Unlocking the Outlaws
The financial scammers coming for your wallet thanks to Trump’s deregulation
Jacob Silverman | Bryce Covert | David Dayen
Maureen Tkacik | Emma Janssen
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The Trump administration is removing every financial guardrail from crypto, in order to enrich the first family and its tech and finance allies while destabilizing the economy. By Jacob Silverman
Medical credit cards have gone mainstream, preying on sick people at their most vulnerable. By Bryce Covert 32 Borrowers Besieged
Student debtors are under attack on all sides. Government contractors make their life miserable, and financial predators are poised to capitalize. By David Dayen 40 Usury in the Water
There’s never been a better time to be a loan shark for small businesses. By Maureen Tkacik
How door-to-door solar salespeople can scam homeowners, and what the government could do to stop it. By Emma Janssen
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PROSPEC TS
ROBERT KUTTNER
Broken China
China is America’s
main global economic rival, growing more powerful every year. While a dictatorship, China’s leadership is also far more competent and strategic than Donald Trump.
Looking back over the past half-century, there are three possible basic approaches for dealing with China. None of them is ideal.
The U.S. can pursue a close connection with China, ignoring its predatory practices and taking advantage of its cheap labor, cheap exports, and opportunities for partnerships that benefit U.S. corporations and investment bankers. This was the approach of several administrations before Trump and Biden. It resulted in escalating trade deficits, job losses, and the theft or coercive transfer of intellectual property. The strategy benefited some American elites but mainly served China.
Alternatively, the U.S. can try to contain China militarily and geopolitically, while keeping some economic relationships that are mutually beneficial and working to make them more symmetrical. This was basically the approach of the Biden administration, and it was a partial success. Our bilateral trade deficit dropped; we avoided war; China did not invade Taiwan; and we reshored some production. But China’s lead in product after product kept growing, and the commercial dependence of much of the economy on China for supply chains was mostly undiminished.
A third approach is a more aggressive
“decoupling” of the two economies. This is possible in theory, but because so many U.S. industries are so dependent on China for so many consumer products and industrial inputs, some of which the U.S. just doesn’t produce, a viable decoupling would have to be carefully planned and staged.
Which of these is Donald Trump pursuing? None of them.
Trump’s China tariffs, 145 percent until temporarily reduced, amounted to a China boycott. No importer can afford to pay a tax that equals more than 100 percent of the price of the product, even if some of it is absorbed by the exporter or passed along to the consumer. This is the opposite of a carefully considered strategy of decoupling, and it hurts American companies reliant on Chinese products and intermediate inputs at least as much as it hurts China.
To the extent that Trump wants to limit China’s wider global influence, the tariff policy is self-defeating. As Trump’s tariffs deter Chinese exports to the U.S., China is increasing exports to other regions. China is making tighter economic alliances with Europe and countries of the Global South. Not surprisingly, it has imposed retaliatory tariffs of its own and is buying a lot less from the U.S. Meanwhile, much of the supposed diversification of sources of supply away from China turns out to depend on Chinese companies operating outside China.
Nations such as Vietnam, historically highly suspicious of Chinese influence, have
been eager to make economic deals with American companies. Trump’s tariffs shove them into the arms of Beijing. Meanwhile, Trump’s other policies are completely at odds with his ostensible goal of containing China. One of China’s key strategies for increasing its global political and economic influence is its Belt and Road Initiative, building infrastructure for Third World countries, notably in Africa, and binding them to China. If you were serious about countering that strategy, would you shut down USAID? Voice of America? The State Department’s Africa operations? Trump did all three.
One prime worry is China’s advanced capacity for spying, both on U.S. industry and on the U.S. government. Trump’s Pentagon has just done its best to wreck the Cyber Command.
The incoherence of Trump’s China policy reflects Trump’s impulsivity. His tariffs are based on the desire for quick retribution, the opposite of strategic thinking. China’s economic policies have taken a long view, measured in decades and centuries, as China works systematically to capture leadership in the entire range of advanced technologies and products.
And Trump’s goals keep shifting. Are the tariffs bargaining leverage in service of deals? Punishment? Revenue-raisers? They can’t be all three, except in Trump’s clouded fantasies.
Nor does it work for Trump to suspend tariffs on specific goods, products, or one company at a time, as he has done with iPhones, because there are too many players to make ad hoc deals on the basis of special pleading. This is beyond the capacity of even a dealmaker like Trump. To the extent that deals do get made, they will favor large corporations with access to Mar-a-Lago at the expense of small businesses.
As an aspiring dictator, Trump’s story is that Americans will have to suffer shortterm pain to get long-term gain. But as a well-run dictatorship facing a blatant foreign threat, China has far more capacity to absorb pain in service of goals that are far more coherent and strategic than Trump’s. Trump’s signature technique is to inflict punishment first and then announce a deal that pulls a rabbit out of a hat and suspends the punishment. The deal may be that Mexico announces a crackdown on gangs, or that India agrees to import more U.S. products;
or that so many countries are lined up to “kiss my ass” that Trump can cut tariffs across the board.
But no such quickie deal is possible with China, because what needs to change is China’s entire mercantilist system. The weekend of May 10-11, Treasury Secretary Scott Bessent and U.S. Trade Representative Jamieson Greer negotiated a 90-day reprieve in which the U.S. cuts its tariffs to 30 percent and China cuts retaliatory tariffs to 10 percent. A joint task force will address deeper issues.
This was exactly the approach of Trump’s China policy in his first administration, when the chief trade negotiator was Robert Lighthizer, who was far more knowledgeable and strategic than Trump or any of his current trade officials. But Lighthizer’s efforts at structural reforms failed. In the end, in Trump’s third year, Lighthizer resorted to across-the-board tariffs as a fallback. The rate was 25 percent, a sweet spot that offset China’s illegal subsides but still allowed plenty of trade.
For now, Trump’s China policy hurts American producers and consumers far more than it hurts China. Take the case of agricultural exports. The largest U.S. export to China is soybeans, which totaled 27 million metric tons last year—valued at $12.8 billion, or about 9 percent of all U.S. exports to China. That is half of all U.S. soybean exports.
China has levied a retaliatory tariff of 125 percent on U.S. exports, which will more than double the effective price of U.S. soybeans in China and kill that export market. Brazil and Argentina, which together produce 52 percent of the world’s soybeans, are happy to make up the loss. That in turn will bind China more closely to South America’s largest economy.
It’s the same pattern with other farm exports to China, which totaled about $26 billion in 2024. In his first term, Trump offered cash grants to American farmers to make up for the losses they incurred during his far milder tariff war with the Chinese. That policy would be far more costly this time. Most farmers want to grow crops, not to be paid for being idle.
You can tell a similar story when it comes to a broad range of consumer products and inputs. Either the U.S. doesn’t make the stuff, or the product is now prohibitively expensive. China has suspended exports of many rare earth minerals and magnets
essential to vehicle, battery, and semiconductor manufacturing. China supplies 90 percent of the world’s rare earth materials. About 80 percent of all toys sold in the U.S. are made in China. Their retail price will now more than double, or they will vanish from store shelves. Alternative sources of supply are not available on short notice. This is playing havoc with business plans for Christmas; stocks of major toy companies such as Hasbro and Mattel have fallen faster than the market as a whole.
Since the U.S. relies heavily on China for both textiles and apparel, clothing prices will take a big hit. The Yale Budget Lab calculates that consumers will face 64 percent higher apparel prices in the short run.
The fact that Trump has ordered different tariff levels on different products, depending on both their nature and their country of origin, has caused vast confusion with ability of industries to plan. All by itself, that depresses economic growth.
In the case of auto parts, mass confusion reigns. The Automotive Service Association in a bulletin recently explained to its members that “a windshield wiper manufactured in China will face a 45 percent import tariff starting on May 3. A microwave made in China will be subject to a 54 percent rate starting on April 9. Meanwhile, a tail light produced entirely in Mexico will not face any tariff.”
Trump’s approach to China stands in bizarre contrast to China’s policy toward Putin’s Russia, America’s other major geopolitical adversary. Unlike China, Russia has no significant economic ties to the U.S. and is the more direct military threat. But Trump coddles Putin, while demonizing China.
You would think that the tariff war with China is so perverse that both Trump and President Xi will have to find a way to end it. But that is by no means guaranteed.
In late April, Trump began suggesting that he was close to a deal for mutual tariff cuts. But several Chinese senior officials made a liar out of him, denying that there had been any contacts or negotiations.
At this writing, there are reports that the U.S. and China may use a redoubled commitment by the Chinese to crack down on fentanyl smuggling, in exchange for substantial tariff mutual relief. Sooner or later, that or some other fig leaf may give Trump a face-saving excuse to relent, but it doesn’t address the larger problem of the U.S.-China relationship or China’s own predatory system.
For his most extreme tariff war, Trump has picked the one country with substantial capacity to outlast the U.S. For several decades, China’s economic development strategy has been to avoid imports and learn to make products at home. Trump, by setting off a trade war that drastically reduces both exports and imports, has just supercharged that strategy.
In the past, China has relied on exports to absorb its prodigious production machine. This has come at the expense of domestic consumption and living standards. Critics, both in and outside China, have argued that China’s economy is now sufficiently mature that it can and should absorb more of its production at home, so that 1.4 billion Chinese can start living better.
Trump has just given that overdue adjustment a nice push. Better domestic living standards in turn will increase the popularity of the regime. So China may be in no hurry to make a deal on Trump’s terms.
