Pluralistic: 23 Oct 2020

Today's links

Student loans are dischargeable (permalink)

Not only are Americans drowning in student loans they have no hope of repaying, but it's commonly understood that student debt can't be discharged in bankruptcy. 1 in 4 bankruptcies involves student debt, and that debt is almost never discharged.

A generation's worth of tacit conspiracies between higher-learning institutions, lenders, and educational advisors has saddled millions of Americans with crushing, punitive debt, subjected to outrageous interest rates and penalties.

These people took out loans when they were children in hopes of attaining a middle-class life through education. They got the education, but are mired in spiralling poverty thanks to the debt they took on to get it.

Meanwhile, that debt has been spun into a form of toxic Wall Street asset, the "student loan asset-backed security" (SLAB), which securitizes the payment streams from immiserated people whose student debts will chase them into the grave.

What if it's all a con, though? What if the law that prevents student debt from being discharged in bankruptcy had been systematically misinterpreted? What if all that debt could just be erased through bankruptcies that are not nearly so awful as the debts they'd clear?

That'd be wild, huh?

Earlier this month, Above the Law ran a long, fascinating feature by Ian Frisch, telling the story of Austin Smith, a lawyer who happened upon a long-buried legal secret while working on a law review article assignment for law-school in 2014.

Smith discovered that most student debt could be discharged in bankruptcy, that the "educational benefit" clause of the 1990 bankruptcy act clearly didn't mean what the courts and the legal profession had taken it to mean. It was right there, in the Congressional Record.

Government student loans couldn't be readily discharged, but the $150b in private student loans, a form of subprime debt dominated by an obscure institution called The National Collegiate Student Loan Trust (no employees, office, or website!) could be.

After law school, Smith got a job at an NYC white-shoe firm and convinced the partners to let him test his theory: he sued Citibank on behalf of a student debtor…and won. It was his first time in court, he didn't even know where to stand, but the case was crystal clear.

His bosses thought the win was cute, but they were in the business of representing banks, not suing them. Smith quit and started his own firm, and racked up 50 individual victories in four years, totalling millions.

Starting in 2016, Smith forged alliances with other lawyers to begin mass-scale class action cases against banks holding student debt.

These cases cover 500k borrowers and $3b in debt, and have three demands:

I. All outstanding debt is wiped away, you never call these people and ask for this money again

II. Give back all the money you have collected since the date of these people’s initial bankruptcies

III. Pay punitive damages for your illegal conduct

He's particularly interested in the NCSLT, that shadowy LLC with no employees or offices, that oversees $12b in debt that it neither originated, issued or serviced.

NCSLT is a front for Massachusetts's First Marblehead, a bank so tiny it lacks a federal charter.

Without a charter, First Marblehead can't originate out-of-state loans, so it created a rent-a-charter arrangement with PNC Bank, Jpmorganchase and Wells Fargo, who originate 11% loans to the poorest, most desperate children hoping for university educations.

First Marblehead buys the loans and pays finders' fees to the big banks. It also works directly with universities, who act as loan originators to desperate kids, knowing that First Marblehead will immediately buy those loans and pay the university a commission.

First Marblehead acquired a nonprofit, The Education Resources Institute, and laundered loans through that division, making the "nonprofit loans" that, it believed, would be immune to discharge in bankruptcy. The company went public in 2003 and shares jumped 250% in a year.

First Marblehead uses NCSLT to turn these subprime loans into SLABS, and the SLABS are unloaded onto investors by Goldman Sachs, Deutschebank, Citibank, and UBS.

One set of giant banks originates the loans, another set buys them, and in between sits First Marblehead and NCSLT, whose sole purpose is to wrap them in a legal fiction that makes them eternal millstones around borrowers necks, immune to bankruptcy.

This is why Smith's work is so important: when he shows that the law has been incorrectly interpreted – as he has in so many cases before now – the whole rotten system collapses and hundreds of thousands of Americans will get justice.

And while NCSLT is the worst offender, it's not the only one. Smith's also locked in legal battles with Navient (formerly Sally Mae) and many other lenders.

Godspeed, Austin Smith, you slayer of debt!

