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Cultural Studies

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Everyday Leverage, or Leveraging the Everyday

Fiona Allon

To cite this article: Fiona Allon (2015) Everyday Leverage, or Leveraging the Everyday, CulturalStudies, 29:5-6, 687-706, DOI: 10.1080/09502386.2015.1017140

To link to this article: http://dx.doi.org/10.1080/09502386.2015.1017140

Published online: 16 Mar 2015.

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Fiona Allon

EVERYDAY LEVERAGE, OR LEVERAGINGTHE EVERYDAY

Credit, debt and indebtedness are key terms for understanding contemporary socialand economic life. In many recent accounts of debt, however, debt is largely anahistorical category that remains constant throughout time, or seen simply in termsof a quantum of interest accrued over time that can then serve as a proxy for boththe accumulation of profit and measurable oppression and exploitation. Thisforecloses analytical investigation of contemporary shifts in the everydayarticulations of credit and debt and the specificity of creditor–debtor relations,including important changes in the nature of debt itself. In contrast, this paperfocuses on the redefinition of debt as ‘leverage’, a dynamic, productive force thatcan have unpredictable effects. Alongside other developments that have transformeddebt into a tradeable asset, such as financial securitization, debt as ‘leverage’involves the anticipation of speculative excess and possibility. Addressing thecontemporary transformations of credit/debt also requires acknowledging themultiple ways in which ordinary households are now expected to embrace thepotentialities afforded by ‘leverage’. This is a symbiotic relationship that isevolving and persistent, and it demonstrates a much larger expansion of financialpower, in which the biopolitical terrain of individual subjectivity, aspiration andforms of conduct at a micro-level is directly linked to macro-financial globalstructures. As the paper suggests, the contemporary consumer-citizen increasinglyrelies on debt-fuelled and frequently asset-based consumption that necessarilydepends on some kind of leverage.

Keywords leverage; debt; credit; speculation; subprime mortgages;securitization

In Ben Fountain’s (2012) novel Billy Lynn’s Long Halftime Walk, the eponymouscentral character, the young soldier Billy Lynn, asks his immediate superior,Sergeant Dime, a man who possesses a worldliness that Billy admires andaspires to, ‘Sergeant Dime, what is leverage?’

Naïve, inexperienced and from Texas, Billy is on a promotional ‘VictoryTour’ across various American cities, championing the democracy, freedom andAmerican way of life that he and his unit, Bravo Company, are defending inIraq. At a visit to the Dallas Cowboys football stadium, meeting with the

Cultural Studies, 2015Vol. 29, Nos. 5–6, 687–706, http://dx.doi.org/10.1080/09502386.2015.1017140

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millionaires who run the show, Billy encounters the language of finance:leverage relative to cash flow, debt ratios, income streams, equity in lieu, andso on. It is a language he has never previously heard and he’s hoping that someof this knowledge, which clearly leads to great power, money and success,might rub off on him: ‘How it works, who gains, who loses, who decides. It isnot a casual thing, this knowledge. In a way it might be everything’. Leftswimming in this sea of exotic new terms and concepts, he imagines a‘shadowy, math-based parallel world that exists not just beside but amid thephysical world … This is where money lives … It seems the airiest thing thereis and yet the realest’ (Fountain 2012, p. 121).

Billy is given one piece of advice, however, that strikes him as particularlysignificant: ‘Leverage is a beautiful thing. In the right hands it can literally movemountains’ (p. 119). Of course, Billy is not unique in being mesmerized by thepowerful magic of leverage. While the word ‘debt’ has mainly negativeconnotations, ‘leverage’ has an indisputably positive aura, suggesting quiteliterally a means of transformation and a way to maximize opportunities. Whatwas once a noun has now become a verb: ‘we leverage our assets in order toreach for the stars’ (Blackburn 2008, p. 84). This magic of leverage stands instark contrast to what is for many the grim reality of everyday indebtedness: aburden of debt service that stretches over the life course and is seeminglyendless, frequently continuing after retirement and sometimes even beyonddeath.1 While leverage may in some instances appear as a ‘beautiful thing’ withmagical qualities of multiplication, a small act that can provide astonishingmomentum, debt on the other hand now commonly describes an almostpermanent condition of indenture and servitude, a way of life in whichobligations are never likely to be repaid. For those trying to cope withunmanageable levels of indebtedness in relation to the basic needs of socialexistence – housing, education, health care – debt is a structural necessity nowrequired to achieve even the most minimal standard of living.

Leverage is just one among many of the more recently popularized technicalterms that, originating from the world of high finance, has spread to the so-called common sense of the everyday. Although it is a term that promisesuntold potential for innovation, growth and wealth accumulation for the few,its implementation also tends to ensure the very opposite for the majority. Thatso many of such terms relate to debt-based financial instruments – credit defaultswaps, collateralized debt obligations, mortgage-backed securities and deriva-tives – are not coincidental it seems. After all, the contemporary society of debtessentially embodies the same cruel, paradoxical relation: the necessaryembrace of credit instruments which hold out the possibility of access to the‘good life’ and yet simultaneously impede its realization (Berlant 2011). Indeed,the mass indebtedness of contemporary social life has been interpreted as aresult of this self-defeating attachment to the fantasy of a good life, an ideal that

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may have made sense in a postwar era of growth and prosperity but which haslittle purchase in the current financialized economic order (Hyman 2011,Ross 2013).