Trump attempted a classic maneuver: create a crisis, then pull back from it and announce that the crisis is solved. But in this case, the ploy didn’t work, because the Chinese refused to play on Trump’s terms. In terms of a long-run China strategy, Trump’s ploy made the U.S. worse off than it was before. All the genuine challenges of dealing with China remain. n
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Trump’s Labor Wreckers
The president has put anti-union, anti-regulation fanatics in charge of worker safety and worker rights.
By Harold Meyerson
If President Trump’s appointees had ever been guests on the 1950s TV show What’s My Line?, they would have stumped the show’s celebrity panelists, who would ask those guests questions to figure out what they did for a living. Who, learning some details of Pete Hegseth’s life, would have ventured so deranged a guess that his day job was secretary of defense? Or that Tulsi Gabbard was director of national intelligence?
Trump chose some of his appointees, of course, specifically to undo the work or even the mission of the departments and agencies they were to lead. This list includes RFK Jr. at Health and Human Services, Pam Bondi
at Justice, and Kash Patel at the FBI. Trump put Linda McMahon atop the Department of Education, which he had pledged to abolish, and McMahon quickly laid off nearly half of the department’s staff.
But it’s the agency that most directly concerns the rights of American workers where Trump had made perhaps his most fox-inthe-henhouse appointment. To be the general counsel of the National Labor Relations Board, Trump has nominated attorney Crystal Carey, a labor relations specialist at the firm Morgan, Lewis & Bockius, which represents employers against their workers in union elections, bargaining, and some grievance proceedings, and in legal actions against the government. Repub -
lican administrations, particularly since Ronald Reagan’s, have invariably appointed pro-employer attorneys to run the NLRB, the agency that Franklin Roosevelt’s New Deal established to ensure workers’ rights to unionize and compel compliance with labor law. But Carey’s appointment—which has yet to be confirmed by the Senate— raises that counter-purposeful practice to a whole new level.
Early last year, upset that the NLRB had found one of his companies (SpaceX) to be in violation of the National Labor Relations Act for having fired eight workers who’d sent management a letter criticizing him, owner Elon Musk reached out to Morgan Lewis to retaliate. Musk, who once flatly declared
at a New York Times conference that “I disagree with the idea of unions,” found fellow disagree-ers at Morgan Lewis. One month later, the firm filed a suit on SpaceX’s behalf arguing that the NLRB was unconstitutional. (In the year since SpaceX and Morgan Lewis first challenged the agency’s constitutionality, a host of other union-hating corporations, including Amazon and Trader Joe’s, are also arguing that the Board is unconstitutional.)
Morgan Lewis contended that by setting up its own dispute resolution infrastructure, in which its administrative judges ruled on cases that companies, workers, and the agency brought before it, the NLRB violated the Constitution’s separation of powers between the executive and judicial branches—despite the fact that any NLRB ruling can be appealed to federal courts. But in establishing the NLRB in 1935, Congress had decided that labor law specialists should have first crack at the myriad cases that would arise—just as they had previously decided that they’d entrust the securities law specialists at the Securities and Exchange Commission, and the trade, retail, wholesale, and market-concentration law specialists at the Federal Trade Commission to make rulings of their own, which also then could be appealed to the federal bench. By so doing, they not only vested power in the administrative judges best versed in the often highly technical case law, but also kept the federal courts from being swamped. In 1937, the Supreme Court upheld the constitutionality of the NLRB, as it had previously upheld the constitutionality of the FTC and the SEC.
confirmation hearing—she has co-authored articles with her fellow Morgan Lewis partners, labor law specialists all, that argue against not merely the pro-worker rulings of Board during the Biden presidency, but also against the Board’s fundamental powers. In light of the Supreme Court’s 2024 decision in Loper Bright , which stuck a blow at the power of regulatory agencies, she and her colleagues wrote that the NLRB has routinely exceeded its authority, particularly during Democratic administrations, by its interpretations of labor law. (Every such interpretation their article referenced was an instance in which the Board had ruled in favor of workers.) That authority, they argued, should have belonged to the courts—historically the branch of government most hostile to worker rights (though they did not say this, of course).
stitutional per se, its contentions would have much the same effect as those in the SpaceX suit were it to prevail: stripping the NLRB of its authority to rule on most labor disputes— perhaps (worse yet) even retroactively—and transferring that authority to the courts.
Today, however, Trump has nominated an attorney from the lead firm that is arguing the NLRB is unconstitutional to be the NLRB’s general counsel, in which position she’d presumably be responsible for opposing that argument in court. While Carey herself has stated no position on this question—though I’m certain that the Democrats on the Senate committee that will vet her will ask her about that during her
For decades, Carey and partners wrote, “the Supreme Court gave deference to the NLRB’s legal positions and did not independently decide the best meaning of the statute. But Loper Bright should eliminate the basis upon which the prior decisions rested …”
Eliminate the basis upon which prior decisions rested? Does that mean that Carey would be fine with tossing every NLRB ruling since its inception? While her article does not contend that the Board is uncon-
The NLRB has yet to see the kind of mass flight or firing of staff that many federal agencies and departments have seen since Trump, Musk, and DOGE blew into town. In part, this is surely because Carey, as I write, has yet to be confirmed, and Trump has been slow to nominate new members to the Board. “Most of 30-some-odd members of the career staff who have left,” says Jennifer Abruzzo, who was the Board’s general counsel during Biden’s presidency, “had already determined to retire this year,” before Trump came to power. In the face of steadily shrinking budgets, however, the NLRB had already been losing career staff for many years. “Ten years ago, the board had 1,400 field staffers,” says Abruzzo (who’d worked at the board for a quarter-century), investigating allegations of unfair labor practices and running representation elections. “Now, there are just 700.” Except for the first two years of the Biden presidency, when the Democrats also controlled Congress, the Board was “flatfunded” for many years, says Abruzzo, being appropriated the same amount of funding
Trump’s labor secretary, Lori Chavez-DeRemer, was touted as prolabor but has been nearly invisible since her confirmation.
Roughly 20 percent of DOL staff had retired or taken the administration’s buyout offer by early May.
every year even as inflation ate away at the value of that money. Even before Trump’s return, that has had real consequences for the Board’s ability to do its work.
“We’ve gone from 20 cases a year to 80 cases a year,” says one field investigator in the New York region. “It used to take two to three weeks to complete an investigation; now [dealing with so many cases simultaneously] it takes two to three months.”
While no one as yet is contesting the constitutionality of the Department of Labor, and while Trump has not vowed to abolish it as he has the Department of Education, his appointees to the department are just as hostile to workers’ interests as Carey would be at the NLRB. The department’s new secretary, Lori Chavez-DeRemer, was touted by the Teamsters as something of a unicorn: a Republican with a pro-union background. Since her senatorial confirmation, however, she’s been the quietest member of Trump’s Amen Chorus (aka his cabinet and agency heads), while also eschewing any remarks that could be construed as pro-union.
But Trump and Musk have had their guns out for the DOL, both quantitatively (through their “reductions in force” mass layoffs) and qualitatively (through their other DOL appointments that have prompted pro-worker staffers to leave in droves). Trump’s nominee to be the department’s solicitor—its chief legal strategist and advocate—is Jonathan Berry, a onetime clerk for the union-loathing Sam Alito, an alumnus of Morgan Lewis, a partner at Boyden Gray (a leading Republican law firm), and the author of Project 2025’s chapter on the DOL. In that chapter, Berry advocated reducing the department’s restrictions on teenagers working on hazardous jobs if they’d obtained parental consent, and overturning its “walk like a duck” standards for supposed independent contractors who are really just regular employees, and thus covered by wage and hour laws.
Berry’s further stance on worker rights, if one were needed, became even clearer in a colloquy he had with Rep. Ro Khanna (D-CA) during one congressional hearing last year. In it, Berry explicitly and enthusiastically supported Trump’s right to fire up to 50,000 federal civil servants if they failed to adequately reflect and promote Trump’s worldview. Asked by Khanna if he agreed that Trump could do that, Berry answered, “100 percent.”
As late as this January, Berry, still in private practice, was in court arguing against the Labor Department for its insistence that a Louisiana home care agency was legally required to pay overtime to its workers, whose regular hourly pay was roughly $9. In the process, Berry and his fellow attorneys argued that the 1974 congressional act that extended the minimum wage to domestic workers was unconstitutional.
Berry’s apparent preference for subjecting large numbers of American workers to poverty-level wages by no means makes him an exception within Trump’s new Labor Department. Incoming personnel at the department’s Wage and Hour Division come disproportionately from regions of the country where wage standards have been all but nonexistent. The acting administrator of that division, Donald Harrison, comes from Alabama’s Labor Department, where he was deputy secretary. Alabama is one of the five states never to have adopted a minimum-wage law of its own. Caroline Brown, the new senior adviser of the division, was in private practice in Atlanta, where she specialized in advising employers on federal and state wage laws. Georgia is one of the three states whose own minimum hourly wage is lower than the federal $7.25. Lorenzo Riboni, the division’s new policy adviser, doesn’t appear to have come from our nation’s historic slavery belt, but does hail from the law firm of Littler Mendelson, the only firm that may exceed Morgan Lewis in its anti-union zeal.
In case none of these appointments sufficed to give DOL staffers a sense of where the department was headed, they all also received a memo from the department’s chief of staff forbidding them from engaging in any “informal conversations, emails, texts, and social media” about the department’s new doings. If they violated this gag order, staffers could face “potential criminal penalties, depending on the nature of the information and the applica -
ble laws,” which could include “immediate disciplinary actions, up to and including termination from the DOL .” Communicating with the media would also “be treated as a serious offense.”
