The Unwinding: An Inner History of the New America

Elizabeth Herring was born in Oklahoma in 1949 to conservative Methodist parents who had survived the Dust Bowl. By the time she was born, her father’s business partner had run off with his savings, and he was working as a janitor in an apartment building in Oklahoma City. She got good grades and thought her family was middle class. After her father had a heart attack when she was 12, the family lost their car because they were no longer able to pay for it. Mrs. Herring had to take a job answering phones in the Sears mail order department. She blamed her husband for failing the family, and Liz stayed out of the way and kept up appearances. She decided she would be a teacher someday.

Her experience on the debate team was her first inclination that there was a wider world. She got a full scholarship to George Washington University just as the family was regaining its status as lower middle class. She married a high school boyfriend and became Elizabeth Warren and got a degree in speech pathology from the University of Houston, then a law degree at Rutgers. Her husband wanted her to stay home and raise their kids. They got divorced in 1978, and she began teaching law in Houston. She was a Republican then because she believed in free markets. That year, Congress defeated a bill that would set up a new consumer protection agency but passed another making it easier to declare bankruptcy. Warren decided to study that, thinking she would prove that all those declaring bankruptcy were cheaters who were taking advantage of everyone else. Warren spent the 1980s doing her research.

From the nation’s founding, there were financial crises every decade or so until the Great Depression. Then, Americans decided to do better and produced three important regulations: the FDIC (protecting bank deposits), Glass-Steagall (preventing banks from doing crazy things with people’s money), and the SEC (regulating stock markets). For a half century, those rules kept America from having more financial crises. Then came the late 1970s and early 1980s when people decided that regulation was too expensive and annoying, so the government began unraveling those regulations. That led to the Savings and Loan crisis in which 700 financial institutions went under. This was just as Warren and her colleagues were publishing their research on bankruptcy. What they found was that most Americans in bankruptcy were middle class people who worked hard to afford houses in areas with good schools but that had run into problems due to illnesses, job loss, or divorce. They lived more on credit and then had no choice but to declare bankruptcy. They weren’t irresponsible cheaters. Bankruptcy was not socially shameful but really a personal tragedy that was at least partially caused by weak regulations.

She continued her research and teaching law at Harvard and watched as banks and credit card companies lobbied Washington for even cushier laws. In 2005, Joe Biden, Chris Dodd, Hillary Clinton and other Democrats helped the Republicans pass a law restricting the right to file for bankruptcy. In 1998, Long-Term Capital Management crumbled and almost took the global financial system with it. Enron fell a few years later. These collapses showed how connected financial institutions were. But Washington kept on deregulating things. As wages stayed flat, families relied more on debt, especially as public schools rotted and parents became even more dependent on staying in houses that were in the right school zones so their children could stay middle class. The banks recognized that the middle class was the biggest source of profits in the United States and pulled at all the threads connecting mortgages, credit cards, and consumer lending. The regulators that still existed were spread too thin, and three things happened for Wall Street: profits soared, bonuses got bigger, and ever more risk was assumed. When everything fell apart, the American people bailed them out.

President Obama met Warren in 2004 and knew she could handle addressing predatory lending issues. He agreed with her idea that there should be a new federal agency that would make banks disclose the risks and penalties of their products in simple terms to consumers. So she went to Washington where she didn’t fit in because she looked and sounded nothing like the typical Washington woman. She seemed to hate the banks and spoke with a sense of radicalism and the voice of the common person, like a modern-day William Jennings Bryan or Hubert Humphrey. Her presence made everyone uncomfortable because it reminded them all of how corrupt Washington had become. The banks, Republicans, and even some Democrats could never forgive her. Banks called her naive but were mad at how well she understood their scams. Republicans devoted themselves to killing the consumer agency. Obama didn’t know what to do with her, especially as his most devoted supporters were moving away from him and toward her. In 2011, he announced the new agency she had pitched and put her deputy in charge of it. She went to Massachusetts to run for the Senate.

Kevin Moore (an alias) was raised in Manhattan and started work at a top American bank right out of college in 1998, the same year Long-Term Capital Management went down and the year before Glass-Steagall was repealed. Wall Street used complicated and opaque language to intimidate others, but the truth was you just needed to be competent at math to be a trader tor good at talking to be good at sales. The people who could do math and lie made big money. In his first six years, he never made more than a quarter million. The crazy money came later.

On September 11, 2001, Kevin felt the ground shake. He decided not to wait and left work, watching as brilliant traders stood around waiting for directions from someone else. At street level, he saw life going on, with no one aware of the attack. In a crisis, he learned, society just functioned while no one understood what was happening. The bank moved operations out of the city for a bit, but the markets recovered quickly. The Fed was cutting rates, and the housing boom was about to start.

