February 18, 2010

What Does Nietzsche Say About Credit Scores?

Filed under: Land Reform, Law, Neo-feudalism, Nietzsche — Tags: — Russ @ 6:22 am


When I wrote previously about strategic defaults (part one of the series here), one of the issues I discussed was the creditor’s ability to rat out the defaulter to the credit report bureau, to trash his score.
This kind of punishment is general throughout the process, for missing a payment, for being foreclosed upon, for strategically defaulting, for going bankrupt. Little of it has any relation to one’s actual behavior. It doesn’t matter whether somebody was a rampaging “flipper” or someone pumped full of American Dream propaganda and hard-sold on a predatory loan, who later loses his job, sustains a medical crisis, or simply is dumped underwater by the bursting of the bubble. In every case the point of the system is to intimidate and bully the consumer into docile, compliant rat-racing behavior.
In this particular case, the banks blew up the bubble and made the subprime loans, while the government and MSM indoctrinated the people into the home-ownership debt ideology. And now that the bubble has burst, the hapless borrower is supposed to take the full hit, while every cent of fraudulent bank “profit” is conserved.
As Brent White writes, this is not only a unilateral reshuffling of the contractual balance of exposure, but hinders any rational, equitable mortgage modification policy goals.

Most lenders will, in other words, take full advantage of the asymmetry of norms between lender and borrower and will use the threat of damaging the borrower’s credit score to bring the borrower into compliance. Additionally, many lenders will only bargain when the threat of damaging the homeowner’s credit has lost its force and it becomes clear to the lender that foreclosure is imminent absent some accommodation. On a fundamental level, the asymmetry of moral norms for borrowers and market norms for lenders gives lenders an unfair advantage in negotiations related to the enforcement of contractual rights and obligations, including the borrower’s right to exercise the put option. This imbalance is exaggerated by the credit reporting system, which gives lenders the power to threaten borrowers’ human worth and social status by damaging their credit scores – scores that serve as much as grades for moral character as they do for creditworthiness. The result is a predictable imbalance in which individual homeowners have borne a huge and disproportionate burden of the housing collapse……

The suggestion that Congress should amend the Fair Credit Reporting Act to prevent lenders from reporting mortgage defaults is premised upon the underlying mortgage contract, in which lenders agree to hold the house alone as collateral. In the case of underwater mortgages, however, the portion of the mortgage above the home’s present value essentially becomes unsecured. Lenders compensate for this by holding the borrowers’ credit score, and thus their human worth, as collateral – thereby altering the underlying agreement that the home serves as the sole collateral. As a consequence, lenders are often able to reap the benefit, but escape the costs, of their bargain.

The credit score has been institutionalized as a key metric not only of financial reliability but of character, reputation in general. The point is not only to clinically catalog financial behavior, but to threaten, extort, punish, shame, outlaw.
This seems like a recrudescence toward olden times where the punishment of debtors was actually part of what Nietzsche called the “festival of cruelty.”
N writes (On the Genealogy of Morals, essay II, sections 5-6) of the creditor inflicting pain, even literally extracting flesh, as recompense when the debtor can’t pay.

Let us clarify for ourselves the logic of this whole method of compensation—it is weird enough. The equivalency is given in this way: instead of an advantage making up directly for the harm (hence, instead of compensation in gold, land, possessions of some sort or another), the creditor is given a kind of pleasure as repayment and compensation—the pleasure of being allowed to discharge his power on a powerless person without having to think about it, the delight in “de fair le mal pour le plaisir de le faire” [doing wrong for the pleasure of doing it], the enjoyment of violation. By means of the “punishment” of the debtor, the creditor participates in a right belonging to the masters. Finally he also for once comes to the lofty feeling of despising a being as someone “beneath him,” as someone he is entitled to mistreat—or at least, in the event that the real force of punishment, of executing punishment, has already been transferred to the “authorities,” the feeling of seeing the debtor despised and mistreated. The compensation thus consists of an order for and a right to cruelty.

He goes on:

In this area, that is, in the laws of obligation, the world of the moral concepts “guilt,” “conscience,” “duty,” and “sanctity of obligation” has its origin—its beginning, like the beginning of everything great on earth, was watered thoroughly and for a long time with blood. And can we not add that this world deep down has never again been completely free of a certain smell of blood and torture—(not even with old Kant whose categorical imperative stinks of cruelty)? In addition, here that weird knot linking the ideas of “guilt and suffering,” which perhaps has become impossible to undo, was first knit together. Let me pose the question once more: to what extent can suffering be a compensation for “debts”? To the extent that making someone suffer provides the highest degree of pleasure, to the extent that the person hurt by the debt, in exchange for the injury as well as for the distress caused by the injury, got an extraordinary offsetting pleasure: creating suffering…

N calls this a conjecture regarding how the whole sense of guilt, the “bad conscience”, was branded into prehistoric man. And today the system, in scrambling to maintain that sense of guilt among the peasants even as its own criminality and abdication of authority becomes ever more manifest, is retrogressing to measures redolent of this primordial guilt branding.