Not surprisingly, perhaps, fully 2,700 DOL employees—roughly 20 percent of the department’s staff—had retired or taken the administration’s buyout offer by early May, even before DOGE’s reductions in force had taken effect. As Michael Sainato has reported in The Guardian , about half of the staff at the department’s Bureau of International Labor Affairs took buyouts in response to grant cuts and threatened firings. These staffers worked to uphold worker rights in trade agreements, and delivered reports on forced and child labor in nations whose goods reach U.S. shelves. With Berry calling for relaxing the restrictions on domestic child labor (and with Republicans avidly rolling back such statutes in Florida, Iowa, and other states they control), the staffers likely concluded that the Trump administration’s interest in lessening child labor abroad was effectively nonexistent.
Like the NLRB, the DOL has also experienced a decades-long reduction in its funding. In 1980, the department was appropriated $119 billion in inflation-adjusted dollars; last year, it received $54 billion. Despite that, DOGE has it down for an additional 35 percent cut this year. There’s no direct link between these declining budgets and the declining share of unionized American workers, but both are consequences of the political economy’s profound dismissal of workers’ concerns since the advent of Reaganism. Popular dissatisfaction with that political economy has now led to a revival of popular support for unions, but that support is nowhere to be found in Donald Trump’s government, at the DOL , at the NLRB, or anyplace else.
As NLRB general counsel during Biden’s presidency, Abruzzo was probably the most innovative and effective pro-worker federal official since Sen. Robert Wagner, who authored both the NLRA and the Social Security Act 90 years ago. Today, Abruzzo definitely isn’t looking to government to advance the workers’ cause. “It’s going to take a real groundswell to hold our representatives accountable,” she says. “And not just rallies, but boycotts, sit-ins, strikes: There needs to be that sort of real collective action on a broad scale in order to shift our government to where it needs to be.” n
Rocketing Toward Monopoly
Elon Musk’s control of space is even more entrenched than it seems. What dangers could that lead to?
By Daniel Boguslaw
Presidential sidekick Elon Musk has thus far been spared from the greatest risk to his interstellar empire: the continuity of hawkish antitrust enforcement between the Biden and Trump administrations. That’s good news for his company SpaceX and its subsidiary Starlink, which are in a plum position to dominate not only commercial space transportation, but space itself. By most accounts, Musk will soon depart government for the friendlier confines of his own private city after pulling out random wires from the federal motherboard. But if everything goes according to plan, the richest man on Earth will soon earn an even darker and stupider moniker: viceroy of low-Earth orbit.
More than half of satellites circling the Earth are currently owned by Starlink, launched into our atmosphere using SpaceX Falcon rockets, and the company is now petitioning to launch tens of thousands more. Starlink gained new eligibility from Trump’s Commerce Department to wire much of the underserved parts of the country with satellite internet. There are now Starlink satellite systems serving the White House, and Starlink contracts upgrading IT for a Federal Aviation Administration in disarray thanks to cuts by DOGE, Musk’s hand-selected government-destroying apparatus. If that wasn’t enough, Republicans could soon steer wireless spectrum auctions Starlink’s way, which could bulk up the company’s satellite capacity even further.
Meanwhile, SpaceX has raked in billions of dollars in government contracts sending satellites and astronauts into space, while also collecting millions from private entities using SpaceX rockets to further their own space enterprises. President Trump’s proposed budget for the next fiscal year would
shower further billions on SpaceX for a back-to-the-future missile defense system and manned flights to Mars and the moon.
The federal government’s reliance on SpaceX started well before the Trump administration, and for good reason. SpaceX rockets have proved efficient, reusable, and cost-effective. SpaceX enjoyed $3.8 billion in federal contracts in 2024, the last year of the Biden administration. But critics, including those inside the Department of Defense, have sounded the alarm on the increasing dominance of a single company.
“Heaven forbid we have a mishap with a Falcon 9 launch,” Col. Richard Kniseley, an officer in the Space Force’s Commercial Space Office, told The New York Times last year. “That means it is grounded, right? And that means we could be without launch.” Kniseley’s concern is just one among many related to SpaceX dominating the full range of space services.
Hal Singer, a professor of economics at the University of Utah, has even more concerns. Singer’s tally of anti-competitive SpaceX actions includes corporate predation, barrier-to-entry protectionism, exclusionary contracting, and more. Meanwhile, two competitors of note—Jim Cantrell of Phantom Space and Peter Beck of Rocket Lab—have both publicly disclosed actions that SpaceX has taken to undercut their growth.
Cantrell said that two clients he was courting for his launch company balked at deals due to provisions they had already committed to in SpaceX contracts preventing them from using other firms. Beck claims that in the months after he met with Musk to discuss Rocket Lab, SpaceX rapidly moved to offer payloads at discounted prices to quash rival development.
Beck and other space CEOs have gone on record claiming that SpaceX intentionally fixed the cost of its payload service to under-
mine nascent competitors. “Transporter’s low price—initially $5,000 per kilogram— was below what some industry executives calculated was SpaceX’s basic cost. They concluded that SpaceX could only offer such a low price by subsiding those flights with some of its government contracting revenue,” the Times found.
At the same time that SpaceX is allegedly undercutting the price of transporting satellites into space, it is simultaneously engaged in consolidating the vertically aligned satellite communications industry through its subsidiary Starlink. If successful at cornering the market in both space transport and satellite communications, Elon Musk would effectively control space.
Perhaps the most sinister aspect of monopolization is a firm’s ability to blot out the effects of market capture through size alone, concealing the everyday effects of monopoly control by enveloping entire industries and leveling any alternative. Take Amazon. The e-commerce and cloud services firm boosted its own products on its retail website, ferreted away its sprawling, inhumane warehouses in the hinterlands of major transport hubs, and engaged in PR blitz after PR blitz to conceal the toll its services take on the workers powering its empire.
But at least Amazon is down here, on Planet Earth, where we can see its fleets driving mercilessly day and night through suburbia and the urban sprawl. (Although maybe not for long: In late April, Amazon launched its first Kuiper satellites into space, in an attempt to compete with Starlink, albeit perhaps too late to change the trajectory of the market.) By contrast, SpaceX and Starlink are largely invisible, save for the flickering of satellites that can be seen over certain latitudes for just a few minutes on clear evenings after launch.
The creeping effects of monopolies usually include the stifling of innovation, price manipulation, increased costs, and selectively provided services. But when it comes to SpaceX, national-security concerns largely absent in consumer cartels are introduced into the equation.
While the Cold War space race has been absent-mindedly memorialized in postcards of Sputnik and dioramas at the Air and Space Museum, a new, subtler competition for space dominance has increased steadily in the background of the 21st century. The U.S. Space Force was maligned at the time of its
creation as one more flashy excess of Donald Trump’s imagination, but the new military branch is a very real, very active part of the armed forces, which monitors and preempts interspatial and space-to-ground attacks by American adversaries, among many other duties. Given the risks posed by privatization, the Space Force and its stupidly named Guardians’ duties are only expanding.
In testimony submitted to a U.K. parliamentary foreign affairs committee, experts Raúl González Muñoz and Marcel Plichta described the emerging vulnerabilities posed by corporate expansion into space and the risk this growth poses to national security. “The rise of ‘New Space’ makes terrorist activity easier and more deleterious to UK interests: The term New Space refers to a new mindset towards space, not a specific technology,” they wrote.
“It stems from three main developments: 1) miniaturization of satellites, 2) space privatization by companies like SpaceX and Rocket Lab, and 3) new services based on space data. As a result, the barriers to entry in space are lowering, with non-state actors increasingly able to access LEO [low-earth orbit].”
America’s meager attempts at corporate regulation safeguard national security not only by creating physical redundancy, but also by distributing control over essential systems to more than one actor. This point is critical given recent reports about security problems that have long plagued Elon Musk’s companies. In 2024, The New York Times published an incredibly long list of failures.
According to the report, three separate reviews into SpaceX compliance with federal security protocols were opened prior to
Musk’s ascension to DOGE. These included investigations by the Defense Department’s Office of Inspector General, the Air Force, and the Pentagon Office of the Under Secretary of Defense for Intelligence and Security.
The Air Force denied Musk a high-level security clearance for certain programs, and insiders report that since 2021, Musk and SpaceX have failed to comply with core parts of security clearance screening. Details of Musk’s travel and meetings with foreign leaders in addition to the details of his drug use were not adequately provided to defense officials, according to the report.
Daniel Collins, a former DOD official hired by SpaceX to run the necessary security vetting, “allowed some executives who did not have the proper clearance into classified meetings” and “discouraged reporting violations of security clearances, including
More than half of the satellites currently circling the Earth were launched by SpaceX.
by Mr. Musk,” the Times found. When Cody Miller, an Army veteran working on clearances, emailed executives to warn them that the company’s “let’s push it till we are caught mentality” was not going to end well, he was summarily asked to resign.
The government’s obsessive cult of secrecy all too often works in service of keeping the public out of the business of government and occluding what the military blob is really spending our money on. But when it comes to ensuring proper security vetting in the private sector, the calculus changes, at least at SpaceX. Elon Musk, a South African by birth—who spends as much time posting about white Afrikaners as Americans—is not in the business of government, or national defense, but the business of business.
And as senators and defense officials investigating SpaceX have made clear, America’s national security is increasingly dependent on SpaceX safeguarding America’s secrets from foreign adversaries at a time when space is filling up with satellites, weapons, and spies.
In 2024, the director of national intelligence released a report on the evolution of the adversarial “gray zone,” a new sphere of technologically enabled competition that stops short of overt violence—“beyond diplomacy and in lieu of war,” according to the report.