In 2004, he left his boring job to join the proprietary trading desk at a large bank based in Europe. It offered no security but lots of potential, as the European bank was just about to aggressively get into collateralized debt obligations. Kevin thought that everything Wall Street created that would later turn out bad had been good inventions but had been executed poorly. Kevin traded credit derivates and things like airline debt. He got everything right for the first two years and earned close to a million dollars a year. He knew something was off, though, even if he didn’t think he was doing anything wrong. Global credit was in a huge bubble, and he worked for a normal bank, not an investment firm.

In 2005, nearly thirty years old, he followed his boss to an emerging markets desk and split his time between London and New York. In 2006, everything exploded, and people were grabbing every financial asset they could. At the end of the year, he went short, convinced the credit market was just a confidence game. After Bear Sterns collapsed, his bet paid off.

After Lehman filed for bankruptcy, he realized the scale of the damage and the number of trades that would have to be unwound. Kevin lost his job and thought over who was to blame. Finance had always been mostly bull, but a good financial system was beneficial—without Wall Street money, Silicon Valley wouldn’t exist. But he realized that when private partnerships went public in the 1980s and small investment banks became huge trading houses and Glass-Steagall was eliminated, things got out of whack and Wall Street people got greedy. The financial sector had just gotten too big.

But Wall Street came back faster than anyone expected. Kevin got an offer for a new job from another European book in 2010 and went back in. For Wall Street, the financial crisis was just a blip.

Nelini Stamp read on Facebook that a Canadian magazine had called for some sort of action around Wall Street at noon on Saturday, September 27, 2011. By the time she had gotten downtown, Wall Street was cordoned off by the police, and she heard that everyone was moving to nearby Zuccotti Park, a park she and few others in New York had ever heard of before. She heard there was going to be a General Assembly and wanted to see it. The crowd did a mic check, which meant one person would speak and then everyone around them would repeat what that person said until the entire crowd had heard the message. This got around the need to have a permit for an amplification system. After the General Assembly, people broke into working groups, and Nelini chose the Outreach group, because she knew a lot of people in labor unions and thought they would need to be on board with the action. She saw everyone tweeting “Occupy Wall Street” and decided to join Twitter, too.

Zuccotti was privately owned and required to stay open 24 hours a day. That night, 60 people or so slept there, including Nelini, a 23-year-old Brooklyn native. Her mother was a Puerto Rican customer service representative for Time Warner Cable. After dropping out of high school, she went to work with the Working Families Party, a political organization that worked with unions. For $30,000 a year, Nelini went door to door for progressive candidates in New York who were fighting for paid sick leave and campaign finance reform. In 2008, she thought it would be awesome if a Black man could be elected president but worried he wouldn’t turn out to be very progressive. Still, people were suddenly talking about things like a single-payer healthcare system, so she got behind Obama. When the mortgage crisis hit, she thought that the financial system was over and that America would return to a blue-collar economy with strict regulations on Wall Street. Then Obama got to office and nothing happened. Nelini started to think the political system was set up simply to protect capital and wealth. Even progressive politics was full of cynics who argued about injustice but never changed anything. Occupy Wall Street felt different

For two weeks, she slept in the park, went to work, showered at home, and hurried back to the park. During that time, two thousand other people showed up, renaming the park Liberty Square. On a march to Union Square, she joined others in chanting about occupying Wall Street and being the 99 percent, but then things got crazy. Officers began to arrest and paper spray the marchers, and news cameras caught it. Suddenly, the media was obsessed with Occupy Wall Street. Since the movement was organized on “horizontal” lines that involved no leadership or structure, no one really knew what the movement was about, but visitors noticed the electricity in the air and the feeling that something widely felt but long repressed was now being voiced. Nelini’s boss at Working Families asked her to help organize a solidarity march with union members and students, and she became a middleman between the different groups. She was invited to speak at a conference in Washington and told the conference that no one should demand something from Wall Street, because that would be telling Wall Street that it had the power. Instead, she thought Occupy Wall Street would start a revolution.

The park itself was a small rectangular block of granite with some honey locust trees. The movement divided the park into zones. One, called “the ghetto,” was made up of long-term people experiencing homelessness and anarchists; it contained a large drum circle and was a world in itself that felt unwelcoming to outsiders. The park banned tents, so people had set up tarps on top of the granite, and some tarps were hubs for various communal activities: eating, cleaning, recycling, reading. In fact, the library tarp contained thousands of free books. On the other end of the park, tourists and workers on their lunch hour could converge with Occupy Wall Street. Some carried signs of solidarity, and everywhere visitors could hear conversations about what had happened to the financial system. One day, some Russian men accused the movement of leading directly to communism and North Korea. They were drowned out by crowds screaming “false.”

Ray Kachel had lived all of his 53 years within a few miles of Seattle. He was a self-taught computer expert who worked for various tech companies. When he was between tech jobs, he worked in the janitorial business his parents owned. After they died, he became a bit of a recluse, living alone in a small apartment but doing alright for himself. When the recession hit, he couldn’t find work in technology and made cuts to his expenses. He was starting to feel sick by 2011 when he had been unable to find steady work for a long time. His last job only offered him twenty or thirty minutes of work a day. He sold his computer gear through the summer, and then fell behind on his rent in September. He could not stand the idea of being homeless in his hometown.