Cracking the Ghislaine Maxwell redactions (permalink)

Since the earliest days of digital legal records, redaction failures have been a source of perpetual mirth and chaos. The most common failure is simply adding black boxes over text in PDFs; the text can be easily recovered by selecting the underlying text and copying it.

I first encountered this in the early 2000s, and it was the stupid mistake that no one ever learned from. Not the TSA in 2009:

Not the DHS in 2016:

Nor Facebook's legal opponents in 2018:

This 2011 study by Timothy B Lee for Public Resource reveals how widespread the problem was a decade ago:

It's only gotten worse since. Better redaction systems – blurring and pixelation – turn out be vulnerable to machine learning attacks that unblur these elements:

But this week revealed a new kind of redaction failure, in the spectacular, high-profile case of Ghislaine Maxwell, the woman accused of being the procurer for the child rapist Jeffrey Epstein.

Maxwell was deposed on Epstein's crimes in 2016. Yesterday, a federal court released a redacted transcript of her deposition, in which the names of high profile individuals who've been accused of collaborating with Epstein in sex-crimes were redacted.

Within a few hours, journalists at Slate had reversed many of these redactions! Their secret weapon was the deposition's index, which was also redacted, but which nevertheless served as a key for uncovering the masked-out names.

For example: the journalists saw that a redacted word that fell alphabetically between "client" and "clock" appeared on several pages. They know that this is a name that starts with "Cl." But only some instances of that name have been redacted.

On page 135, line 7, that name appears in the clear: "President Clinton." Now we know that all the places in which that name is redacted, it can be unmasked as "President Clinton."

A similar method revealed the places where Alan Dershowitz's name had been blacked out: a word that comes between "Airport" and "Alcohol" appears before a word that comes between "Depth" and "Describe" on several pages.

The inference that the A-word is "Alan" and the D-word is "Dershowitz" is validated through context.

A related technique reveals the blacked-out instances of Prince Andrew's name.

All in all, the journalists de-redacted mentions of 15 people, from Chelsea Clinton to Marvin Minsky to Kevin Spacey to Al Gore. Note that their presence in this record is not proof of their direct complicity in sex-crimes.

Epstein's method involved mixing legitimate business (particularly scientific research) with child rape in ways that blended people who suspected his crimes, knew of his crimes, and participated in his crimes, all together in a jumble of varying complicity and knowledge.

I don't know if we'll ever know the full truth of the crimes committed (and abetted) by wealthy, powerful people.

But this de-redaction attack is noteworthy irrespective of the Epstein case. In some ways, it militates for a heavier hand in redaction, blocking all instances of a term (even those that don't reveal sensitive info) and/or redacting indexes.

As to the Maxwell deposition, the Slate journalists are seeking help in reversing the remaining redactions in the document.

Bring back the CCC (permalink)

In 1933, FDR created the Civilian Conservation Corps, which went on to employ 3m workers (5% of the US male workforce!) in projects whose benefit we still feel today: road- and trail-building, tree-planting, firefighting, infrastructure maintenance and more.

The CCC had serious flaws – notably a policy of racial and gender discrimination – but for those who were lucky enough to qualify, it was a transformative experience, an end to the years-long terror of economic precarity and a chance to make a difference in the world.

Millions of working-class Americans were given a chance to see their country and be immersed in the natural environment in a way that mainstreamed the principles of conservation. The beautiful outdoor spaces Americans enjoy today are the legacy of that program.

Today, about a quarter of the US workforce is unemployed; when you add in the people who are underemployed, or whose employment is in through a precarious, exploitative "gig economy" app that misclassifies them as contractors, the number climbs even higher.

But America does not lack for work that needs doing. The nation's crumbling infrastructure and public works need more than maintenance: the needs remediation and hardening against the coming waves of climate emergency.

Just in California, we need at least $1b worth of brush clearout and controlled burns, ANNUALLY, for the next DECADE, to make up for a century of forest mismanagement, terribly exacerbated by climate change.

There's caring work, too, as people are traumatized by climate change and its heralds: invasive species, pandemic, dislocations.

Long term, there's relocating every coastal city inland. We have full employment for the next three centuries. At least.