“[D]iverse activities ranging from Iran’s targeting of US officials for assassination, to Russia’s election disinformation, and China’s militarization of artificial islands in the South China Sea” all fall into this gray zone orbit. So does “[k]inetic, non-reversible, or reversible attacks on terrestrial and onorbit space assets.”
Given that Musk’s allegiance to America seems secondary to an extraterrestrial obsession with the propagation of martians, the dangers posed by his control of outer space are grave. Space-to-space (using a satellite to strike another), Earthto-space (using radio frequency, directedenergy weapons on the ground to destroy or degrade a satellite), Earth-to-Earth (destroying/disrupting means to communicate with the satellite), and space-toEarth (purposefully deorbiting a satellite) attacks are all on the menu for state actors and terrorist organizations eager to see American destabilization.
And it is not as though these types of attacks have not been attempted success-
America’s national security is increasingly dependent on SpaceX safeguarding Americans’ secrets.
fully. On the low end of the spectrum are satellite hijackings: The Tamil Tiger insurgents of Sri Lanka hijacked a satellite frequency for over a year to broadcast calls for insurgency. Hamas followed the same playbook in 2012 and 2014. And in 2021, it was revealed that a German/U.S. research satellite turned itself directly toward the sun and imploded, an attack covered up at the time but later deemed to be the result of a hacking campaign on a satellite command station inside NASA
These are just the incidents we know about. A graduate thesis from the National Intelligence University on space terrorism written by a redacted author notes that the barriers to downing a satellite from orbit, or worse, turning it into a weapon to crash into other satellites, are exceedingly low.
Elon Musk is working with defense/tech firms to win the $10 billion Golden Dome missile defense contract.
A high-energy laser and a query of public satellite frequencies is all an enterprising terrorist might need to wreak chaos. If that’s not worrisome enough, Musk has joined forces with an array of defense/tech firms that are allegedly on the cusp of securing a $10 billion contract to build a “Golden Dome” composed of satellites equipped with lasers strong enough to shoot missiles out of the upper atmosphere, giving him control of even more satellites, this time with weapons attached. (The Golden Dome may premiere with a subscription-based model, where Musk and his partners own the space lasers, and the Pentagon rents them.)
While the cost of defense monopolies is felt most acutely in America’s lack of universal health care, child care, and welfare benefits, the cost of allowing Elon Musk’s monopoly on outer space to continue unchecked poses an even greater existential threat: one man with the impulse control of a 20-year-old Fortnite addict controlling the entirety of our planet’s internet, communications technology, and even space itself. As Trump’s regulators hack away at Google, Facebook, and the barons of terrestrial technology, a similar undertaking should be launched into outer space. n
Republicans Break the Weather
The private sector can’t match the value proposition of the National Weather Service, but companies work to entice Americans to pay up anyway. What happens if they can’t?
By Gabrielle Gurley
When it comes to summer weather in the eastern half of the country, people either whine about the haze and heat, the humidity and the thunderstorms, or they debate the best free app to track what’s coming next.
Name brands like The Weather Channel and AccuWeather have free smartphone
apps for the basics: high and low temperatures, sun or clouds or rain. More advanced hyperlocal alerts and frequent forecast updates or models will cost you. Clime, a newer offering, bills itself as an “all-in-one weather assistant” and offers freebies like current radar maps and seven-day forecasts. But severe weather “Clime PRO” add-ons like lightning or hurricane trackers will set you
back $9.99 a week (which they call their “most popular” option) or $99.99 for the year.
For most people, it’s the zero-dollar options that get the highest praise. The National Weather Service (NWS) serves up weather and climate data free of charge for consumers, and for the businesses that create these weather apps. Don’t look for an NWS phone app: The agency doesn’t have one, though it does have a shortcut that takes a user to weather.gov, its portal for forecasts, watches and warnings, and other resources. But the broader effort to design a new mobile-friendly site has been thrown offkilter: A beta version of that site notes that it has been “deactivated until further notice due to the loss of critical federal staff, which leaves this project without the resources required to continue its development or for routine monitoring and maintenance.”
Despite a treasure trove of public-facing weather intelligence, Americans may be headed toward the day when they have to pay for anything beyond the basics, and where your ability to know about imminent
Weather forecasts from the National Weather Service are free to consumers and businesses.
danger depends on how much money you have to spend on it.
The Trump administration’s scorchedearth march across the federal bureaucracy threw hundreds of NWS forecasters, researchers, and contractors across its 122 weather forecast offices out on the street in the run-up to hurricane season. Local communities depend on the agency to be on top of its forecast game to determine storm tracks, wind speeds, and precipitation that help put teeth into evacuation orders or shelter-in-place advisories.
The top weather-related recommendation in the far-right Project 2025 blueprint was to “break up NOAA .” The National Oceanic and Atmospheric Administration is the division of the Commerce Department that houses NWS . Elon Musk’s Department of Government Efficiency (DOGE) has delivered on this promise. Though the rampage appeared to leave the forecasting agency largely intact, retirements and other vacancies that cannot be filled under a hiring freeze have put it in worse shape than expected CNN reported that nearly one-quarter of the weather forecast offices don’t have a head meteorologist, including in hurricane-prone cities like Houston and
Tampa. Alerts in Spanish and other languages were temporarily suspended. And daily weather balloon launches that yield the most precise information about weather patterns have been curtailed
Project 2025 proposed that NWS “should focus on its data-gathering services” and “fully commercialize its operations.” First of all, it’s hard to understand how forced retirements and layoffs of over 550 public-sector workers (equivalent to all of the departures at the agency over the past 15 years) improve data collection, analysis, and dissemination.
In May, five former NWS directors released an open letter to the American people. “Our worst nightmare,” they wrote, “is that weather forecast offices will be so understaffed that there will be needless loss of life.” The wholesale abandonment of core responsibilities like the data collection that powers national and local severe storm forecasts is a first-level disaster.
But what’s even more puzzling is that Project 2025’s paean to the private sector glides over NWS history. The private weather sector, composed of weather forecast firms, private forecasters, and meteorologists working for media outlets, and academic departments and research institutes, has
been deeply embedded in NWS for decades. While these sectors have butted heads, overall this public-private partnership is flourishing, successful (and evidently lesserknown)—and it’s at risk.
Weather forecasting, particularly for hurricanes and severe storms, is complex. A disturbance can be on a course for one state and shift direction to strike a different one: In 2012, Hurricane Sandy changed course. It veered from a northern track to a northwestern one, made landfall close to Atlantic City, New Jersey, and severely affected metro New York.
Does a private weather forecaster want to be on the hook for a hurricane forecast that changes dramatically? Federal government meteorologists are held blameless for busted forecasts, but private weather companies have fewer protections, which is one reason why firms have been satisfied enough with the status quo to let NWS shoulder the burden of informing the public about severe weather events.
“In its responsibility, the government holds the liability,” says Craig McLean, a former assistant administrator of NOAA Research who retired three years ago. “The agency is responsible for that project. The idea of just
A weather balloon is prepared for launch into the atmosphere in Sterling, Virginia.
Any new
weather forecasting sector would be dominated by Big Tech, which has already shown a disposition toward monopolization.
writing a deep contract and paying a commercial entity doing what the weather service does today, it just does not compute.”
Judicial precedent has protected private forecasters—for now. In Brandt v. The Weather Channel (1999) a federal district court rejected a claim that the network was liable for the death of a man who went out on his boat and drowned since the cable network had not provided any warnings about choppy seas or approaching bad weather.
“Because prediction of weather is precisely that—a prediction—a weather forecaster should not be subject to liability for an erroneous forecast,” the court found.
It’s not just severe weather watches and warnings that private companies could balk at providing for free, if at all. Would a private weather firm want to make a meteorologist available to talk to community members about possible severe weather?
In the tornado-prone Paducah, Kentucky, area, keeping the Amish and other off-thegrid communities aware of weather developments is a major concern. To keep them in the loop for basic forecasts and hazardous weather information, NWS meteorologists set up a phone tree complete with an option to speak to a human. But a private weather company may be no more willing to serve offthe-grid communities than companies like Amazon are to deliver packages to remote locations. Shippers contract out those runs to the U.S. Postal Service; who would be left to provide critical, free information to the general public if NWS is decimated?
Incidentally, Paducah is one of the weather offices without a chief meteorologist; that’s true of all the offices primarily serving Kentucky.
In the absence of a robust NWS, some companies may try to paper over forecasting gaps with technology. Although artificial intelligence can make fine predictions in certain instances, it’s only as good as the data dumped into it. It’s reliable enough to
hit the mark on forecasting a week’s worth of high and low temperatures. But predicting a storm with Hurricane Katrina–like characteristics going into an area off the coast of North Carolina may not be as accurate, since there isn’t enough data to train AI on. Humans have to be involved with overseeing forecasts.
If the executive branch continues to dismantle weather agencies and stops collecting and storing data, that’s also a challenge for AI researchers. “AI is as good as the information that it processes,” says Kari Bowen, a science and administration manager at the University of Colorado Boulder’s Cooperative Institute for Earth System Research and Data Science. “If something happens to historical climate data [or] data streams, AI will be impacted.”