In these terms, finance in general has been commonly understood as adestructive and impersonal force of abstraction that has led to the impoverishedsocial bonds of the present: ‘The history of western civilization is a history ofcreeping abstraction. It has now reached its endgame in finance’ (Fleet 2013).From this point of view, debt-fuelled financialization has institutionalized theshort-termism of the repayment schedule and thus extinguished the possibilityof any time of life outside the time of debt, including the possibility of any kindof meaningful investment in a non-indebted future (Berardi 2011, Lazzarato2012). In these and other recent accounts, debt is a category that remainsconstant throughout time, describing a common form of subordination andstruggle despite the widely different historical conditions in which it occurs.Frequently referred to as the ‘oldest means of exploitation’ (Federici 2014,p. 233), debt is essentially the same time-honoured contractual obligation, orpromise to pay, enforceable by the violence of morality and/or the state,irrespective of which credit and debt instruments are involved. In contrast, thisessay resituates debt in relation to recent financial developments, especiallyprocesses of securitisation that operate not only through systems of abstractionand quantification but also through dynamic engagements with the livedmaterialities of the social. Proposing an understanding of debt as a qualitativemultiplicity that undergoes long chains of transformation in non-Euclidean spaceand time, the essay departs from the conventional depiction of debt asmeasurable exploitation within a framework of absolute, fixed, metrical spaceand linear time. In turn, this brings to light a metrics that is contingent, fungibleand uneven and significantly different to the Marxian focus on abstraction as acalculus of exchange that is typically registered as the measurement ofequivalence and sameness and distance from an originary source of value. Isuggest therefore that debt needs to be understood not only in terms of thehistorical specificity of what it is and does, but also in terms of the concreteparticularities in which it occurs, including the particular subjects, such asminority and women borrowers, who were previously excluded from credit/debt relations but that have been specifically targeted for new loan instrumentsin recent decades. Addressing the contemporary transformations of everydaycredit/debt also requires acknowledging the multiple ways in which ordinaryhouseholds have been increasingly exhorted to operate as everyday investorsand to perform their own kinds of ‘calculative agencies’ (Callon 1998),including embracing the open-ended potential afforded by ‘leverage’. As theessay suggests, the contemporary consumer-citizen has been enjoined, indeed isnow required, to invest in their lives through asset-based wealth accumulationthat necessarily depends on some kind of debt leverage.

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Indebted

Even before Deleuze (1990/1995, p. 181) presciently observed that ‘A man isno longer a man confined but a man in debt’, it was clear that the debteconomy had fundamentally changed over the course of the 1970s.2 Thesuspension of US dollar-gold convertibility in 1971 brought an end to theinternational gold reserve system that had been at the centre of the postwararchitecture of unprecedented economic growth and stability, including theperiod of relative debt restraint that had lasted until the late 1960s. In 1973 theBretton Woods regime of fixed exchange rates was subsequently abandoned,beginning a new era of money and credit creation that dramatically expandedboth the forms and supply of monetary and credit instruments, and the kind ofinstitutions that could participate in that expansion (Arrighi 2003).

The restructuring of money and credit markets led to a massive expansionin the availability of credit. But the adoption of floating exchange rates and therise of the US dollar as the global reserve currency also inaugurated a boom-bust volatility that contributed to recession, unemployment and large tradeimbalances, and also fundamentally changed the way ordinary peopleexperienced borrowing money and, therefore, credit and debt. Variable ratescould rise unexpectedly and so have a calamitous impact on the multiple debtobligations of households. While such floating rates made funds cheaper, theylikewise increased the risks associated with interest rates, most obviously forborrowers.

In the period following the end of the Bretton Woods, overall indebtednessincreased significantly for consumers, households and nations, with debt levelsgrowing faster than comparable rates of growth for most national economies.Debt also began to play a more prominent role in national and internationalpolitical discourse, with a new focus on the ‘unsustainable’ liabilities ofconsumers and the national debt burden of governments in particular. But thegrowth of debt from the mid-1970s onwards was not simply due to the readyavailability of credit that followed the abandonment of Bretton Woods. Muchwider structural changes produced the unique deterioration of economicconditions in the early 1970s, entrenching inequalities of income and wealththat would continue to play out over the next few decades, and coincide withthe extension of consumer credit as a substitute for wage growth. In an era ofstagnant and declining real wages ‘Personal debt was no longer a private choice,but a structural imperative’ (Hyman 2011, p. 283).