The leading theorist of a modernized workforce to cope with climate emergency is Pavlina Tcherneva, whose "The Case for a Job Guarantee" makes the case that, beyond "programs" like CCC, we need to make employment for those who want it into a legal right.

The Sanders campaign endorsed the idea, as do progressive elements of the Democratic Congressional caucus. But even though the party establishment hasn't come around to a guarantee, they have come out for a rebooted CCC, a Civilian Climate Corps.

The new CCC is in the Biden platform, and versions of it have been mooted by Sen Dick Durbin [D-IL] and Rep Marcy Kaptur [D-OH]. As MattSimon points out in his Wired story, the CCC is an American institution, something with a national history.

The American exceptionalism used to dismiss other commonsense measures like universal health care ("Maybe it works in Sweden, but it won't work here") can't be applied to CCC: it has worked here, and left behind a beloved legacy.

The popularity of a new CCC is another sign that Reaganomics and its emphasis on enriching the wealthy in the hopes of some trickledown for the rest of us is on the way out.

If the US government gives people good jobs that pay inclusive wages and humane benefits, it will create massive demand for goods and services from the private sector.

"A revived CCC could pour money into tackling a bevy of other environmental problems, too. Revitalizing public green spaces, for instance, benefits all Americans. We urgently need to better prepare our coastlines for rising seas. Restoring wetlands and forests would pull double duty, returning ecosystems to their former glory and creating carbon sinks: Plant more trees and you can sequester more CO2 from the atmosphere. Actually, in the case of wetlands, make that triple duty—healthy wetlands work as flood control during hurricanes, absorbing surges of water."

Foxconn out-trumped Trump (permalink)

In 2017, Donald Trump declared victory. Working with the far-right Wisconsin governor Scott Walker, he had brokered a deal to bring high-tech manufacturing jobs back to America, with a new, massive Foxconn plant that would anchor the new Wisconn Valley.

Right away, there were three serious, obvious problems.

I. Foxconn are crooks. It's not just the Apple device factories where they drive workers to suicide, it's a long history of promising to build massive factories, absorbing billions in subsidies, and then bailing.

It's a con they'd already pulled in Indonesia, Vietnam, Brazil and in Pennsylvania. The US heist happened only four years before the Wisconsin deal (which offered $4b in subsidies!) was signed.

II. The plant made no sense. Foxconn promised that it would employ tens of thousands of American workers building massive LCDs. The world did not need massive LCDs. It had a glut of them. The price for cheap LCDs built by low-waged workers in the Pacific Rim was tumbling.

III. There was already stuff where the plant was supposed to be built. Notably, there were family homes, places that had been owned by Wisconsinites for generations, real homesteads.

In order for Foxconn to build its nonsensical plant and receive $4b in US public subsidies, these families would have to be expropriated and their homes – their whole communities – literally bulldozed and dumped into landfills.

The deal revealed – if there was any doubt – that Trump is a rube, a sucker, a fool. Foxconn played him and played Walker and the state of Wisconsin. They never planned to build an LCD plant. Indeed, they seem never to have planned to build ANYTHING.

They wanted the free money as a subsidy for exploring what they might build, and they knew that the best way to get Wisconsin and the USA to subsidize this speculation was to tell risible lies about multibillion-dollar LCD factories that credulous US leaders would swallow.

No news outlet has done more to chronicle the endless, absurd, idiotic Foxconn grift than The Verge, and while many writers there have worked on the story (like Bruce Murphy and James Vincent), Josh Dzieza has been the most indefatigable chronicler of the Foxconn shitshow.

Now, after reporting out piece after piece on the Foxconn deal, Dzieza has published a kind of master narrative that tells the whole story from beginning to end, piecing it all together and augmenting it with new insider dope:

Dzieza's masterpiece leaves no doubt that this was a titanic fraud, nor that it was incompetently negotiated by Wisconsin's local and state officials as well as the federal government.

Take the subsidies: to qualify for them, Foxconn had to meet various hiring targets.

But those targets were easily gamed. So long as Foxconn had a certain number of workers on the books in December, it could count them as employed for the whole year, even if it laid them off in January.

Which, of course, it did. Indeed, the way Foxconn uses human lives as conveniences not worthy of any consideration make it clear that the suicides at its Apple factories are not isolated incidents (and also constitute a stinging rebuke to Walker and Trump's union-bashing).