NOAA’s hurricane hunter flights collect data used to plot storm track and intensity. That data is at risk if NOAA is forced by budget cuts to make fewer flights with fewer scientists; according to current reporting, aviation capacity at the agency is down 25 percent . The Air Force also has hurricane hunters, but the NOAA crews have Doppler radar that provides detailed views of the entire storm track and intensity, data points that state and local officials use to weigh evacuations against shelter-in-place orders. Federal cost-cutting has even gone after tools that are cheaper and more accurate. Launching weather balloons is a regular task at NWS offices. A balloon carries an instrument into the stratosphere, the second layer of the atmosphere. When it pops, the instrument lands on Earth with valuable information. Offices that only had 15 to 20 people to begin with will have fewer people to collect 24/7 measurements.
The quality of information collected by weather balloons can be better than that of satellites or on-the-ground instruments. The retrieved data indicates how much energy is stored in the atmosphere that can be released as a severe thunderstorm. Kerry Emanuel, an MIT professor emeritus of atmospheric science, argues that reducing weather balloon launches is counterproductive: “You’re not saving very much money and you’re decreasing the value of the forecast much more than you’re saving money.” What will happen is that severe weather outbreaks will be that much harder to predict.
Even hundreds of buoys moored in the ocean yield valuable data when storms approach. But the possibility of all of this
data collection disappearing leaves experts wondering how anyone in the private sector could fill the gaps.
If NWS doesn’t do it, who would? “It’s just hard to imagine any institution and any company could come in and take on all of that,” says David Stensrud, a Penn State professor of meteorology and atmospheric science. “Basically, you’d have to give everything NOAA owns to the private company, just to be able to maintain the system as it is, before you could transition into something else. I would think that would be a multiyear process if it would even work.” He added, “I guess anything can work, if you throw enough money at it, but just the transition itself would cost millions of dollars to move all that someplace else.”
Mary Glackin, a former NOAA deputy undersecretary and a past president of the American Meteorological Society, fears that any new weather forecasting sector would be dominated by Big Tech, which has already shown a disposition toward monopolization. Microsoft, Google (both companies working on AI weather forecasting models), and others would invest heavily and pick off select components like satellites before they’d recruit the people with the know-how to repair them.
There’s little evidence that private companies want to throw any money at something that they get today for free. There’s scant altruism in the relentless fixation on their own bottom lines. Business-tobusiness weather companies could theoretically use profits from selling specialized forecasts to farmers, fishers, airlines, and other companies to power free data for everyone else. But that would require an interest in serving the public, such as keeping severe weather watches and warnings in a basic tier of service at no charge. That’s not necessarily what the profit motive drives private companies to do.
The 2025 hurricane season promises to be a real-time evaluation of whether the National Weather Service is broken beyond repair or if can be resuscitated and redeployed. At the very minimum, there has to be a recognition that any acceleration toward a system whereby some people pay for lifesaving data while others just watch and wait has catastrophe written all over it. No country should triage its weather forecasts. Says Bowen of CU Boulder: “I don’t want to see a day where the only way someone can get a weather warning is if they’re paying for it.” n
Private Equity’s Do-or-Die Moment
Regulators have been cracking down on consolidation just as dealmaking dries up and investors head for the exits. Can the lords of finance find a way out?
By James Baratta
The year 1978 is not just noteworthy for the election of Pope John Paul II and National Lampoon’s Animal House . It was also the year that a little investment banking firm known as Kohlberg Kravis Roberts announced plans to take manufacturing conglomerate Houdaille Industries private through a leveraged deal, using the company’s assets and future cash flows as collateral to secure debt financing for the acquisition. Although KKR had completed three smaller deals the year before, its acquisition of Houdaille was the first leveraged buyout of a public company in modern history.
The successful deal set the stage for KKR’s rapid expansion into the 1980s and beyond. Today, KKR is a publicly traded investment firm with $638 billion in assets under management. Despite some initial skepticism, Wall Street would go on to follow in the firm’s footsteps. Such financial engineering has become a staple of the private equity industry.
Private equity firms pool investments from institutions like pensions and endowments into funds that buy a portfolio of companies through leveraged deals, where the bulk of the acquisition is financed through debt. To secure debt financing, the firm fronts a small amount of its own cash and raises additional capital from investors. It then leverages those assets to borrow the money it needs to complete the acquisition.
The typical holding period for a portfolio company is five to seven years. At the end of this period, the firm will either sell the company (ideally at a premium) or attempt to take it public. But countless companies have been crushed under the debt obligations they’ve been saddled with, from Toys “R” Us to Red Lobster. In these and many other
cases, the private equity firms extracted hundreds of millions of dollars in fees and interest, while abandoning companies and their workers.
Beyond financial engineering, private equity has undermined competition through serial acquisitions of multiple companies in a particular sector, which then get merged into a single platform that benefits from an enhanced market position. These are commonly referred to as buy-and-build strategies or rollups, and they have been prevalent in health care and even obscure markets like telecommunications for the deaf and hard of hearing.
Not all rollups are illegal. However, serial acquisitions intensifying market concentration triggered regulatory scrutiny under the Biden administration. With private equity’s prospects fading in the uncertain economy, whether that scrutiny continues under President Trump will go a long way to determining whether the KKR s of the world can survive.
A Day of Reckoning
At the end of Biden’s presidency, the Justice Department’s Antitrust Division filed a civil lawsuit against KKR over the firm’s alleged failure to comply with the HartScott-Rodino Act of 1976, or HSR , between 2021 and 2022. The agency accused KKR of “repeatedly flouting the premerger antitrust review process,” which regulators rely on to determine whether further investigation is warranted.
The Justice Department is seeking at least $650 million in civil penalties from KKR , the highest civil penalty ever sought for an HSR violation.
KKR responded with a countersuit, arguing that HSR “is not the government’s primary tool to investigate mergers.”
Although the principal method for investigating anti-competitive conduct is through “second requests,” regulators depend on the premerger antitrust review process to detect irregularities.
KKR claimed it has been in compliance, describing its premerger filing errors as “immaterial slips.” But it didn’t stop there: The firm went on to characterize the Justice Department’s complaint as “politically-motivated” and “inconsistent” with HSR guidance, and even sued the then-acting head of the Antitrust Division Doha Mekki personally as part of the lawsuit.
U.S. attorneys for the Southern District of New York filed a motion to dismiss KKR’s complaint on April 23, but the case is ongoing.
The legal exchange comes as regulators under Biden ramped up efforts to rein in the private equity industry, some of which has carried over into the Trump administration. For example, the FTC finalized a new HSR rule that significantly expands how much information and documentation financial sponsors must submit in their premerger filings, and requires filers to disclose all acquisitions from the past five years. Essentially, the revisions to HSR will enable enforcers to evaluate whether certain mergers threaten competition in a more swift and efficient manner. This new filing form was passed with bipartisan votes on the Federal Trade Commission, and allowed to take effect early in Trump’s new term.
According to Brendan Ballou, former special counsel for private equity in the Justice Department’s Antitrust Division and author of Plunder: Private Equity’s Plan to Pillage America , premerger filings “are the primary way by which enforcers see that anti-competitive acquisitions are happening.”
Private equity vehemently opposed the rulemaking changes. “Understandably, they oppose this kind of regulation,” Ballou told the Prospect. “If they are forced to comply with all the HSR requirements, then enforcers are going to see a lot more rollups happening that may be anti-competitive.”
The American Investment Council, a lobbying and research organization that doubles as the industry’s spin doctor, has argued that the new disclosure requirements will result in higher compliance costs and deter mergers and acquisitions altogether. More recently, it lambasted regulators for their supposed “animus” toward the private equity industry and disregard
for the “efficiencies and other procompetitive benefits that are often created by mergers.”
The HSR revisions must survive a resolution of disapproval from Congress using the Congressional Review Act, which was introduced as soon as the new form took effect on February 10. But Congress only has until late May to use the CRA mechanism, and the resolution in question only has three co-sponsors.
Boom and Bust
The private equity industry is teetering on the edge of its former glory. Dealmaking has been glacial, tariff-induced market turmoil has upended exit plans (or sales of the portfolio companies), setting prices for acquisitions has been impossible due to the uncertain economic environment, and bankruptcies at private equity–owned companies soared to record levels last year. Moreover, cash-strapped institutional investors have been exploring ways to shed some of their private equity exposure. That includes endowments at universities that are under pressure due to Trump’s attempts to deny them federal funding. Yale’s endowment, one of the first to enter private equity investments, has been considering exits.
how enforcers “can examine whether a firm’s pattern or strategy of multiple acquisitions risks substantially lessening competition or tending to create a monopoly.”
These challenges mean that the industry will have to get creative. It remains unclear the extent to which private equity can successfully manufacture favorable profitability outcomes through financial engineering, but as Ballou noted, these firms “are generally out for themselves.”
“One could see them leaning on their portfolio companies to extract as many fees as they can while they still can … to increase profitability in the short term, even if it sacrifices profitability in the long term, in order to try to get a better valuation on some of these businesses and offload them,” he told the Prospect
When it comes to ensuring competition, regulators have established a new framework for reviewing mergers and acquisitions.
The 2023 Merger Guidelines, a nonbinding directive published by the Justice Department and FTC during the Biden administration, have significant implications for the private equity industry. Although the directive does not explicitly mention private equity, it highlights the many ways in which enforcers intend to remedy the industry’s anti-competitive business practices.
In a September 2023 op-ed for the Financial Times , former FTC chair Lina Khan described the 2023 Merger Guidelines as “a handbook for how market participants should understand the analytical tools and frameworks we apply when assessing whether a deal violates the law,” adding that one of the guidelines details
The vigorous antitrust enforcement regulators have pursued since the Biden administration has persisted under President Trump, for now. Notably, the Trump administration agreed to maintain the 2023 Merger Guidelines earlier this year. But how long will this unusual continuity last?
