Friday, January 1, 2021

Post-Modern America is as vicious and dysfunctional as Victorian England, the Weimar Republic, and 17th century France

If you get your news from network television, you are being bombarded by commercials about prescription medicines and financial services. 

These ads typically show prosperous older Americans who look remarkably fit, live in lovely homes, and spend their days cooking gourmet meals, wind-surfing, and flyfishing with their adorable grandchildren.

These advertisements purport to show life in 21st century America--the best of all possible worlds where everyone is healthy, happy, and financially secure.

But I don't live in that America, and you don't either. Instead, most of us live in a society that is remarkably similar to dysfunctional regimes of bygone centuries.

Our government is printing money at a frightening pace to prop up the financial markets, much like the Weimar Republic did in the 1920s. And we know how that turned out. Germany experienced runaway inflation that set the stage for Adolph Hitler.

We may celebrate the fact that the United States abolished debtors' prisons, but 21st century America treats debtors much the way England treated them in the Victorian age. 

We don't deport debtors to Australia or put them in jail as England did in Charles Dickens' time, but we've created a virtual prison for student-loan borrowers, millions of whom are trapped in income-based repayment plans that last 25 years. Compounding student-debtors' misery, our supposedly benevolent Congress has made it almost impossible for insolvent student-loan debtors to get relief in the bankruptcy courts.

And the American tax system is remarkably like the tax regime in Louis XIV's France. W.H. Lewis, who wrote a masterful social history of seventeenth-century France, described the French tax structure this way;

[T]he whole fiscal system was in itself radically and incurably vicious; as a contemporary remarks, if he Devil himself had been given a free hand to plan the ruin of France, he could not have invented any scheme more likely to achieve that object than the system of taxation in vogue, a system which would seem to have been designed with the sole object of ensuring a minimum return to the King at a maximum price to his subjects, with the heaviest share falling on the poorest section of the population.

Doesn't that sound like the American tax system? Sure it does. As financial tycoon Warren Buffett has repeatedly observed, he pays federal taxes at a lower rate than his secretary.

And the COVID pandemic didn't change the system at all. Indeed, the latest coronavirus relief package includes 100 percent deductibility for the so-called "three-martini lunch." Think about it: wealthy Americans can write off extravagant meals that can cost more than $1,000, while the working stiff gets a $600 coronavirus-relief check.

 In short, although Americans may deceive themselves into believing that our society is evolving into a paradise based on the principles of equity, diversity, and inclusion, in fact, we live in a world not so very different from Victorian England, Weimar Germany, and 17th century France.

Louis XIV: Is everybody happy?

Saturday, December 26, 2020

Happy New Year! Your middle-class status has been revoked and a college degree will not get you reinstated

 As 2020 comes to a close, you may think 2021 will be a better year. And if you are among the nation's wealthiest Americans, things look pretty rosy.

But if you are a middle-class person, next year will be worse for you than 2020.

First of all, as Charles Hugh Smith pointed out in a recent online essay, the middle class is an illusion. If you think you are in the middle class, you have been deceived. In fact, you are in a "phantom middle class," a class of permanent debtors.  

Over the past 40 years, earnings for the top one-tenth of one percent of Americans has grown 15 times faster than income for the bottom 90 percent.  Wages as a share of the national economy have been going down for the last half-century. 

You know that because you saw how wages went up for your parents' generation, but are not going up for working people today. 

Or as Mr. Smith put it: 

If the top 10% own 90% of the wealth and has captured virtually all the income gains of the past 20 years, then isn't it obvious America has no middle class? What the traditional middle middle class . . . owns is debt . . . .

Nowhere is this more obvious than when we look at the massive debt that gullible Americans have taken on to get a college degree in the pathetic hope that a diploma would get them into the middle class or keep them from falling out of it.

As Mr. Smith pointed out, Americans are burdened by "$I.7 trillion in student loan debt burdening those who bought the narrative that a college diploma was a passport to the security of the middle class. The debt load carried by those clinging on to aspirations of middle-class security is staggering."

Indeed, "burdening powerless students with uncertain futures with trillions in high-interest debt would have been viewed as criminal two generations ago, but now it's celebrated by those reaping interest from precarious debt-serfs."