Although the organized labour movement had been successful throughoutthe 1960s in its demands for welfare provisions and a wage share that wouldmaintain adequate standards of living (at least for its unionized workers),declining economic conditions in the 1970s triggered increasing resistance tothese demands. The price inflation that had served to nullify wage inflationbecame a counterproductive inflationary pressure that simply exacerbated the

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combination of economic stagnation, high unemployment and high inflation thatnow presented as intractable ‘stagflation’. The devaluation of the US dollaraverted a run on American reserves but it had little effect in containing thegeneralized inflation that proved so stubbornly resistant to the conventionalKeynesian methods of governing the economy. Compounded by the 1973 oilcrisis and a fall in global aggregate demand, the steep drop in levels of bothproductivity and profitability across many sectors of the economy, andespecially in international manufacturing, contributed to an economic downturnin a number of Western countries in the mid-1970s. The subsequent recessionof 1973–1974 not only brought an end to the exceptional growth of thepostwar era, it also signalled a major structural shift that marked the end of fullemployment and the decline in inequality that had accompanied it in thepostwar years. The movement of capital away from trade and productiontowards services, a shift that included the growing centrality of the financialactivities associated with the FIRE (finance, insurance and real estate) industriesin particular, also highlighted the major reorganization of capitalist dynamics atthis time. These exceptional macroeconomic conditions at first tested the limitsof Keynesian policy, and then ultimately toppled the Fordist/Keynesian socio-economic order.

One event in particular proved decisive in shifting the composition ofinflation from the wage inflation that benefited organized labour to the asset-price inflation that would ultimately prove to be a boon for US finance capitaland also fundamentally change the nature of personal debt: the ‘financial coup’of Paul Volcker, chairman of the Federal Reserve, in October 1979 (Kunkel2014, p. 130, see also Harvey 2005, pp. 23–31). In answer to cycles of wageand price inflation that had proved unresponsive to the standard Keynesian toolsof fiscal management, Volcker pushed up interest rates to the debilitating levelof 20 percent. This policy of radical monetary restriction induced a severerecession in North America and Europe and led to soaring levels ofunemployment, especially in traditional heavy industries and manufacturing(which could not compete with offshore production in Asia). In the USA andthe UK, industries that had long been the backbone of industrial capitalism,such as coal and steel, were destroyed along with the bargaining power of theunions that had once represented their workers. The so-called Volcker shockalso induced the debt crises in Latin America, when several countries, nowunable to service their dollar-dominated foreign debt, had to turn to IMFapproved debt restructuring and its mandatory set of free market reforms(Klein 2007, Heintz and Balakrishnan 2012).

Under the political stewardship of Ronald Reagan in the USA and MargaretThatcher in the UK, the recession triggered by the unprecedented hike ininterest rates created the ideal opportunity to dismantle the residualarchitecture of the Fordist-Keynesian class compromise. Both leaders targetedunionized labour and working conditions, restructuring the workforce around

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flexible labour and the forms of temporary, contingent and short-term contractwork that would become a permanent feature of the employment landscape inthe following decades (Hatton 2011, Cooper 2015). In addition, alongside theirconcerted campaign to erode formal work entitlements, both Reagan andThatcher embraced privatization and the reorganization of welfare and socialinsurance, promoting the involvement of ordinary people in the ownership ofproperty and stocks, and encouraging employee shareholding and personalequity plans as an alternative to traditional forms of welfare and social securityprovision.

Another outcome of the same high interest rates that had created cripplingdebt burdens in the Global South was the attraction of a steady flow of capitalto the USA. After a period of declining interest in a devalued US dollar, foreigninvestors suddenly returned to US financial markets, investing in US Treasurybills, securities, bonds and other dollar-dominated assets. This flood of capitalinto the USA would continue over the next two decades, maintaining thestrength of the US dollar and capping the price of goods while simultaneouslyleading to significant asset-price inflation. Assets such as housing and real estateappreciated dramatically in value, becoming popular investment opportunitiesfor foreign and domestic investors alike. This was a turning point for the worldeconomy, securing the emerging dominance of the US financial sector andunleashing what would become known as the financialization of global capitalmarkets. Awash with flows of foreign investment, US financial markets werealso in a position to rapidly widen and deepen networks of credit and debt,expanding the supply of credit to unprecedented levels (Konings 2011, pp. 13–14).This also resulted in the further erosion of any remaining boundaries between highfinance and everyday life.

With assets appreciating in value much faster than incomes, consumers alsoeagerly embraced asset-accumulation, scrambling to borrow money and investin residential housing in particular, hoping to capitalise on their rapidly risinghome prices. As the supply of funds increased, consumers found it easier thanever before to access credit. But they also found it more difficult than everbefore to pay it back. In this new age of post-growth volatility characterized byrising unemployment and deindustrialization, American consumers not onlyfaced the possibility of sudden loss of employment and therefore income, butalso stagnating wages, a trend that would actually amount to a steady decline inreal wages over the next 30 or so years. As Thomas Piketty (2014) has shownin his study of inequality, Capital in the Twenty-First Century, in terms ofpurchasing power the US minimum wage reached its maximum level in 1969,at $1.60 an hour, and has reflected an overall three-decade long fall in wagesever since. The expansion of consumer credit therefore coincided with a periodof economic uncertainty in which consumers began to rely on credit tocompensate for lack of wage growth, enabling households to maintain theirstandard of living while also upholding the levels of consumption that capitalist

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expansion increasingly depended on. This came at the cost of ballooninghousehold debt levels, however, and, unsurprisingly, between 1970 and 1979outstanding debt tripled (Barba and Pivetti 2009).