Ray was active on Twitter and learned about Occupy Wall Street there. He saw the occupiers were angry about something he understood from his own life: the injustice of the system that sucked life from the middle class for the reward of the rich and powerful. With his last $450, Ray boarded a bus to New York. He arrived at Zuccotti Park on October 6 and found the area oddly familiar to him. Then panic set in, as he recognized he was homeless in a city he’d never been in before. He knew he would have to join in the collective spirit in order to survive and immediately signed up for the Sanitation Working Group. Over the next month, he tweeted regularly about what he experienced there and saw his followers grow into more than a thousand. When he lost his sleeping bag, his new friends gave him a free one. By then, Liberty Square was his home.

On October 12, Mayor Bloomberg and the NYPD announced the park would be closed for cleaning in two days. Neighbors had been complaining, especially about the trash and the drum circle. Nelini was working with the drum circle to try to limit the noise to a couple hours a day. She saw the mayor’s plan as an attempt to shut the whole movement down. The night before the cleaning, Zuccotti was more crowded with supporters than it had ever gotten. Her boss at Working Families was talking to the deputy mayor behind the scenes and got word to Nelini that the park would not be cleaned. They had won.

Kevin and his colleagues at the bank dismissed the Occupy Wall Street movement at the beginning, but Kevin was impressed when he went to see it. He kept going back. It reminded him of New York in the 1980s when he was in private school and listening to Run-D.M.C. Kevin didn’t like that Occupy kept talking about the 1 percent instead of the 0.1 percent. He was a member of the 1 percent and didn’t feel like he had any power. He also thought the protesters should appeal to bankers’ better natures rather than demonizing all of them.

Around the nation, hundreds of similar occupations started. The movement’s slogan, “We are the 99 percent” became the name of a blog on Tumblr that captured the stories of real Americans who complained about making $8 an hour in a management position or owing thousands in student debt. They hinted at why Occupy Wall Street had captured people’s attention and why it had become a brand name. The phrase “income inequality” became saturated in the media; Obama even gave a speech on the topic.

Everyone had an opinion on it. Colin Powell was sympathetic, remembering a time when his parents in the South Bronx could always rely on a job. Robert Rubin agreed the movement had identified the problem of falling median ranges. Peter Thiel worried about how the inequality would end. Elizabeth Warren took credit for creating the intellectual framework for the movement. Newt Gingrich was heckled as he said that the Occupy movement was based on the false premise that society owed anyone anything. Andrew Breitbart complained the media was obsessing over a circus. Jay-Z started selling t-shirts that said “Occupy All Streets” but then defended the 1 percent by saying free enterprise was the foundation for the nation.

Dean Price helped plan the Occupy march through Greensboro. He tried to tell the marchers about the change that was starting there in North Carolina. Matt Weidner started blogging about Occupy very early on, calling the movement a smarter version of the Tea Party. Occupy Tampa drew hundreds of marchers. Danny Hartzell wanted to go but wasn’t sure he could afford the gas to drive up. Sylvia Landis went and was a little worried about the anti-capitalist rhetoric, but she drove some of the occupiers to a training session of foreclosure defense attorneys in Sarasota. The movement dissipated after a few weeks, and downtown Tampa returned to its normal emptiness.

In late October, the rules against tents in Zuccotti Park were relaxed, and Ray claimed a small area for his own tent. Once the tents were there, the park grew less lively and more squalid. The intensity of the park was getting to him. It was no longer easy to stay active in the park; the General Assembly sessions were going on for hours without resolving anything. Some of the “working groups” had split away from the park for meetings, and those groups, often dominated by a few loud activists, seemed separate from the people actually occupying the park.

Nelini was growing disenchanted, too. When the General Assembly had included hundreds of people, it was harder for one person to disrupt it. But now the small groups could be overrun by arguments from two or three people, arguments that were often rooted in race or gender and then became harder to quell. Occupy was dominated by very educated anarchists; they intimidated Nelini. She started to think Occupy was narrowing and needed to start making demands or even leave the park altogether, especially as the park became more violent and ramshackle.

On November 15, just past midnight, Nelini found out that the park was being raided. It was her birthday. Police in riot gear announced the park was being closed due to health and fire concerns. Ray broke down his tent and left. The streets were full of people raging at the police. Nelini got pepper sprayed right in her eye and got away. Later, she was walking blocks away from the park, and she heard a cop shout “that’s her.” They cuffed her, and she spent her birthday in jail.

Ray only thought of escape while he watched downtown become militarized. He kept checking Twitter to see if the occupiers were gathering elsewhere to no avail. He was now alone, a man homeless in New York. The park had once again become a plain granite rectangle littered with some trees.