The poor saps who have been plunged into poverty by their student loans cannot discharge their debt in bankruptcy courts, and they got nothing but crumbs from Congress's so-called coronavirus relief legislation.

College presidents--most of whom make more than half-million dollars a year, whined to their legislators about how much the pandemic was costing them, and Congress bailed them out. But did even one of these charlatan bozos urge some relief for their ex-students who are groaning under the burden of student loans they can never repay? No, they did not.

If Americans graduated from colleges and graduate schools with useful skills, they would earn enough to pay off their student loans quickly--within 10 years at least. But they are not acquiring practical skills--especially if they majored in the liberal arts or the social sciences.  

Again, Mr. Smith:

As for possessing skills, much of the workforce has few producer skills, as the consumer economy devotes inordinate attention not to producing but to marketing, speculation and complying with counterproductive regulations and bureaucratic file-shuffling.

But our fun-house economy cannot continue indefinitely with the superwealthy exploiting the rest of us while the government prints money and runs up the national debt--now pushing $28 trillion. As Smith observed:

Once the con of printing trillions of dollars out of thin air dissolves and the nation has to balance its books in the real world, these file-shuffling and speculative skills will no longer generate meaningful income.

Those of us in the bottom 90 percent of the nation's earners can do very little to stop the downward spiral in our wealth and income.  But at least we can advise our children not to take out student loans to get worthless college degrees, useless MBAs, obscenely expensive law diplomas, and meaningless doctorates.

Does Harvard President Larry Bacow have anything to say about student debt?


Tuesday, December 22, 2020

The $900 Billion COVID-19 relief bill: Did Santa Claus forget you this year?

 Congress passed a $900 billion COVID-19 relief bill yesterday.  It is almost 5,600 pages long, so most of our national legislators weren't even able to read it. 

The bill has the usual benefits we expected, but it contains other goodies that have nothing to do with the coronavirus. Those goodies added another trillion dollars to the bill's cost.

Who got the pork? Schools, colleges, and universities got $82 billion, the airlines got $25 billion, and the entertainment industry got $15 billion.  

And foreign countries got some money too. Ten million dollars went to Pakistan for a gender program. Venezuela is getting $33 million for “democracy programs," and the formerly Soviet Republic of Georgia will receive $132 billion.  

Hey, the Palestinians will get a cool quarter of a billion the nation of Sudan will get a little something as well.

Is there anything in there for you and me? Perhaps, a little, but the non-relief portion of the COVID-19 relief bill is actually larger than the amount that went to distressed Americans.

Did any one of our 535 Congressional representatives think to add a provision to this mammoth bill that would prohibit the Department of Education from garnishing the Social Security checks of elderly student-loan defaulters? Did anyone think about amending the Bankruptcy Code to allow insolvent private student-loan debtors to discharge their college loans in bankruptcy? Did anyone think to pass some legislation to clean up the for-profit college industry?

Apparently not. 

Isn't it Congress's job to take care of suffering Americans and to put their needs over the whims and desires of special interest groups, not to mention foreign governments run by people who hate us?

Sorry, pal. I gave my last Christmas present to the Ukrainians.

Monday, December 21, 2020

Living the good life with Fielden Poolaw: The Merchants Club, two quarts of Coors, and a teen hop

Several teenagers in my hometown struggled with alcohol when I was growing up, but I only knew one: Fielden Poolaw, a classmate of mine at Anadarko High School. 

Fielden was a Kiowa with a copper complexion and elongated earlobes that looked like someone had stretched them. He wore his hair short and went around in a rumpled, grey trench coat, which he rarely took off. The trench coat gave him a vaguely sinister appearance, which is probably the look Fielden was going for.

About one out of five kids at my high school were Natives, but the white kids and the Indian kids lived on different planets. Fielden, however, had a couple of things going for him that bridged the gap between the white world and his Kiowa world. 

For one thing, Fielden had an evening job taking tickets and popping popcorn at the Redskin Theater. Fielden sometimes let a few of his friends slip into the theater without paying, and he occasionally gave out free bags of fresh, hot  popcorn—heavily seasoned with orange popcorn salt.  