From the 1970s on, as they sought to insure against the uncertainties ofemployment, a declining social wage and increasingly privatized and downsizedpublic services, flows of highly liquid capital enabled Americans to borrowcheaply and so invest in, and acquire, assets. This new debt economy, however,not only represented simply a growth in the debt burdens of households.Rather, it entailed a much wider reconfiguration of the relationships betweenlenders and borrowers, between consumer credit and investor capital, andbetween households and financial markets.

Leverage this!

In Michael Lewis’s The Big Short: Inside the Doomsday Machine, one financialtrader describes his use of leverage thus:

Leverage means to magnify the effect. You have a crowbar, you take a littlebit of pressure, you turn it into a lot of pressure. We were looking to getourselves into a position where small changes in states of the world createdhuge changes in values (2011, p. 128).

Leverage derives from ‘lever’: a simple tool that employs the principle ofmechanical advantage to amplify an input force so that the output power itproduces is over and above that of the original input. A mechanical inventionmost commonly associated with the Greek mathematician Archimedes, lever isa term that is commonly used to describe any instrument capable of generatingan amplification of power that will in turn provide leverage. For example,Archimedes described how a simple block-and-tackle pulley system couldbecome a powerful instrument capable of moving great weights without theapplication of great force. According to Plutarch, Archimedes personallydemonstrated how such a lever could be deployed to move large objects, even alarge ship (Plutarch 1961, pp. 78–79, Latour 1990). Archimedes wrote onmany different aspects of mechanics and geometry, but his work on thedynamics of leverage provided the quote that has become a standard refrain ofAmerican popular culture, frequently put to use by politicians of all stripes,from John F Kennedy to George Bush: ‘Give me a place to stand and with alever I will move the whole world’.

The lever, then, is an inert object or instrument that provides a fulcrumaround which differences in distance can be arranged in space as differences inforce. When such positive differences are manipulated in time, the fulcrum istransformed into a dynamic technology capable of magnifying movement topowerful effect. It is the seemingly magical power of leverage to amplify and

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multiply, to always be greater than the sum of its parts, which provides itsappeal to the financial investor as much as to the mathematician or philosopher.In Deleuzian terms, leverage can be understood as a dynamic multiplicity that isnon-additive and non-metric, an intensive, virtual continuum that differentiatesitself in emergent, largely unpredictable ways (Deleuze 1968/1994, De Landa2002, Lozano 2015).3

When Sergeant Dime answers Billy’s question, ‘What is leverage?’,however, the answer he provides refers to a context more prosaic than theradical mathematical potential imagined by either Archimedes or Deleuze:‘Leverage, Billy, that’s a fancy way of saying other people’s money. As in,borrowing. Debt. Credit. Hock. Using other people’s money to make moneyfor yourself’ (p. 122). With this definition, Sergeant Dime is alluding to themore conventional financial understanding of leverage as the use of credit,borrowed capital or other financial instruments for an investment, with theexpectation that the potential return (the profits) will be greater than theinterest payable on the outstanding debt. In the 1980s and 1990s, after financialderegulation, the phrases ‘leveraged buyout’ and ‘leveraged takeover bid’became commonplace in the financial media, developing notoriety not onlybecause of some instances of spectacular failure but also because theyrepresented a significant shift in the formation of capital itself. In particularthis represented a new strategy for capital to valorize itself by borrowing,restructuring and selling assets. This was a strategy that dovetailed neatly withthe growing influence of the financial sector, in which profits are to be madenot by investing money, in production or other productive activities, but ratherby lending it (Krippner 2005, 2011).

In the context of the global financial crisis, and specifically in relation to thebail out of banks and other financial firms, leverage has again become aprominent term in the media, usually in relation to the (exceptionally high)ratios of debt to equity that banks now increasingly hold (also called ‘gearing’,or, to ‘lever up’). In an era of financialization in which borrowing money (debt)is frequently cheaper than raising equity (by issuing new shares), the levels ofequity in the banking system have steadily dwindled, falling to lows which hasalso made them inherently fragile and more ‘exposed’ to the risk of an abruptdownturn, or, even a ‘bank run’ (first depicted so memorably in Frank Capra’sfilms American Madness [1932] and It’s a Wonderful Life [1946]). The scale of thebank bailouts in 2008 – after a financial crisis that also incidentally included adepositor run on the UK bank Northern Rock – demonstrated the inability ofmost banks to even absorb losses that amounted to only a small decline in thevalue of their assets (MacKenzie 2013). Indeed, the failure of many banksduring the global banking crisis was directly tied to risky debt to equity ratiosand inadequate minimum capital requirements. And, as this example shows, the

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magic of leverage works both ways: it may be a powerful amplifier of success,but it can also be a great amplifier of failure.