In one sense, what the feds decide won’t completely let private equity off the hook, Ballou said. “In a world where federal regulators are not particularly interested in antitrust enforcement in private equity, that responsibility is going to fall to the states, which have the authority to pursue or to enforce federal antitrust laws. I think that’s probably where a lot of the energy is going to be.”
The FTC has continued to crack down on anti-competitive conduct by private equity firms under the Trump administration, by challenging a medical device rollup. Despite this, the uncertain future of antitrust enforcement at the federal level increases the likelihood that states will need to step up efforts to check corporate power.
“One of the basic problems we’ve got with private equity is we have a disconnect between private equity firms having operational control over their businesses but very little legal or financial responsibility for when bad things happen with those businesses,” Ballou told the Prospect. “State legislatures can help change that.”
States have been fixated on private equity’s involvement in health care for obvious reasons, but rollups by these firms are playing out across a range of sectors. The industry’s iron grip on the U.S. economy and the problems that come with it are not going away. n
The Golden Age of Scams
There’s an economic principle named after a 16th-century British financier—Sir Thomas Gresham—who urged Queen Elizabeth I to clean up the sorry state of the national currency. Gresham’s Law states that “bad money drives out good,” and while Sir Thomas meant “bad money” in terms of coinage that didn’t carry the intrinsic value of gold or silver, the principle applies just as well to the business world. Simply put, honest companies have a hard time competing with dishonest ones.
This is intuitive if you think about it. An auto dealership that only sells lemons and lies about it will earn well above fair value for their vehicles. Snake oil doesn’t cost as much to make as a useful medication. Robbing your customers is more lucrative than making sure they’re satisfied.
If you accept this premise, then you should recognize that we’re about to see a lot of honest businesses either turn to the dark side or close up shop.
The first Trump administration didn’t pay much attention to white-collar civil and criminal enforcement, but this term is off the charts. Investigations into any business executive with even a passing relationship to Trump have been scotched, with beneficiaries ranging from the richest man in the world to the husband of the education secretary. Over 100 active enforcement actions have been either paused or dropped across the executive branch. In March, Trump donor Trevor Milton was pardoned after being sentenced for lying to
investors; in April, Trump issued a corporate pardon to Bit MEX , a crypto exchange that had pled guilty to failing to prevent money laundering.
Entire areas of the law, from prohibitions on U.S. companies bribing foreign countries to crackdowns on public corruption to bans on workplace discrimination, have essentially vanished. An orgy of deregulation , mainly benefiting corporate activities, is being planned. About $50 million in donations for Trump’s inauguration festivities came from companies under active federal investigation or lawsuits, and it’s hard to believe that any of those cases will see the light of a courtroom, or that any of those executives will be held accountable.
Most importantly, anyone who buys a product or secures a loan has been abandoned by their government. The consumer protection unit and (literally) the kleptocracy unit of the Justice Department will both be disbanded; the Consumer Financial Protection Bureau has been defanged (even if 1,500 of its workers have been temporarily saved by court orders); and two Democratic commissioners of the Federal Trade Commission were illegally fired
Busting up the safeguards against rapaciousness and greed means that the bad money will drive out the good. Trump’s second term has sent up a giant flashing signal to every miscreant, thief, and bad actor in America that their moment is now. “All signs point to open season on anyone who would
have relied on these kinds of protections to soften the invisible hand,” Rick Claypool, research director at Public Citizen, told me. But where will the bad money lurk? What will it target? Who is at risk? We wanted to explore what to watch out for in a golden age of scams, what innovations will emerge in the exciting industry of parting people from their money. In this issue, we detail different critical segments of the economy—health care, higher education, energy efficiency, small-business sustainability— where financing is a hurdle and desperation can create opportunity. And we pay special attention to the most powerful beneficiary of a country without financial watchdogs: the president himself, who is now less the commander in chief and more of a crypto mogul and meme coin hype man who just happens to be able to sign bills into law.
It’s important to document where the next scams will originate, because unrestrained corporate misconduct has historically fueled larger catastrophes. “We have seen this movie before, when the mortgage crisis ripped a hole in the world economy,” Seth Frotman, former general counsel of the CFPB, said in a congressional hearing in March, “and the sequel may well be much worse than the original.”
Let these stories be both a warning and a call to action, to help avoid abusive practices and to learn about the presidential directives from whence they spring.
—David Dayen
Three Coin Monte
The Trump administration is removing every financial guardrail from crypto, in order to enrich the first family and its tech and finance allies while destabilizing the economy.
By Jacob Silverman
When Javier Selgas, the CEO of Freight Technologies, Inc., or Fr8Tech, a publicly traded trucking logistics firm, was thinking about how he might influence policy in President Donald Trump’s second administration, he landed on a novel mechanism: buying $20 million worth of $TRUMP tokens, the cryptocurrency meme coin (colloquially known as a “shitcoin”) Trump had released the day before inauguration weekend.
“We believe that the addition of the Official Trump tokens are an excellent way to diversify our crypto treasury, and also an effective way to advocate for fair, balanced, and free trade between Mexico and the US,” said Selgas in a press release. The company also disclosed the purchase in Securities and Exchange Commission (SEC) filings, noting that it took out $20 million in debt to buy the tokens, whose value can fluctuate wildly. (In a stricter economic sense, meme coins like $TRUMP are considered to have no inherent value, their price propped up by hype, the hopeful delusions of speculators, and market manipulation. So in that sense, Fr8Tech was borrowing $20 million for the financial equivalent of air.)
But the motives of using corporate trea-
suries and borrowing capacity for a shitcoin were perfectly clear. Twenty million dollars may be enough to vault Selgas to the top of the leaderboard of owners of $TRUMP, which would land him an audience with the president, who recently announced that the top 220 on the leaderboard would be invited to a presidential dinner.
If the president, with the backing of the Supreme Court, hadn’t claimed broad immunity for himself, the $TRUMP dinner might be considered an unparalleled form of potentially illegal influence peddling. Instead, it’s another lucrative way the president has found to monetize his office. And even if it were still illegal—which it may well be—the president’s team of regulators and law enforcers are highly unlikely to see it that way.
With a pro-crypto regulatory regime being constructed and the old financial guardrails mostly dismantled, everyone has adjusted to the new reality. Corporations and even some unions have started adding crypto tokens to their balance sheets, with ostensibly sober-minded CFOs treating it as a reasonable financial diversification strategy. The pacesetter for this trend is MicroStrategy, once a reasonably successful enterprise
software company that now owns about 1 in every 40 Bitcoins in existence, whose CEO has become a Bitcoin celebrity, constantly hosting events for executives to learn about adding Bitcoin to their company portfolios. (Selling to one’s peers is a core strategy of any multilevel marketing scheme, which Bitcoin in some ways resembles.)
These are the increasingly hallucinatory economics of crypto-laden corporate balance sheets, which ring out with risk and contradictions. But buying tokens from the president of the United States is another innovation entirely, a form of corruption so obvious that even some frontline Democrats have begun calling it for what it is: the biggest financial scandal to ever hit the presidency. What Freight Technologies did was perhaps a sensible act of self-interest. Since Trump introduced his meme coin, many observers (including me) have warned that it is an unprecedented vehicle for personal enrichment and potentially for bribery. It doesn’t even require Trump’s explicit agreement. The immediate effect of buying $20 million in crypto tokens issued by the president is to boost their value, directly boosting the fortunes of Team Trump, since Trump-
connected wallets control 80 percent of the $TRUMP token supply. A CEO or leader of an autocratic state can simply buy up millions in $TRUMP tokens from an exchange and then alert someone on Trump’s side, or even just announce publicly with the expectation that someone in Trump’s orbit will hear it, that they’ve put money in his pocket.
Trump and his investors could even pump the token together. If I tell Trump’s crypto company that I intend to buy $50 million of $TRUMP, they could take advantage of the brief rise in token price that’s sure to follow. Indeed, this is the intention anytime Trump posts on social media about his token, and it was the intention anytime Elon Musk posted about DOGE (back when it was just a meme coin, rather than a vehicle for an administrative coup). It’s a standard part of the pump-and-dump mechanics underlying all meme coins, being done here on a larger, Trumpian scale.
A beneficiary of at least three separate crypto businesses, Trump has an uncanny knack for remembering everything that anyone has ever done for him or to him, with an eye toward meting out reward or punishment in exchange. The $TRUMP token, and crypto in general, has become the perfect medium for that exchange. And the casual brazenness by which powerful people are playing this game has become the defining characteristic of the second Trump term.
The Trump administration has dismantled crypto crime task forces at the SEC, Department of Justice, and across the government. The administration moved quickly to end numerous regulatory investigations of crypto companies and tycoons, including top campaign donors like Coinbase and Ripple. Deputy Attorney General Todd Blanche issued crypto-related legal guidance calling for an end to “regulation by prosecution,” echoing language used by the crypto industry when it complained about the Biden administration’s “regulation by enforcement.” The Blanche memo also seemed designed to end two prominent criminal prosecutions into developers of “crypto mixers” that obfuscate the trail of crypto, facilitating billions of dollars in money laundering by North Korean hackers and other criminals.