And Fielden had another thing going for him. He was the leader of a gang of Indian kids who hung out at the Redskin.  These Indian boys--probably popcorn addicts--swore an unspoken oath of fealty to Fielden. He could dispatch them on a moment’s notice to rescue any friend who was getting harassed or bullied—and there was a lot of harassment and bullying going on in Anadarko when I was young.

So Fielden was a handy guy to know. But he only dispensed his favors (protection and free popcorn) to his friends. So how did someone become Fielden’s friend?  By providing him with something he desperately needed—transportation.

Fielden was too poor to own a vehicle, and he depended on white kids to drive him around in their parents’ cars on the weekends. I was one of Fielden’s chauffeurs, and I often drove him around the drag—the endless loop between the Tastee Freeze Drive-in on the east side of town and the Powwow Drive-in on the west side.  

As I said, Fielden drank way too much. He was generally stewed when I drove him around on the weekends. I don’t think he ever carried a gun, but he pulled a claw hammer out of his trench coat once, telling me cryptically that he was expecting trouble.

I liked Fielden, and I wasn’t afraid of him. When I was with him, I felt like I was on the precipice of a great adventure; and in fact, Fielden and I experienced an adventure together—at least a minor adventure.

One Friday night I was driving Fielden around in my father’s 1950 Chevrolet pickup—a death trap that constantly leaked brake fluid. The truck had once been black but had turned an orange-gray color. The undercarriage was so rusted that there was a hole in the floor, and I could actually see the road beneath me when I drove. It had a faulty alternator that I had to pound with a pair of pliers to get the engine to crank.  Oh yeah, it was a dreamboat—a real chick magnet!

On this particular night, Fielden collared me to drive him to the teen hop at the Caddo County Fairgrounds. This was an easy assignment because I was going to the teen hop anyway—the King's Men were playing. 

But Fielden had a stop to make before the teen hop. By a series of grunts, he guided me down an alley behind Broadway Street and told me to stop at the back door of  the town’s most notorious bar—the Merchants Club!

Yes, the Merchants Club—the seediest of Anadarko’s seedy bars. The Merchants Club—a bar with an attitude-- which kept its double front doors flung wide open so that all of Protestant Anadarko could peer into its dark and smoky maw in the hope of seeing a neighbor sucking down a Coors, a Jax, or a Stag, accompanied—we hoped--by a woman other than his wife.

But, of course, our neighbors didn’t hang out in the Merchants Club. It was a bar for Indian men, and a middle-class white guy would be nuts to go inside.

Perfect place for Fielden, however. And I knew when we drove up to the Merchants Club’s back door where he had been getting his booze. Fielden mumbled a stern order to wait and then slid silently into the back door of Hell itself. 

I waited and I waited. And then, through the pickup’s rear window, I saw an Anadarko cop walking down the alley, checking for unlocked doors. He was carrying one of those long, heavy flashlights that double as a nightstick. Uh oh!

The officer tapped the window glass with his flashlight. “What are you doing here, kid?”

I was terrified. What in the hell did he think I was doing behind the Merchant Club? Buying booze? Cocaine? Soliciting a prostitute? Planning a burglary?

My mind reeled with the shock of adrenalin, and for once in my otherwise dull-witted life, I did some fast thinking.

“Officer,” I said, “my truck won’t start.”  

Then I explained how beating on the alternator would sometimes get the engine to turn over. The cop said he had seen that problem before and offered to help. I raised the hood on the most dangerous and ugly truck in America and started beating on the alternator with a crescent wrench, while the cop shined his light into the engine compartment.

Then I quickly scrambled back in the truck, turned the key, and the engine cranked right up.  “Thanks for your help, officer!” 

And in fact, he had been helpful, and I felt bad about deceiving him.

But where was Fielden? To hell with Fielden, I thought. I’m getting out of here.

And then, with almost perfect timing, Fielden came out of the backdoor of the Merchants Club with two quarts of Coors Banquet Beer, bottle tops peeking coyly out of brown paper bags. My heart stopped beating

If Fielden was surprised to see the cop, he didn’t show it, and the cop didn’t seem surprised either. The cop didn’t say anything. Fielden didn’t say anything. And I didn’t say anything. Fielden climbed in the truck, and off we went.