The financial innovation that led to it being cheaper than ever before to takeon debt also led to greater levels of integration and interconnection betweencommercial banks, insurance companies, large investment firms and ordinaryconsumers. It also fundamentally changed the way in which banks performedrisk calculations and organized their balance sheets, indeed the way theyunderstood the very relationship between debt and equity and the meaningsthose terms signified. Securitization in particular enabled banks to move loansoff their balance sheets by pooling and then repackaging them into investmentproducts and selling them on global financial markets. This was a major shiftaway from the classic originate-to-hold model of bank lending, in which banksheld loans on their books until maturity and were thus also exposed tosignificant default and liquidity risks. This new, originate-to-distribute modelseparated loan making from risk taking and facilitated a massive expansion ofthe provision of credit (Dymski 2009). Under the auspices of PresidentJohnson’s Great Society programs, the mortgage-backed security was originallydesigned to generate much needed capital that could be used to fund housingprogrammes so as to ‘solve’ the housing crisis and in turn quell the riots andunrest in America’s cities. As Hyman (2011, p. 224) argues, ‘For Great Societypolicymakers and promoters, the problems of inequality were framed as aproblem of credit access rather than job access’. One largely unanticipatedoutcome of securitization, however, was that it enabled new sources of funds toflow into the mortgage system more generally, which in turn completelyreshaped both the way home finance was provided and how the everyday creditand debt practices of households would connect with financial markets. Everyform of personal debt would eventually be securitized: credit cards, auto loans,student loans, medical insurance and household water and electricity payments.Repackaged and sold as bonds to mainly offshore investors, American consumerdebt became a large market and a profitable investment opportunity.

In short, securitization transformed the banking industry, enabling financialinstitutions to move beyond the regulations of the New Deal/Fordist-erawelfare state that had organized housing finance around a ‘middle-class-familymodel buying single-family homes’ (Schwartz 2009, p. 185) and effectivelyrestricted credit to the citizen in full time and regular employment who hadbecome an iconic representation of this era: the white, middle-class, maleworker. But it also, unexpectedly, provided a way of responding to the pressurefrom the civil rights movement and its demands for antidiscriminatory lendingpractices in consumer credit markets, a transformation that eventually enabledthe extension of credit to groups most often employed in irregular, non-standard and primarily low-wage work: African-Americans, Latinos and women(Cooper 2015).

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Securing debt

Until the early 1970s women and racial minorities had been systematicallyexcluded from mortgage finance and consumer credit, not only due to generalprejudice and discrimination but also through specific techniques such as bankredlining and the underwriting guidelines employed by the Federal HousingAdministration (FHA) (Dymski 2009, Dymski et al. 2013). Like the practices ofmost banking and financial institutions, the New Deal housing programmesassociated with the FHA were structured by racial covenants which discriminatedagainst minority areas and essentially defined suburban home ownership assynonymous with the white middle class. In this way, the underwriting guidelinesemployed by the FHA not only shaped suburban development but dictated whichgroups could access credit and on what kind of terms. Moreover, genderdiscrimination frequently compounded racial discrimination, with womenfinding it difficult if not impossible to obtain credit in their own names. Evenafter credit reform, women faced discrimination due to the intransigence of long-standing assumptions about ‘the proper relation of men, women and credit’(Hyman 2011, p. 192). With the new financial instruments associated withsecuritization the supply of capital suddenly became plentiful, indeed nearlylimitless, banks and non-bank private lenders were soon willing to extend creditto those who had been largely excluded from postwar prosperity and theindebtedness it required.

What subsequently became known as the ‘subprime market’, whichtypically involved high interest rates, high fees and onerous non-paymentpenalties, then became one of the most common forms of mortgage lending bythe late 1990s, particularly among female-headed and minority households,growing by an astonishing 900 percent between 1993 and 1999 (HUD 2000,Dymski et al. 2013). Women, and in particular women of colour, wereoverrepresented in the ranks of ‘the wretched and reckless’ (The Economist2007) who were targeted for subprime loans, with the profile of the typicalsubprime borrower seeking assistance from foreclosure counselling organiza-tions described as ‘single, female, with two children, in her first house’ (quotedin Baldauf 2010, p. 225). Moreover, a disproportionate number of womenreceived subprime mortgages even when they had incomes and credit scoresthat qualified them for conventional loans (Fishbein and Woodall 2006). Deepin debt, in insecure ‘flexible’ forms of employment, often underpaid, andcarrying an increased individualized responsibility for all kinds of risk: this is theprofound ordinariness which the figure of the female subprime mortgagorrepresents. Yet this so-called ‘delinquent’ or ‘irresponsible’ borrower is alsosignificant now for being more common than unique, and, in two-earner asmuch as single, female-headed households this is an existence that is increasinglythe rule rather than the exception. Although the racial and gendered dimensionsof housing and mortgage credit, and of finance more generally, have rarely been

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given much attention, the picture of the subprime crisis that has now emergedis one in which practices of credit and debt (and therefore leverage of course),played out around and through the dynamics of race, gender and class. Giventhe now prominent role of the female subject in managing household debt, of‘making do’ within generalized conditions of precarity and insecurity, and offinding and pursuing micro-tactics of struggle and survival for herself and thosearound her, perhaps one might ask whether debt is better understood, as LisaAdkins (2014, p. 12) suggests, not in terms of Lazzarato’s ‘indebted man’ butin terms of the ‘speculative woman’? This is a female subject who calculates andtakes chances, recognizes potential and plays with the opportunities at hand; thesubject who, in other words, employs any available financial strategy necessaryfor negotiating an uncertain future (Roberts 2013, Allon 2014).