To prop up its sham, Foxconn sent recruiters out to hold high-pressure job fairs where applicants were pressured to immediately accept job offers and tender their resignations at their current employers.

Then they were strung along for months as they jobs they'd been promised didn't materialized, and, for many, those jobs did not ever materialize. Workers who DID get jobs hardly fared better, showered in racist abuse about their inferiority to Asian workers.

They were asked to work in facilities without furniture, made to bring in their own pencils and networking equipment, made to buy new elevator carpets out of their own pockets to assuage the screaming rages of their managers, given impossible duties or none at all.

At various stages, these workers were called in to brainstorm ideas for building something, anything, in the facilities that Foxconn had been given at firesale prices by the state of Wisconsin.

Some ideas:

  • A fish-farm that could absorb the subsidized water they'd been guaranteed for cooling the data-center they would never build

  • An AI research lab

  • A Wework clone

  • A dairy exporter serving the Chinese market

  • A federal tech contractor

None of this bore fruit. The only time Foxconn turned a nickel was when they bought in-use office buildings with the intention of using them for some harebrained scheme but lost interest before they could evict the businesses tenanted there, and so earned some rent.

Foxconn eventually laid off the bulk of its US workforce and hired Indian and Chinese tech-workers on H1B visas, whom it showered with even more abuse, backstopped by threats of deportation if any of them dared to complain.

All along, Foxconn just told stupid lies that Wisconsin's business community gobbled up: Foxconn founder Terry Guo got fantastic praise for his $100m donation to the U Wisconsin system. None of that praise was revoked when he only delivered $700k of it.

The Foxconn deal is a black hole that has sucked Wisconsin's productive economy through its event horizon. The company charged local businesses thousands of dollars to get signed up as suppliers, then stiffed them on their invoices.

And the towns – like Mt Pleasant – that destroyed their residents' family homes to clear the way for Foxconn lost those taxpayers – and never got the promised tax payments that a Foxconn facility was supposed to deliver.

Here's Dzieza's masterful summary: "Trump promised to bring back manufacturing… Into the gap between appearance and reality fell people’s jobs, homes, and livelihoods."

Trump calls the Foxconn plant "The Eighth Wonder of the World."

In 2018, Wisconsin voters fired Scott Walker for being such a plute-sucking rube.

In 2020, they have the chance to fire Trump.

This day in history (permalink)

#15yrsago Technorati indexes 20 millionth blog

#5yrsago DoJ to Apple: your software is licensed, not sold, so we can force you to decrypt

#5yrsago Botnets running on CCTVs and NASs

#5yrsago Astounding showpiece table full of hidden compartments nested in hidden compartments

#5yrsago Investing in David v Goliath: hundreds of millions slosh into litigation finance funds

#5yrsago Ta-Nehisi Coates’s “Between the World and Me” is the next book you should read

#5yrsago Antioxidants protect cancer cells, help tumors to spread

#5yrsago 70% of CEOs’ effect on company performance can be attributed to random chance

#5yrsago FCC trying to stop phone companies that rip off prisoners’ families

#1yrago A visual history of Soviet anti-religious artwork

#1yrago When the HR department is a robotic phrenologist: “face-scanning algorithm” gains popularity as a job-applicant screener

#1yrago Japanese robot hotel chain ignored repeated warnings that its in-room “bed-facing” robots could be turned into spy devices

#1yrago The wonderful You Must Remember This podcast returns to tell the secret history of Disney’s most racist movie, Song of the South

#1yrago New York Times abruptly eliminates its “director of information security” position: “there is no need for a dedicated focus on newsroom and journalistic security”

#1yrago Educational spyware company to school boards: hire us to spy on your kids and we’ll help you sabotage teachers’ strikes

Colophon (permalink)

Today's top sources: Naked Capitalism (, Lowering the Bar (

Currently writing: My next novel, "The Lost Cause," a post-GND novel about truth and reconciliation. Yesterday's progress: 520 words (76061 total).

Currently reading: Harrow the Ninth, Tamsyn Muir

Latest podcast: Someone Comes to Town, Someone Leaves Town (part 17)

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