About five minutes later, Fielden and I were at the teen hop. I parked the truck, and we bought our admission tickets—a buck apiece.  I had had enough excitement for the night, and I began drifting away from Fielden, hoping to lose myself in a crowd of dancing Oklahomans.

But Fielden followed me—lurching across the dance floor with a quart bottle of Coors squeezed under each armpit and concealed beneath his trench coat. 

Then, when he was only about two feet from me, an enthusiastic girl doing the Twist—I think she was from Fort Cobb—bumped him.

Fielden’s arms flew up and two quarts of Coors crashed on the concrete floor. Flying glass went everywhere. The bottom of Fielden’s trench coat was drenched in beer.

Fielden had been trying to tell me something just before the beer bottles broke. What was it he wanted to say? I’ll never know because a squad of Rotarians, the teen hop’s zealous chaperones, hustled him out into the darkness.

A few months after that memorable evening, I went away to Oklahoma State University, where I wasted four more years of my life. Fielden stayed in Anadarko and slipped deeper and deeper into alcohol.  He died in Florida at the age of 33. I think he was in rehab at the time.

I learned that Fielden was buried in the cemetery next to the Redstone Church, situated below a bluff that overlooks the Washita river.

Did Fielden die a Christian? I do not know, and I do not care. And, at this stage of my life, I feel sure God doesn’t care either.

But what the hell do I know? Fielden and I spent hundreds of hours driving around Anadarko together, and I don’t think I ever asked him a single question.

Nevertheless, if there is a heaven, I’m sure Fielden will be there. After all, paradise would not be paradise without fresh, hot popcorn, seasoned with orange popcorn salt. And nobody popped popcorn better than Fielden.











Friday, December 18, 2020

Mosley v. Educational Credit Management Corporation: "It's not personal. It's just business."

The U.S. Department of Education and Educational Credit Management Corporation (ECMC), DOE's ruthless sidekick, don't want anyone to get bankruptcy relief.  This has been DOE's policy for many years.

Let's take a look at Mosley v. Educational  Credit Management Corporation, decided by the Eleventh Circuit back in 2007. As we will see, Mosley was clearly entitled to discharge his student loans in bankruptcy under the undue hardship standard, but ECMC fought him all the way into the Eleventh Circuit Court of Appeals.

Keldric Mosley attended Alcorn State University, an HBCU, from 1989 to 1994, but he never got a degree. While a student, he was enrolled in Army ROTC, and he injured his back and hip when he fell from a tank during summer ROTC exercises.

Mosley left Alcorn State in 1994 to help his mother, whose health was deteriorating. He lived with his mother from 1994 until 1999. He held numerous jobs during that time but was unable to keep any of them due to depression, heavy drinking, and physical limitations due to his ROTC injury. (p. 1323)

In 2000, Mosley's mother committed him to a state-supported mental health facility, where he was diagnosed with depression and anxiety. He sought treatment for his physical and mental disabilities from the Department of Veterans' Affairs, which placed him on prescription medications. These medications left him groggy. The combination of medicines and his physical disabilities made it difficult for Mosley to find stable employment. (p. 1323)

As noted by the Eleventh Circuit, Mosley was homeless from 2000 until his adversary proceeding in bankruptcy court, and he lived off of food stamps and small disability checks. He had no car and frequently slept at his aunt's house. (p. 1323)

Mosley represented himself in his adversary proceeding and sought to get evidence of his medical disabilities before the bankruptcy court. ECMC showed up to oppose bankruptcy relief and objected to the admission of some of Mosley's medical evidence. 

Although Judge Mullins reluctantly declined to accept some of his medical evidence, he discharged Mosely's student loans without that evidence. Judge Mullins reasoned that Mosley's testimony was sufficient to show that "he was in a vicious cycle of illness and homelessness that prevented him from working" and that repaying his student loans would constitute an undue hardship. (p. 1324)

After a trial, Judge Mullins discharged Mosley's student loans in bankruptcy.  ECMC appealed, but U.S. District Court Judge Robert Vining affirmed Judge Mullins' decision.