Subprime lending can certainly be understood as a form of predatorylending whereby gender and racial exclusion was largely replaced by gender andracial inclusion, but in a way that actually extended rather than curtaileddiscriminatory and extortionary practices (Dymski 2009, p. 162). Much moreenduring than one-off predatory lending practices, however, are the profoundchanges to the relationship between households and financial markets which theglobal financial crisis highlighted, changes that go far beyond suspect orexploitative lending practices to vulnerable households. This is a symbioticrelationship that is evolving and persistent, and it demonstrates a much largerexpansion of financial power in which the biopolitical terrain of individualsubjectivity, aspiration and forms of conduct at a micro-level is directly linkedto macro-financial global structures (see Shiller 2003). At the same time asmortgage-backed securities offered institutional investors stable, bond-likeinvestments in mortgages, they also provided American borrowers with aseemingly unlimited source of mortgage capital. This expansion of lending musttherefore be understood as speculative as much as extortionary, for everydayconsumers as much as for banks and institutional investors.

In this way, the processes of securitization that completely transformed theUS housing finance industry also dramatically changed the way in whichconsumers were able to use debt. Leverage is most commonly used in realestate transactions through the use of mortgages to purchase a home. With thehuge increase in credit provision that securitization afforded both banks andlending institutions, however, leverage shifted from being simply a device that‘assisted’ in the purchase of an asset, to an all-encompassing financial blanketthat could often end up larger than the entity it was intended to help cover.With a home equity line of credit, for example, home equity withdrawalallowed consumers to tap into a now fungible source of housing wealth, movingmoney in and out of their house as they saw fit, irregularly, sporadically,flexibly and even reversed (in the case of reverse mortgages), yet alwayspermanently available to be added to or drawn on (see Langley 2008). Homeequity loans became one of the most popular ways that homeowners could

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capitalize on the steadily rising equity in their homes, primarily because homes,for most Americans, ‘were the only kind of financial leverage to which theycould have access’ (Hyman 2011, p. 235).

In a context in which house prices were rising faster than other consumergoods, as well as rising much faster than wages, asset-acquisition was therebyreconfigured as a de facto form of welfare, encouraging households to rely onasset-price appreciation as a safety net, a contingent solution for all possiblefinancial needs. After all, alongside the massive expansion of financial liquidityin the US economy there was an intense promotion of the ‘ownership society’and housing investment ‘opportunities’, including schemes for equity with-drawal and refinancing. The importance attached to asset-accumulation, andhome ownership in particular, was reinforced even further when Bill Clintonannounced his intention to ‘end welfare as we know it’. With the decline of araft of public services, including the disappearance of the very idea of a socialwage, the home came to be increasingly viewed as an object of leveragedinvestment, providing a liquid source of funds for consumption in the presentand also an asset base for welfare in the future. As the Economist put it:consumers had begun to view their house as their ‘main store of wealth,regarding it as a combination of cash cow and pension plan’ (1985, p. 83, alsosee Langley 2009).

Home equity loans were also increasingly used for debt consolidation, ashift that highlights the convergence of different kinds of credit and debt andtheir fluid transfer from markets to households and consumers and back again.What is also significant is that for many borrowers subprime loans were neverintended for new home acquisition but rather for distress financing – usingmortgage finance to generate cash loans for emergency expenses, includingpaying off outstanding debts (Schloenmer et al. 2006). Several studies have nowconfirmed the extent to which American households have been borrowingmoney against property not just as leverage for home purchase, but rathersimply to raise funds to make ends meet, a trend that has also becomeprominent in other countries such as the UK and Australia (Smith 2010). Afterall, 30 years of wage stagnation had made it virtually impossible to pay backdebts except through largely fortuitous asset appreciation, and it is hardlysurprising that around 40 percent of home equity loans were used for debtconsolidation (Hyman 2011, p. 276). With securitization, then, the supply ofcapital not only became more plentiful, and available to more people, it alsotransformed consumer debt towards complete substitution, fluidity andinterchangeability.

Bodily pledges and indebted intimacies

Debt and indebtedness are steeped in the quotidian world of bodies, intimaciesand materialities, inseparable from habits and routines, dispositions and moods,

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as well as the disciplining rhythms of the repayment schedule. In Debt: The FirstFive Thousand Years, David Graeber describes in detail how the logic of debt andindebtedness has ‘come to suffuse and shape even the most intimate aspects ofour existence’ (2011, p. 15). Indeed, Graeber provides much historical materialto show how the calculus of debt has inserted itself into human relations on thelevel of the sentient physical body as much as on the level of abstract power andeconomic calculation. Although slavery is perhaps the most extreme example ofdebt redemption through bodily indenture, Graeber also demonstrates theeveryday violence that underpins most relations of indebtedness, structured asthey are by an implicitly asymmetrical obligation to repay.

