Rolling Jubilee: can a crowdsourced bailout of personal debt work?

A new spin-off of Occupy Wall Street wants to cancel debt. Can it?

This is an interesting thing. The Rolling Jubilee:

A bailout of the people by the people.

We buy debt for pennies on the dollar, but instead of collecting it, we abolish it. We cannot buy specific individuals' debt - instead, we help liberate debtors at random through a campaign of mutual support, good will, and collective refusal.

So how does this work? Distressed debt – debt which is in default – is frequently more trouble than it is worth for banks. Those institutions specialise in making money from money they hold, not recovering money they are owed. So if they have too much trouble getting that debt repaid, they sell it on. Someone pays less than the full value of the debt, and hopes to profit by recovering it and pocketing the difference

For really troublesome debt, sometimes that value can shrink to pennies in the pound – hence the Rolling Jubilee's plan, to buy $16,000 of debt for every $500 they raise (that is, $32 for $1).

That's how it works. But will it work? Maybe.

The legal mechanics of what they are doing are pretty clearly in their favour. Debt collectors really can cancel the debt if they want.

The problem is that if you try to actually do that, you may find very quickly that people stop selling you debt.

A similar idea was proposed a while back by an organisation called American Homeowner Preservation. It also deals with distressed debt, but focuses exclusively on mortgages, buying up pools of bad loans, and restructuring them to make it easier for the homeowners to pay them off.

But the original plan was simpler still. Felix Salmon explains:

Investors would buy a house in a short sale at the market price, and then lease the home back to the homeowner until the homeowner had the ability to get a mortgage and buy it back at a pre-set price.

The idea might have been elegant, but it didn’t work in practice, because the banks wouldn’t play ball: they (and Freddie Mac) simply hated the idea of a homeowner being able to stay in their house after a short sale, and often asked for an affidavit from the buyer saying that the former owner would certainly be kicked out.

There's not really any cold hard economics at play here. The banks have no reason to care what happens to a house after they've sold the mortgage for it, but they do. The best explanation for their stubbornness is that they fear that organisations like American Homeowner Preservation are creating a sort of moral hazard by reducing the penalties for defaulting on mortgages.

Will the debtholders be similarly reluctant when it comes to playing along with Rolling Jubilee? We'll see, but I don't have high hopes for a change in tactics any time soon.

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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Labour's establishment suspects a Momentum conspiracy - they're right

Bernie Sanders-style organisers are determined to rewire the party's machine.  

If you wanted to understand the basic dynamics of this year’s Labour leadership contest, Brighton and Hove District Labour Party is a good microcosm. On Saturday 9 July, a day before Angela Eagle was to announce her leadership bid, hundreds of members flooded into its AGM. Despite the room having a capacity of over 250, the meeting had to be held in three batches, with members forming an orderly queue. The result of the massive turnout was clear in political terms – pro-Corbyn candidates won every position on the local executive committee. 

Many in the room hailed the turnout and the result. But others claimed that some in the crowd had engaged in abuse and harassment.The national party decided that, rather than first investigate individuals, it would suspend Brighton and Hove. Add this to the national ban on local meetings and events during the leadership election, and it is easy to see why Labour seems to have an uneasy relationship with mass politics. To put it a less neutral way, the party machine is in a state of open warfare against Corbyn and his supporters.

Brighton and Hove illustrates how local activists have continued to organise – in an even more innovative and effective way than before. On Thursday 21 July, the week following the CLP’s suspension, the local Momentum group organised a mass meeting. More than 200 people showed up, with the mood defiant and pumped up.  Rather than listen to speeches, the room then became a road test for a new "campaign meetup", a more modestly titled version of the "barnstorms" used by the Bernie Sanders campaign. Activists broke up into small groups to discuss the strategy of the campaign and then even smaller groups to organise action on a very local level. By the end of the night, 20 phonebanking sessions had been planned at a branch level over the following week. 

In the past, organising inside the Labour Party was seen as a slightly cloak and dagger affair. When the Labour Party bureaucracy expelled leftwing activists in past decades, many on went further underground, organising in semi-secrecy. Now, Momentum is doing the exact opposite. 

The emphasis of the Corbyn campaign is on making its strategy, volunteer hubs and events listings as open and accessible as possible. Interactive maps will allow local activists to advertise hundreds of events, and then contact people in their area. When they gather to phonebank in they will be using a custom-built web app which will enable tens of thousands of callers to ring hundreds of thousands of numbers, from wherever they are.

As Momentum has learned to its cost, there is a trade-off between a campaign’s openness and its ability to stage manage events. But in the new politics of the Labour party, in which both the numbers of interested people and the capacity to connect with them directly are increasing exponentially, there is simply no contest. In order to win the next general election, Labour will have to master these tactics on a much bigger scale. The leadership election is the road test. 

Even many moderates seem to accept that the days of simply triangulating towards the centre and getting cozy with the Murdoch press are over. Labour needs to reach people and communities directly with an ambitious digital strategy and an army of self-organising activists. It is this kind of mass politics that delivered a "no" vote in Greece’s referendum on the terms of the Eurozone bailout last summer – defying pretty much the whole of the media, business and political establishment. 

The problem for Corbyn's challenger, Owen Smith, is that many of his backers have an open problem with this type of mass politics. Rather than investigate allegations of abuse, they have supported the suspension of CLPs. Rather than seeing the heightened emotions that come with mass mobilisations as side-effects which needs to be controlled, they have sought to joins unconnected acts of harassment, in order to smear Jeremy Corbyn. The MP Ben Bradshaw has even seemed to accuse Momentum of organising a conspiracy to physically attack Labour MPs.

The real conspiracy is much bigger than that. Hundreds of thousands of people are arriving, enthusiastic and determined, into the Labour party. These people, and their ability to convince the communities of which they are a part, threaten Britain’s political equilibrium, both the Conservatives and the Labour establishment. When the greatest hope for Labour becomes your greatest nightmare, you have good call to feel alarmed.