The Trump Crypto
$TRUMP: A meme coin controlled mostly by Trump-connected wallets
$MELANIA: A meme coin launched by the first lady
Truth.Fi: A crypto financial services brand through Trump’s Truth Social microblogging website
The White House has said that it will not enforce the Foreign Corrupt Practices Act, the law that bans bribery of foreign officials. The Federal Deposit Insurance Corporation and Federal Reserve revoked several pieces of guidance on banks’ crypto activities, breaking down the firewall between the crypto sector and the banking sector, precisely what protected the broader economy during the series of crypto meltdowns in 2022, culminating in Sam Bankman-Fried’s FTX collapse. Now, the crypto industry is likely to have access to all the mainstream financing it wants—with the attendant potential for contagion to spread to mainstream markets when crypto crashes again. Taken together, these measures open the door for almost limitless corruption, just as President Trump’s crypto ventures prepare to take in billions of dollars from foreign investors.
USD1: A Trump-issued stablecoin pegged to the U.S. dollar
$WLFI: A digital token available through World Liberty Financial, a Trump business entity
After receiving more than $200 million in support from the crypto industry in the 2024 election cycle, Trump isn’t just clearing the regulatory runway for industry takeoff. Trump and his family have jumped into the deep end of the crypto business, becoming one of the country’s leading purveyors of meme coins, non-fungible tokens (NFT s), and other digital tchotchkes while partnering with some of the industry’s sketchiest players. Even Trump’s cult-of-personality Truth Social microblogging website is gearing up to release something called Truth. Fi, a fintech investment platform that is partnering with Crypto.com, an exchange that just so happened to have a pending SEC investigation dropped just three days after the announcement of the partnership. As the writer Molly White has chronicled, the Trump family’s crypto interests extend from tokens to Bitcoin mining to lending
Even some Democrats have begun calling it for what it is: the biggest financial scandal to ever hit the presidency.
Universe
products and even a crypto game in the mold of Monopoly. The normally staid Wall Street Journal aptly summarized the harrowing state of play: “The crypto tycoons that previous administrations pursued for helping the U.S. government’s foes move their funds— Russian sanctions evaders, Islamic terrorist groups, Mexican drug cartels, global fraud rings—are now doing business with the president and members of his inner circle.”
These ventures are divided between a number of companies, including some semiobscure LLCs: Trump Media, World Liberty Financial, CIC Digital, Fight Fight Fight LLC, DT Marks DEFI LLC, and so on. While The New York Times and other prominent outlets have begun devoting more resources to chronicling Trump’s crypto operation, there is no comprehensive account of how many companies he has, where they’re located, who the investors are, what deals he’s making, or who’s purchasing his tokens. No blockchain analytics firm—which tend to cater to a conflicted mix of corporate, government, and gray-market clients—
has issued a substantive report on the full scope of Trump’s crypto dealings. It should have been an automatic investigation for Congress and for multiple inspectors general, but Democrats have wallowed in their minority status while Trump illegally fired 18 IGs during his first week in office.
While Trump builds out this lucrative operation, he and his crypto and tech industry advisers have been sweeping aside consumer protection regulations and legal barriers that limited crypto’s access to mainstream banking. “This [crypto] empire is set to profit precisely because Trump is gutting the regulations that would normally constrain it—brazen self-dealing that dwarfs even the unchecked emoluments violations of his first term,” wrote White.
The Consumer Financial Protection Bureau, for instance, has more than 8,000 registered consumer complaints about Coinbase, America’s leading crypto exchange and a popular market for speculators to gamble on the $TRUMP token. In February, when Elon Musk and DOGE began gutting the CFPB, Coinbase CEO Brian Armstrong celebrated on X, writing: “The CFPB is unconstitutional on the face of it. And even if it wasn’t, it should be deleted as we already have DOJ to prosecute fraud, and (many) other financial services regulators. It’s an activist organization that has done enormous harm to the country.”
As the CFPB and other institutions designed to contain finance’s worst excesses and prosecute fraudsters are battered into submission, there is nothing stopping Trump from merging his personal business with foreign policy. For example, according to some reports, Trump is already pushing his tokens on foreign governments via Steve Witkoff, the president’s diplomatic envoy to the Middle East. Witkoff and his son Zach are co-founders of World Liberty Financial, a platform that Trump has a controlling 60 percent stake in and the title of chief crypto advocate. World Liberty Financial offers a digital token called $WLFI; the elder Witkoff has publicly promoted the venture, and apparently he is doing the same in private. “Steve Witkoff is calling every sovereign government and saying, ‘You need to support this coin if you want to be in good standing with Trump,’” a venture capitalist who advises the Trump administration told Business Insider.
We have already seen the kind of quid pro quo that can result from a prominent person doing business with Trump’s crypto compa-
nies. After Trump was elected in November 2024, Chinese businessman Justin Sun bought $75 million worth of $WLFI tokens from World Liberty Financial. After Sun made his purchases, the company publicly celebrated his involvement as an investor, and the SEC froze its fraud investigation into Sun.
In all, World Liberty Financial has sold at least $550 million worth of its tokens, which can’t yet be traded or moved off its platform. According to WLF ’s website, the Trump family receives 75 percent of all proceeds from token sales, after certain expenses are covered.
After the SEC quashed its fraud investigation into Sun, The Wall Street Journal and Bloomberg soon reported that Changpeng Zhao, or CZ, the co-founder of Binance, the world’s largest crypto exchange, who spent four months in federal prison for his company’s money-laundering violations, wanted to strike a similar agreement as Sun did. Steve Witkoff led some of the negotiations between the two sides, according to the Journal. The alleged pardon was reportedly going to be accompanied by a Trump investment in Binance’s U.S. operations, which had also been subject to regulatory investigation. Just a year earlier, Binance had agreed to pay a $4.3 billion fine for allowing money laundering on its platform, the largest corporate fine in U.S. history.
Zhao denied the substance of the reports but later said that he did in fact request a pardon. “I was like, well, if they’re writing this article, I might as well just officially apply, right?” Zhao told an interviewer. (After going to prison, Zhao stepped down as CEO while retaining his ownership share. Since his release and return to his home in Dubai, he has appeared to still be involved with Binance in a major capacity, representing it at public events.)
Trump and Binance show every sign of diving into business together. As Congress works toward codifying stablecoins into law—and giving non-bank corporations and Big Tech firms the ability to issue their own digital currencies—Donald Trump has already gone ahead and created his own as part of a project that involves Binance. Called USD1, the token is issued by World Liberty Financial, and like all stablecoins, it’s supposed to remain at a constant value, pegged to the U.S. dollar. (Stablecoins sometimes lose their peg, which is when calamity can strike.)
USD1 is a digital dollar—a counterfeit dollar, perhaps, depending on one’s legal inter-
NFTs: Digital trading cards released by the president
pretation. Certainly, the identification of an essentially fictitious dollar-like digital currency with the U.S. president must be good for business. According to a State Democracy Defenders Fund report, “By designating its stablecoin ‘ USD1,’ WLFI has largely appropriated the internationally recognized code used for trading U.S. dollars in the foreign currency market—that is ‘ USD’. As a result, the USD1 designation may lead potential investors to mistakenly believe they are purchasing a digital asset that is backed by the full faith and credit of the United States.”
USD1 is already off to a running start. MGX, an Abu Dhabi investment fund, is purchasing $2 billion worth of USD1 tokens to use for an investment in Binance, whose unofficial headquarters is in the United Arab Emirates. The deal was announced by Zach Witkoff at the TOKEN2049 conference in Dubai, where Eric Trump appeared alongside Justin Sun.
“It’s one of the more successful things we’ve ever done,” Eric Trump told The New York Times, speaking about World Liberty Financial.
In both a legal sense and by his own example, Trump has created a permission structure for crypto businesses to push whatever limits might remain. Crypto partisans oversee the SEC and the Justice Department. Paul Atkins, the new SEC chair, was the CEO of a consulting firm with several crypto clients whose first public appearance as chair was at a crypto roundtable where he vowed to throw out rules on digital assets imposed by his predecessor, even without congressional guidance. The attorney general is Pam Bondi; her brother Brad has advised multiple DeFi and other crypto projects for years, according to published reports. Even if one does run afoul of the law, there are options. Trevor Milton, former CEO of an electric truck company, was convicted of securities fraud and sentenced to four years in prison in 2022. (He was represented by Marc Mukasey, who had previously represented the Trump Organization.) After Milton and his wife made $1.8 million in proTrump political donations, he was pardoned by the president in March.
Those who don’t need pardons know well that enforcement of the vast array of exploitation facilitated by crypto seems likely to plummet. The prominent crypto figure and
Tether CEO Paolo Ardoino, who almost certainly would not have attempted to enter the United States under the previous administration given the federal criminal investigation reportedly trailing him, has appeared with politicians in D.C., on conference panels, and at the New York Stock Exchange, despite his company being banned from doing business in New York state, a condition of an $18.5 million settlement that Tether reached in 2021 with state Attorney General Letitia James related to the cover-up of $850 million in missing company funds. (Commerce Secretary Howard Lutnick was Tether’s primary U.S. banker and business partner when he was CEO of Cantor Fitzgerald. The portfolio at Cantor Fitzgerald has since been passed to Lutnick’s son.)
Above all, Trump’s crypto policies— which unite self-dealing and political favoritism toward a single industry to a unique degree—represent a scam upon the American people. Trump’s legal and regulatory moves will result in fewer prosecutions of financial criminals, fewer fines paid, and less attention from authorities on the plague of financial scams that rob Americans of billions of dollars per year, like pig butchering, the text-based scheme that lures in unsuspecting people to make worthless crypto investments. Fewer shitcoin dealers will be investigated for issuing unlicensed securities or defrauding customers, because the president is the country’s leading shitcoiner. Fewer stablecoins will be questioned about the assets backing their offerings, because the president has a stablecoin. Fewer crypto game magnates will face regulatory scrutiny for their exploitative, pyramid-scheme-like business models, because the president has a crypto game. And nobody will raise a peep about whether crypto tokens are unregistered securities, as long as the president is peddling unregistered securities.