At times of financial misfortune or miscalculation debt also registers itscosts on health and well-being, taking its toll quite literally on the limits ofbodily composure and endurance. Debt, then, has always been an intimatelyembodied experience, as the moneylender Shylock’s demand for a ‘pound offlesh’ made clear. Similarly, from Graeber’s anthropological miscellany on debtwe also learn that in the colonial days of the USA, an insolvent debtor’s ear wasoften nailed to a post (2011, p. 16), a bodily pledge that now finds itscontemporary counterpart in the punishment of foreclosure, the exemption ofstudent loans from bankruptcy protections (a revision introduced for federallyguaranteed education loans in 1978 and extended to loans issued by privatebanks in 2005), and in the revival of debt-related incarceration and debtorsprisons (Joseph 2014). In both instances, but most especially in the case ofstudent debt as a form of indenture – a burden that must be indeterminatelyendured until the elusive conditions of full employment and economicautonomy have been reached – debt bondage seems less an archaism that hasnow been civilized and more of a technology that has simply proliferated intonew forms (see Ross 2013).

If the figure of the rational and self-interested investor has become one ofthe most esteemed figures of economic liberalism, signalling the superiority ofcold, utilitarian calculation over hot-headed passion and inchoate affect, aneveryday economics of money, credit and debt demonstrates that thesedispositions are rarely so cleanly disentangled. For the ordinary people whowere swept up by the pre-crisis housing boom, for example, there was a drivingsense of optimism about ‘getting a foot on the property ladder’ and a deep-seated fear of missing out, of leaving it too late, of being left behind by a risingmarket. Many of these borrowers were late housing market entrants andtypically had adjustable-rate mortgages (ARM), the most common form ofmortgage in the subprime or Alt-A sector, which usually indicated less than20 percent down payment, or even no down payment at all, or some problemswith the borrower’s FICO score or credit history. ARM featured low ‘teaser’interest rates for the first two or so years that then reset to much higher rates,and they were generally designed to be refinanced into low, fixed-rate loansafter house price appreciation had generated some amount of equity in the

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home. Subprime and Alt-A mortgages were also geographically concentrated inthe states of California, Virginia, Florida and Texas, states which unsurprisinglyhad the highest rates of mortgage default and foreclosure and which then had toendure the devastating consequences of fiscal crisis and punishing regimes ofausterity.

Yet before these debilitating conditions of personal and collective over-indebtedness and community decomposition had emerged in the post-crisisdownturn, subprime mortgagors optimistically embraced debt, and leveragemore generally, as key to the freedom of a more secure future. Such a feeling ofbeing propelled into a better future, of no time to lose, not even the time toread the fine print of mortgage documents, was frequently described byCalifornian mortgagors when they were interviewed after they had lost theirhomes or were in the process of organizing distress refinancing. As oneborrower explained: ‘I didn’t read them carefully. I just pretended to look overthem and then asked for the pen … They were going to give me my keys.I wasn’t going to raise any kind of concern at that point’ (quoted in Reid 2010).In these instances, debt has an implicitly speculative form, pegged to the futureand marked by anxious anticipation and expectation.

In Stockton, California, the city that was dubbed the ‘sub-prime mortgagecapital of the United States’ (Clark 2008), speculation became akin to a generaland widespread ‘structure of feeling’, driving the sentiment that buying ahouse, by any means necessary, was what everyone should do. As one residentput it: ‘Everyone was speculating … everyone wanted houses … even the CityCouncil was speculating’ (interview conducted with Diana, Stockton, July2013). With the ready availability of ARMs, interest-only loans and other so-called ‘affordability mortgage products’, which explicitly enabled and called upwhat Paul Langley has defined as ‘leveraged investor subjects’ (2009, p. 1406),such debt-based speculation became the norm. Yet for many households(including many low-income households), debt was not simply a financial meansto embrace risk, calculation and the benefits of asset-acquisition; it was alsosimultaneously affective, intimate and entrepreneurial, frighteningly personaland precarious, gut-wrenching, embodied and locked onto the anxious yetnonetheless hopeful promise of provisioning for the future. In this sense, theseexperiences of debt were very much the total social fact that Mauss (1990, p. 3)envisioned, a cultural and experiential intensity in which ‘everythingintermingles’ (cited in High 2012, p. 364).

Stockton was hit hard by the financial crisis. In 2008 it had one of thehighest rates of mortgage default and foreclosure, and one in 25 homes wasrepossessed. Rows of empty, abandoned houses were commonplace inestablished, relatively affluent suburbs as much as in the new housingdevelopments on the city’s fringe. Brown lawns, dumped furniture, new,cheap, ill-fitting locks on the front doors of foreclosed houses that were aboutto be resold to property speculators became the material signifiers of debt gone

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bad. These ‘zones of abandonment’, to use Elizabeth Povinelli’s (2011) term,also stretched to the homeless families camped in parking lots, the tents pitchedunder bridges and freeways and the shanty-like structures haphazardlyconstructed along the main roads. Beyond the subprime ‘scandal’ or financial‘crisis’, however, ordinary, more endemic forms of financial leverage,speculation and expropriation continued. In 2012 Stockton filed for bankruptcy,in part because a gamble with pension obligation bonds failed to pay off and thecity could not service the interest it owed on those bonds. More recentlythough, according to some residents and community activists, life in Stocktonhas begun to improve (for example, the murder rate is not as bad as it used tobe), and many essential social services such as policing and the fire departmentare due to return to normal levels in the not too distant future. As the propertymarket also begins to show signs of improvement, however, housing andfinancial counsellors remain concerned about the next wave of defaultinghomeowners.