ECMC then appealed to the Eleventh Circuit Court of Appeals.  It argued that Judge Mullins erred in admitting Mosley's own testimony about his health. ECMC also argued that Mosley's evidence did not support Judge Mullins' conclusion that Mosley's financial situation was unlikely to improve or his ruling that Mosely handled his student loans in good faith.

But the Eleventh Circuit rejected all of ECMC's arguments and affirmed Judge Mullins' decision to discharge Mosley's student loans.  The appellate court ruled that Judge Mullins properly considered Mosley's testimony about his medical health. The court cited the Sixth Circuit's decision in Barrett v. ECMC, in which that court ruled that requiring an indigent debtor to obtain expensive expert testimony or documentation "imposes an unnecessary and undue burden on the debtor in establishing his burden of proof." (p. 1325)

Regarding the good faith requirement, ECMC argued that Mosley had not managed his student loans in good faith because he had not made a payment on his loans since 1996 and had not enrolled in an income-based repayment plan. 

But the Eleventh Circuit rejected those arguments. 

 [F]ailure to make a payment, standing alone, does not establish a lack of good faith. Good faith is measured by the debtor's efforts to obtain employment, maximize income, and minimize expenses; his default should result, not from his choices, but from factors beyond his reasonable control. (p. 1327)

Nor is a debtor always obligated to sign up for an income-based repayment plan to establish good faith:

While a debtor's effort to negotiate a repayment plan certainly demonstrates good faith, courts have rejected a per se rule that a debtor cannot show good faith where he or she has not enrolled in the Income Contingent Repayment Program. (p. 1327).

In short, Keldric Mosley--who clearly met the undue hardship standard for discharging his student loans in bankruptcy--had to fight for that remedy all the way to the Eleventh Circuit Court of Appeals. Although Mosley had a record of homelessness and chronic health problems, ECMC refused to allow him bankruptcy relief until three levels of federal judges ruled in his favor. 

It was not personal with ECMC. It was just business.

Congress needs to remove the "undue hardship" language from the Bankruptcy Code, and perhaps someday it will. 

But until that day comes, the U.S. Department of Education and ECMC could do a lot to ease the stress on overburdened student-loan debtors if they would merely allow people like Keldric Mosely to discharge their student loans in bankruptcy without having to battle their way into the federal appellate courts.  


Mosely v. Educational Credit Management Corporation, 494 F.3d 1320 (1lth Cir. 2007).

"It's not personal. It's just business."

Thursday, December 17, 2020

Mendenhall v. Navient: Idaho bankruptcy judge grants a family man a partial discharge of student loan debt totally more than $400,00.

Mendenhall v. Navient Corporation: A $76,000 student-loan debt grows fivefold

In 2007, Steven Mendenhall obtained a bachelor's degree in film and video production from Brooks Institute of Photography, a for-profit college in California, which later closed.  To finance his studies, Mendenhall took out about $75,000 in federal student loans and $76,000 in private loans from Sallie Mae.

Mendenhall's private student loans gradually spun out of control. By 2013--six years after graduating, Mr. Mendenhall's private student-loan debt had grown from $76,000 to  $260,357.69--more than three times what he borrowed.  By 2018, his private loan debt had grown to $407,912.84--more than five times what he borrowed.

How did that happen? To begin with, Sallie Mae's interest rate was quite high--13.625 percent. Interest on Mr. Mendenhall's unpaid debt accumulated and capitalized, causing his loan balance to spiral upward.  Also, Sallie Mae charged Mendenhall additional fees--nearly $40,000 in fees as of 2013. That's more than half the amount Mr. Mendenhall borrowed.

Added together then--Mr. Mendenhall's private student-loan debt and his federal debt totaled almost half a million dollars.

Mr. Mendenhall diligently sought employment and finally landed a pretty good job working at Brigham Young University's branch campus in Rexburg, Idaho. He attempted to manage his towering debt by filing for bankruptcy three times. Realizing he could not discharge his student loans absent a showing of undue hardship, Mendenhall filed for bankruptcy twice to discharge his other debts, hoping to free up more money to pay on his student loans. Still, he was unable to pay down his private student-loan debt.

