November 13, 2012 at 8:58 pm, Dana Larson said:

So, the people are excited, they donate to this campaign this year, maybe the next…what happens after that? What keeps the momentum up? Will young people start taking out huge loans again thinking, "oh, the Jubilee will have me covered!"

There should be some sort of cap or time limit on the Jubilee. That way we build press and focus on the urgency of this problem, but acknowledge that a better, longer-term solution is needed. Otherwise, we all get excited about this movement and put all our efforts until publicizing and fundraising for it, and tuition continues to rise and students continue to choose majors that aren't fortuitous and take out loans they can't realistically repay, all because our eyes are on the Jubilee, not addressing these larger issues.

In short, this is another "kick the can" initiative. I think the "powers that be" that Occupy is hoping to change will see this as a welcome distraction that allows them to continue their current, detrimental practices.

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November 14, 2012 at 6:09 pm, William Morrill said:

I agree with Steve, any debt forgiveness generates a taxable event. In addition, when debts are bundled and sold, they are not sold to "debt collectors / collection agencies" but are sold to investors for the purposes of receiving income (the payments received). The idea that a seller of these securities would not sell because there would be no collection seems a bit odd, as once they are sold, the seller receives nothing more anyway. What I am afraid may happen is that any new "buying power" will just turn, say, mortgage debt into credit card debt and we are worse off than we are now.

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November 16, 2012 at 6:13 pm, Steve Hochschild said:

After talking all week: An open letter to the StrikeDebt initiative: This plan has problems and I have been trying to find someone to explain things to me. I am not in any way an expert, but nobody is more committed to change than I am, and exposing change organizations to legal and media liability is something I want to help prevent.

There are three ways that the donated funds can be used to the stated purpose. First, the debt can be purchased and retired. This is what everyone thinks is going to happen, but there are two issues: the cost, reported to be 8-10%, and the tax liability to the borrower. The cost is important, because the 20-1 claims are 100% too high, but the tax issues are much more important. Any retired debt must, by law, be reported to the IRS on a form 1099-C, a copy of which also is sent to the borrower. This is an informational form, and must be filed regardless of the profit or loss sustained by either party. The amount of debt that is retired becomes taxable income to the borrower, and tax on that income is immediately due. If, for example, the borrower owes $20k, and SD purchases that debt and retires it, the borrower immediately owes tax on that $20k. This will reduce the money owed, but now what is owed is owed to the IRS, which will never go away, and can't be ignored. Failing to receive a 1099-C does not protect the taxpayer from this liability; it will continue to accrue interest and penalties, which are now owed to the IRS. It was stated that SD would not have to file 1099-Cs for the retired debt, but this is not correct. This approach is stupid.

The second approach is to buy the debt and hold it. This eliminates the 1099-C issue, but it does not achieve the stated goal, because not seeking payment for the debt does not make the debt go away for the borrower. Generally, this is the situation for most borrowers in this position, so SD's efforts make no difference, and are "pointless and moronic", as pointed out. The debt is still on the borrowers' credit report, for example. The bigger issue is that this buy and hold approach turns SD into an investment organization, soliciting money for the purpose of investing in debt instruments, just like Goldman Sachs. We all know that investment groups soliciting money have very tight rules and regs that the SEC enforces. For example, investment managers must have licenses and insurance, investors (everyone who donated money) must be qualified, and every part of all transactions must be documented & registered. Obviously, a 503C charitable organization like RJ cannot solicit funds to buy and hold investments. This issue would come under the IRS, so they are still in the picture, even without the 1099-C issue. This approach is not actually possible, in my opinion.

The third approach would be for SD to become a debt collection agency, which is how the plan was originally presented. An agency pays a fee for a time-limited right to become the lender's agent. They get so many months to collect what they can, and then the debt returns to the lender, who sells that right to yet another collection agency. This is where the advertised 20-1 leverage comes from, and the "pennies on the dollar" cost projections, but this approach does nothing but put fees into the lenders' pockets, only to allow them to continue the collection effort when the agency's term is up. This approach actually takes the donations and hands them to the banks — not meeting anyone's expectations.

I continue to rely on faith that SD is not knowingly committing fraud, but ignorance and naivete are not valid excuses for such a poorly conceived plan. Unlike previous Occupy initiatives, this one has solicited money as a charity with no chance of fulfilling the promises made, (i.e. school loans cannot be forgiven), and cannot be easily differentiated from fraud. This initiative has crossed the line from political theater to commerce, and a lot of people care about how commerce is executed. I ask again that someone who knows what the fuck they are talking about to respond and explain where I am mistaken, if possible.

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