Conclusion

Remarkably, some accounts of the financial crisis of 2007 have contained nomention of racial or gender discrimination (Shiller 2008). In these explanations,the subprime crisis is usually interpreted as a breakdown of mechanisms thatshould have functioned efficiently, or as a mispricing of risk, or as a result ofimperfect information. But this reification of abstraction, and the subsequenterasure of localized difference and a sense of the lived contradictions of everydaycapitalist social relations, has also been a feature of accounts of the crisis fromthe other side of the political spectrum too. For example, David Graeber (2011,p. 386) argues that one of the most violent dimensions of the debt economy isthat it reduces human beings to the abstract and interchangeable state of money,‘valuable precisely for their lack of history’ (see Spencer 2014). Yet anexamination of financialization illustrates the way in which abstractionincreasingly proceeds, and in fact depends upon, the concrete and particular(Joseph 2014). Rather than simply confirming the conventional story of financialcapital as the relentless abstraction, depersonalization and dematerialization ofsocial relations, as simply the latest instance of what, in Graeber’s terms,represents the violent destruction of community by monetary calculation andquantification, we can instead see the subprime crisis as one stage in a ‘step-by-step coevolution of banking strategies and communities, one shaped by andreinforcing patterns of racial and gender inequality’ (Dymski et al. 2013, p. 137).

As a tradeable asset in new strategies of accumulation which are themselvesincreasingly focused on the everyday life of households and the necessities oftheir social reproduction, debt, in its conventional guise of measurablequantum, has undergone a significant mutation. Over the past few decades,financial innovations, in particular techniques of securitisation, have become

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focused on home ownership, home equity withdrawal and on the household’sdebt-financed asset-accumulation and therefore subsequent payment streams.However, for many debt-refusal campaigns like Strike Debt, as well as for anti-debt activists like David Graeber and Andrew Ross, debt is still really onlyunderstood in terms of the formalism of measure, whereby it appearsindistinguishable from a prolonged, punitive history of quantification andexpropriation. The problem here though is that not only is the important issueof the redefinition of the householder as a ‘free’, asset-accumulating financialsubject overlooked, the significance of the disappearance of any real distinctionbetween debt as liability and debt as asset is also downplayed.

Yet this is one of the most important features of contemporary capitalism,and it transforms debt into a dynamic means of financial production andreplication, mutable and unpredictable across both time and space when it issecuritised as future cash flows (see Lozano 2015). And yet these are ‘debts’that exist as much more than a simple sense of obligation or liability: thecommodification of debt in securitized financial instruments facilitates ever-growing webs of profit-generating interconnection between the public and theprivate and between consumer and corporate indebtedness and financialmarkets. So, while finance may be amplifying money’s abstraction of value,it is also creating new articulations to the concrete and the particular,reformulating the everyday settings in which the socialness of debt is actuallyproduced and lived out. As Billy Lynne understood, it was not just a casualthing, this knowledge of leverage. In a way, it might be everything.

Disclosure statement

No potential conflict of interest was reported by the author.

Funding

This work was supported by an Australian Research Council Future Fellowship[ARC FT0992302].

Notes

1 See, for example, ‘The 40-year-old mortgage you will pass on to your children:House price boom forces buyers to opt for two-generation loans’, Daily Mail, 11January 2014. Available at http://www.dailymail.co.uk/news/article-2537511/The-40-year-old-mortgage-pass-children-House-price-boom-forces-buyers-opt-two-generation-loans.html#ixzz3TOjrFyz0 Accessed on 1 September 2014.

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2 Interestingly, in this essay Deleuze discusses changes to money, including theshift from ‘molded currencies containing gold as a numerical standard’ to‘floating exchange rates’ as an important site for registering the differencebetween disciplinary and control societies (p. 180).

3 My ideas on leverage have been influenced by Benjamin Lozano’s blog‘Speculative Materialism’, Available at: http://speculativematerialism.com/.For his Deleuzian analysis of finance, see Lozano 2015. I would also like toacknowledge the helpful and insightful conversations about finance I have hadwith Benjamin over the last few years.

Notes on Contributor

Fiona Allon is an Australian Research Council (ARC) Future Fellow andSenior Lecturer in the Department of Gender and Cultural Studies at theUniversity of Sydney, Australia. She is the author of Renovation Nation: OurObsession with Home (2008). Her recent research focuses on cultures of financialcalculation in the everyday life of households, specifically in relation to theinterface between home/housing, mortgage and financial markets. Parts of thisresearch have been published in the Journal of Cultural Economy, Journal ofAustralian Political Economy, Australian Feminist Studies and South Atlantic Quarterly.

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