Mendenhall filed his third bankruptcy petition in 2018, hoping to discharge his student loans. He settled with the U.S. Department of Education but still owed over $400,000 to Sallie Mae's successor in interest, Navient.

Judge Joseph Meier grants Mr. Mendenhall a partial discharge of his massive student debt

Idaho Bankruptcy Judge Joseph Meier reviewed Mr. Mendhall's financial situation and concluded that Mendenhall and his wife had lived frugally. The judge specifically approved of Mendenhall's expenditures for life insurance and his contributions to a retirement fund and a small savings account.

In fact, Judge Meier found only two unreasonable expenses--Mendenhall's $400 a month charitable contribution to the family church and his $300 monthly payments on his attorney fees.

After reviewing the totality of Mr. Mendenhall’s income and expenses, Judge Meier concluded that Mendenhall only had $150 a month in available income to pay on his student-loan bill---$407,000, which was accruing interest at the rate of 13.625 percent.

Judge Meier then analyzed Mendenhall’ situation under the three-pronged Brunner test to determine whether Mendenhall and his dependents would suffer an “undue hardship” if he were required to repay his private student-loan debt.

In the Judge’s view, Mendenhall met all three prongs of the Brunner test.  First, he was unable to repay his student loans and maintain a minimal standard of living. Second, his current financial situation was unlikely to change substantially.  And third, Mendenhall had handled his loans in good faith.

After completing his extensive analysis, Judge Meier then gave Stephen Mendenhall a partial discharge of his private student loans. The judge discharged all of this debt except $45,000--a little more than 10 percent of the total amount he owed. This debt could be paid without accruing interest, Judge Meier instructed, in payments of $150 a month over 25 years.

Sometimes a partial student-loan discharge is an appropriate remedy

Judge Meier made the right decision, one that other bankruptcy judges should follow. Granting a partial student-loan discharge gives a judge the flexibility to fashion a reasonable and just remedy for an honest but unfortunate debtor burdened by massive student-loan debt. Such a remedy is particularly appropriate for Mr. Mendhenhall, a husband and father with four children, burdened by student debt that had careened out of control due to a high interest rate and unconscionable fees.


Mendenhall v. Navient Corporation, JMM Adversary Case No. 19-8010-JMM, 2020 WL 6557964 (Bankr. D. Idaho Oct. 15, 2020).

Monday, December 14, 2020

Small private colleges are going down: Don't get trapped under the rubble

 Inside Higher Education carried a story today about major cuts being made at three higher education institutions. Marquette University, a Jesuit institution, is laying off 225 faculty and staff members. The University of Evansville, a Methodist college, is eliminating 17 majors and three departments. The College of Saint. Rose, a Catholic school, is cutting 16 majors and six master's degrees.

These three colleges are not alone. All over the United States, small, private colleges are suffering from declining enrollments and declining revenues.  Many of them will close over the next couple of years.

The colleges blame demographic trends.  There are simply fewer traditional college-age people in the American population.  Consequently, fewer students are going to college.

The coronavirus pandemic didn't help matters. The COVID outbreak caused a lot of young people to postpone their college plans. And it imposed high costs on institutions that were left with empty dorm rooms this fall.

An overall decline in religion has sapped the vitality of schools that were founded by various churches.  The University of Evansville, for example, is affiliated with the United Methodist Church, but how many young people choose a college because it has ties with a religious denomination?

The small private schools have been fighting desperately to reverse their enrollment crops. They've rolled out new programs, spiffed up their study-abroad offerings, hired public relations firms, and slashed tuition. But for many--these survival strategies won't be enough. 

If you are a young person in the process of deciding where to go to college, here is my advice. Do not go to a small, private school with enrollment below 1,000 students.  The smaller colleges are the most vulnerable. 

You do not want to enroll at a college that closes before you obtain your degree or shortly after graduating.  You don't want to take out student loans to pay tuition at a school that is slashing programs and laying off faculty.  You certainly don't want your parents to take out a Parent Plus Loan so you can study at some obscure little school in the Midwest that won't prepare you for a good job.

In short, private liberal arts education is on the verge of collapse. Don't get trapped under the falling rubble.