to solve.

What I wish to emphasize is the duality of the human requirement when it comes to the question of size: there is no single answer. For his different purposes man needs many different structures, both small ones and large ones, some exclusive and some comprehensive. Yet people find it most difficult to keep two seemingly opposite necessities of truth in their minds at the same time. They always tend to clamor for a final solution, as if in actual life there could ever be a final solution other than death. For constructive work, the principal task is always the restoration of some kind of balance. Today, we suffer from an almost universal idolatry of giantism. It is therefore necessary to insist on the virtues of smallness–where this applies.

I keep my money at a bank that is too big for its own good. For our own good. I have known this for some time, yet the lock-in at Chase is enormous: I pay all my bills online (at; I can transfer money among my accounts at one website (; and my debit card and credit card are stored with hundreds dozens of online vendors, some of those debiting automatically each month.[3]

This is all to say that what I’m doing is wrong. Chase Bank is too large; it is a product of our worship of giantism. There is no reason that I should keep my money with one of the largest banks in the world. Any bank I would put my money in will be FDIC-insured up to $250,000 and I’m a long (long) way from having to worry about what to do with the next 250 grand.

I know what I’m doing is wrong, yet I have been lazy, complacent, compliant.

Continuing to bank with Chase is not just a bad decision because it’s a tacit endorsement of the bad acts of Chase and the hubris of its CEO. It’s also supports bad policy.

Robert Reich has articulated the need to limit the size of a bank’s assets as the only way of limiting the amount of risk to the broader financial system and world economy.

Needless to say, the danger of an even bigger cost in coming years continues to grow because we still don’t have a new law to prevent what happened from happening again. In fact, now that they know for sure they’ll be bailed out, Wall Street banks – and those who lend to them or invest in them – have every incentive to take even bigger risks. In effect, taxpayers are implicitly subsidizing them to do so. (Haldane figures the value of that implicit subsidy to be about $60 billion a year for each big bank.)


As long as the big banks are allowed to remain big, their political leverage over Washington will remain big. And as long as their political leverage remains big, the taxpayer and economic tab for the next mess they create will be big.

By all means, give regulators resolution authority and also impose the tightest regulations possible. But Congress and the White House shouldn’t stop there. Limits should be placed on how big big banks can become.

How big? No one has been able to show significant efficiencies over $100 billion in assets. Make that the outside limit.[4]

Reich suggested this in 2010 and there’s been no move from either Congress or the White House in this direction since then. I think it’s safe to say that we can expect no action from Washington to limit the size of banks for at least another five years. That’s the bad news.

The good news is that we don’t need Washington in this instance. We can limit the size of our banks’ assets ourselves–by moving our assets to smaller banks. Sure, it would be easier if 536 people got together and did something, but they’re not going to and we (millions) can. When shopping for a new bank, I will ask whether they have assets exceeding $100 billion. If they do, that’s a deal breaker, ladies.

Why Doing Something Matters

The problem with continuing to lend my money to Chase (and allow them to lend me money), is that I believe that decisions about money–how you make it, how you spend it, how you save it–are fundamentally moral decisions.

Growing up, my dad had a coffee mug that said, “Talk is cheap.” On the other side of the mug, it said, “Until you hire a lawyer.” He had to explain the joke to me. Now, even though I’m a lawyer, I think talk is always cheap. I guess you could say I’m a James man:

Faith without Works Is Dead

What good is it, my brothers and sisters, if you say you have faith but do not have works? Can faith save you? If a brother or sister is naked and lacks daily food, and one of you says to them, ‘Go in peace; keep warm and eat your fill’, and yet you do not supply their bodily needs, what is the good of that? So faith by itself, if it has no works, is dead. James 2:14–17.

If you’re the sort of person who cares at all about the direction of our country and our culture, if you want something different than what currently exists, you have to recognize that decisions about what to do with your money either sustains or starves that vision. Choosing between buying a tomato from California and one from Kentucky has a direct impact on which farmer puts another tomato seed in the ground next year. Choosing to buy a new car or a used car affects how many new cars roll off the assembly line. Buying an ebook versus a paper book changes what the book industry looks like.

It’s the same way with where you keep your money. As someone who has grown deeply skeptical of the prudence of our giant banks, as someone who is outraged by their continuing rapaciousness and imbecility during the foreclosure crisis, I can no longer continue to lend them money and allow them to lend me money. If I want a different kind of banking system, I need to move my money to a different kind of bank.

Talking about this with a friend, he reminded me that any bank is going to screw me. That’s probably true. But, if I eventually want the option of banking with a bank that doesn’t screw me, the first step is moving to a bank that is going to screw me less.

But, my little bank account doesn’t matter

I have also justified my inaction by rationalizing that, well, my bank account is so small that where I keep it doesn’t make a difference. This fails for two reasons. The first is obvious: if everyone with a tiny bank account moved their money to a more just institution, the effect is not so small anymore. Now we are getting somewhere. As the Amish say, “Many hands make light work.

Even if no one joins me, it’s still important to move my money. Especially important. Failing to do so risks forgetting who I am, of changing who I am. Being true to yourself is a muscle you train; it knows strength or atrophy. I know that moving my money to a bank that doesn’t foreclose blindly on my neighbors is the right thing to do. I know there are banks that are run by men and women less blasé about the financial crisis it helped create than Jamie Dimon. I know that seeking a relationship that is, at minimum, less exploitative reinforces my values. The act of moving banks will remind me of who I am and what I believe. It is simultaneously a product of who I am and constitutive of who I will become.

More dangerously, failing to act in this instance will make it easier to justify failing to act in the future, perhaps when the stakes are slightly or significantly higher. Failing to act in the face of small injustices is how people learn to fail to act in the face of large ones. This thought, more than any, is enough to scare me into action.

I’m scared. Are you?

  1. Growing up, I had this sense, unspoken because it was so woven into the fabric of my existence, that grown-ups were taking care of things. And, for the most part, this was true as far as I knew. My parents took care of business. It has only been recently–far too recently–that I had the terrifying and exhilarating realization that grown-ups are just as clueless as the rest of us. Comments like Jamie Dimon’s were very useful to this process (commonly known as maturation).

  2. Schumacher, E.F. Small is Beautiful: Economics as if People Mattered. New York: HarperCollins, 1989, p. 70.

  3. There is not, as far as I can tell, an easy solution to this problem of lock-in. Especially among local banks. I have found some who seem willing to help you (manually?) transfer your online bill pay to their website, but moving still means tracking down all of the online vendors (iTunes, Amazon, eBay, REI, software developers, web hosting, bar associations, charities, and on and on), changing those accounts, forgetting a few, and having a few bills (how important?) drop through the cracks. (The bank that solves THIS problem and brings their solution to market? Wow.)


  4. Chase has over $2 trillion in assets. Huntington Bank, by contrast, has $52 billion and First Citizens has just over $300 million.