It seems to me that the delicacy and, even more, the Tartufferie [hypocrisy] of tame house pets (I mean modern man, I mean us) resist imagining with all our power how much cruelty contributes to the great celebratory joy of older humanity, as, in fact, an ingredient mixed into almost all their enjoyments and, from another perspective, how naive, how innocent, their need for cruelty appears, how they fundamentally think of its particular “disinterested malice” (or to use Spinoza’s words, the sympathia malevolens [malevolent sympathy]) as a normal human characteristic:—and hence as something to which their conscience says a heartfelt Yes!* A more deeply penetrating eye might still notice, even today, enough of this most ancient and most fundamental celebratory human joy. In any case, it’s not so long ago that people wouldn’t think of an aristocratic wedding and folk festival in the grandest style without executions, tortures, or something like an auto-da-fé [burning at the stake], and similarly no noble household lacked creatures on whom people could vent their malice and cruel taunts without a second thought.

This puts reality TV, ever more humiliating and destructive, in perspective. Are Stephen King’s dystopic game shows “The Long Walk” and “The Running Man” far off in reality?
We’re seeing the new outlines of the old medieval jurisprudence – outlawry, debtors’ prison, and the festival of cruelty. Sublimated judicial combat, in the form of the adversarial legal system becoming a monetized arms race, who can afford to hire the fanciest lawyers, has long been entrenched. (I doubt that the right to an attorney at all if you can’t afford one would ever be enshrined today if it weren’t a superprecedent already; and we can expect to see that under increasing nominal attack, just as it’s long been under surreptitious attack via budget cuts.) Most of all, just as the perverted religious premise that wealth equals merit and virtue has long been the establishment ideology, so more and more all of society is becoming a large scale trial by ordeal, wherein being able to find and hold a living wage job is just as inscrutable a religious Mystery as remaining in perfect health if you can’t afford health insurance, and in either case your success or failure is simply the judgement of god, of mysterious forces of nature. Were you one of the Elect or not?
Can you hold your hand in the flame without flinching? This judges your innocence or guilt, and in our times your human worth. There is no “society”, and certainly calculated top-down neoliberal policy has nothing to do with what’s happening, oh no.
These are all familiar signposts on our journey back to feudalism.


  1. This somewhat OT, but not radically so.


    Comment by Edwardo — February 19, 2010 @ 12:12 am

  2. The impression I get is that he wasn’t my kind of guy, and I support long-term organization, not what they used to call “propaganda by deed.”

    Nevertheless, in the end it’s better that an aggrieved individual do something against the system rather than nothing.

    I would just tell people the truly constructive anti-IRS action is the anti-system action of renouncing debt, “consumerism”, playing their system game in general.

    (The reason I say he doesn’t look like my kind of person is because I get the impression that he didn’t reject the system as such, but was just embittered that he didn’t get to be the bigshot he thought he was entitled to be.

    “The tax code DISSED me!”)

    Comment by Russ — February 19, 2010 @ 2:13 am

  3. Quite possibly that is the case. But let’s face it, a lot of folks who rail against the system are probably informed by the same mindset.

    Comment by Edwardo — February 19, 2010 @ 11:57 am

    • Yes. Well, if more and more people can agree on that, hopefully where they came from to get there won’t be so important for the time being.

      Comment by Russ — February 19, 2010 @ 4:19 pm

  4. A good entry, but also one of the best blog post titles I’ve ever seen!

    Comment by jimmy james — February 21, 2010 @ 1:04 am

    • Thanks, Jimmy!

      Comment by Russ — February 21, 2010 @ 7:03 am

  5. Nietsche? Hannah Arendt? Russ, you need to get out more. Let me recommend a little Veblen- The Theory of Business Enterprise.

    Nietsche is peachy but Freud I avoid. Did you know he was nuts?

    Comment by jake chase — February 22, 2010 @ 6:55 am

  6. Unfortunately there is no education at school about credit scores, even though this should be part of the curriculum. That way people would be a lot more protected against fraud. If you have no clue, getting a loan or a credit card is like walking into the lion’s cage.

    Comment by John Dime | Credit scores — July 29, 2010 @ 3:10 am

  7. Great post! I especially like the amount of detail and information you provide for your readers. I will take great interest in following your future posts.

    Comment by Ryan — September 26, 2011 @ 12:39 am

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