By pardoning and commuting the sentences of crypto executives and convicted fraudsters like Ozy Media CEO Carlos Watson, Trump has signaled to major financial criminals that they have carte blanche, as long as they plan to pay up later. Lawyers and Trump-connected operatives are offering pardon consulting services for a minimum buy-in of $1 million, according to Bloomberg.
There are huge material costs to pardon-
Eric Trump has called his family’s crypto business “one of the more successful things we’ve ever done.”
ing fraudsters and financial malefactors, in terms of individual losses, harm to legitimate businesses, and lost fines and restitution that were supposed to go to victims and the state. “In total, Donald Trump has granted pardons that have wiped out over $1 billion in debts owed by wealthy Americans who have committed fraud and broken the law,” said Liz Oyer, a former pardon attorney at the Department of Justice. It also serves to undermine any remaining faith the public might have that the government can hold white-collar criminals to account.
Fraud is a social crime, where people leverage the trust of those around them, and its growth erodes the social fabric. Trumprelated companies’ meme coin pump-anddump has already leveraged his supporters’ belief in him to scam them out of hundreds of millions or even billions of dollars. According to a recent analysis published by CNBC, “about 764,000 [crypto] wallets that purchased President Donald Trump’s $TRUMP meme coin have lost money on the investment.” At the same time, 58 wallets made a combined
Trump has created a permission structure for crypto businesses to push whatever limits might remain.
$1.1 billion in profit, likely because they were controlled by insiders. The tokens generated at least $324 million in trading fees, some chunk of which went to the Trump family.
“The risk of politician coins comes from the fact that they are such a perfect bribery vehicle,” wrote Vitalik Buterin, co-founder of the Ethereum cryptocurrency, less than a week after the introduction of $TRUMP. “If a politician issues a coin, you do not even need to send *them* any coins to give them money. Instead, you just buy and hold the coin, and this increases the value of their holdings passively.”
Buterin added that there was “deniability” in this scheme—a person could claim they were buying the coin to gamble, not to enrich the politician behind it. “You can even hold the coin privately, and show that you are holding it to whoever you need to show.”
“This all very risky to democracy,” wrote Buterin. “I recommend politicians do not go down this path.”
They haven’t listened. Donald Trump may be the chief political purveyor of cryptocurrencies, but he’s being closely watched by his Republican allies, Argentina President Javier Milei, Central African Republic
President Faustin-Archange Touadéra, and a host of other global politicians wondering how they might emulate his example.
Democratic opposition to Trump’s crypto ventures has been scattered and exceedingly late in coming. Speaking at a town hall about Trump’s dinner invite for tokenholders, Sen. Jon Ossoff (D-GA) said, “There is no doubt that this president’s conduct has already exceeded any prior standard for impeachment.” Earlier this year, Sen. Chris Murphy (D-CT) and Rep. Sam Liccardo (D-CA) introduced the Modern Emoluments and Malfeasance Enforcement (or MEME) Act, which bans the president and members of Congress from selling their own crypto tokens. (A separate but similar bill called the End Crypto Corruption Act was introduced around the same time.)
“It’s essentially a way for any corporate CEO, any Saudi prince, any foreign oligarch who has business before the Trump administration, to send Trump money privately, secretly, and then whisper to the Trump administration about how much money they’ve sent and the favor that they need,” said Murphy in an announcement.
Sen. Murphy is correct, but the phenomenon he worries about is already happening.
And if the MEME Act or the End Crypto Corruption Act passes, who would enforce it? Several Democrats are apparently content to collaborate in blessing this interlocking set of grifts, while pretending to take them on. But even if they stood strong in opposition, as long as Trump is president, the crypto industry will still likely get the market access and personalized rulemaking it desires.
With the president signing an executive order establishing a “strategic digital asset reserve,” the federal government is now exploring ways to acquire and hold more Bitcoin—an interesting thing to do in the same month that Trump’s sons announced an investment in a Bitcoin mining company. A similar effort seeks to put together a reserve of select tokens under the management of crypto and AI czar David Sacks, who has crypto industry investments through his VC firm Craft Ventures. One of the tokens included would be Solana, which has investments from Trumpworld figures like Marc Andreessen’s a16z and whose blockchain powers the $TRUMP and $MELANIA shitcoins. With a strategic crypto reserve, the financial interests of the president, his family, a powerful group of donors, and a new profit-seeking arm of the federal government manage to converge, a turducken of corruption.
We’ve never seen anything like it, but it was also entirely foreseeable—the natural outcome for an industry whose survival has depended on aggressive regulatory arbitrage and political influence campaigns. The problem for the American people is that “the crypto president,” as Trump now calls himself, is overwhelmingly incentivized to continue pumping a substance-free digital-asset bubble that will inevitably pop. Until that happens, the crypto industry will get more access to mainstream banking and financing, creating more cryptobased exchange-traded funds (ETFs) and other risky financial products that in turn will be bought up by retirement funds, unions, and institutional investors. And when it all blows up, we will struggle to explain to our friends and family how shitcoin-based ETFs became the credit default swaps of the latest elitedriven financial crisis. n
Jacob Silverman is the author of Terms of Service: Social Media and the Price of Constant Connection and the co-author of Easy Money: Cryptocurrency, Casino Capitalism, and the Golden Age of Fraud. He is working on a book about Silicon Valley and the political right.
Predatory Lenders ın the Operating Room
Medical credit cards have gone mainstream, preying on sick people at their most vulnerable.
By Bryce Covert
Christopher Crim’s troubles started when his husband, who has cystic fibrosis and is in end-of-life hospice care, needed a tooth pulled. Crim took him to a dentist near their home in Tennessee, and while he was in the bathroom, the dentist pulled all of his husband’s teeth, not one, and left a bone sticking out of his husband’s gums.
The ensuing pain was so severe that his husband couldn’t sleep, even on morphine and oxycodone. So Crim rushed him to a new dentist, who estimated that surgery to fix the problem would cost $6,000. Crim and his husband didn’t have that kind of money. His husband is on Medicaid, but they couldn’t find any providers who would accept the dental coverage. Hospice has already forced them to sell their house and drain their savings. “Everything’s gone,” he said.
After the dentist agreed to shave a bit off the price, and after Crim pawned their wedding bands, he still faced a balance of about $1,500. That’s when he was taken into the back of the office, and a female employee told him he could cover the remainder with a CareCredit card. The cards, issued by Synchrony Bank, can only be used at participating providers to cover medical charges.
Immediately, Crim was approved for $1,500 in credit, and he remembers the woman telling him it was interest-free for the first year. She filled everything out on
a computer and then handed him a stack of papers to sign. His husband was still in pain, waiting to be operated on. “We were in a hurry to get him back there and get his mouth fixed, so I just signed,” he said. He never got a copy of the paperwork. “He was suffering so bad, and I thought, ‘Whatever it costs, whatever I have to do to make him comfortable while he’s dying, I’ll do it,’” he said. “I couldn’t have been more vulnerable.”
Crim routinely paid above the minimum payment on his statements. Then, a couple of months ago, he said he got a bill from CareCredit, which stated that the bank was adding $700 in interest to the $900 he still owed. “I’m like, ‘Well, they made a mistake, of course they had to have made a mistake,’” he said. But when he called Synchrony, protesting that he was told the card was interest-free, he was informed that was only true if he paid the entire amount off before the year was up. Otherwise, a year’s worth of interest would automatically be added to the amount owed. He had never received any paperwork stating that, and all he saw on the company’s app was what he owed. “Nobody stressed to me, ‘You got to pay that $1,500 off in a year or you’re going to pay the interest,’” he said.
Medical credit cards operate like retail credit cards you might get at The Gap or Home
Depot, but instead of a cashier making the pitch at the checkout—a mildly annoying but hardly a life-or-death experience—a nurse or receptionist at a health care practice urges patients to sign up. “It’s a person who you want to be able to trust the most, but they’re deeply conflicted,” said Julie Morgan, a former associate director at the
Consumer Financial Protection Bureau who researched medical credit cards. Many people don’t even realize they’re being signed up for a credit card; they think it’s interest-free financing through their health care provider. Others aren’t given the chance to understand the terms. Most providers do all of the paperwork on a tab -
let, flashing it in front of a patient when it’s time to sign. Consumers report never getting any paperwork after the fact, either at the office or in the mail. And they often receive the ultimate hard sell, with no other choice but to sign if they want to get recommended care that, as in the case of Crim’s husband, they desperately need.
Some people may not even be aware of what’s happening at all until after they’re already signed up. In CFPB listening sessions, Morgan said, she and her colleagues heard of instances where people were given anesthesia and came out of it to find out they had been signed up for a card while they were under.
Many patients don’t even realize they’re being signed up for a credit card; some were enrolled while under anesthesia.
The bottom line is that medical credit card holders often have no idea what they’re getting into. “Had they known, [they] would never have signed up in the first place,” said Mona Shah, senior director of policy and strategy for Community Catalyst, a health care nonprofit, who has heard from people about their experiences.
That’s because, as Crim found out, medical credit cards have a nasty surprise that few consumers understand when they open accounts: Although the cards promise to be interest-free for an introductory period, typically a year, that’s only if consumers manage to pay off the entire balance before the period is over. Deferred interest, as it’s known, silently accrues the entire time and gets added immediately once the introductory period is up. That’s a hidden trap that could put people on the hook for hundreds or even thousands of dollars.
The typical medical credit card has an annual percentage rate (APR) of 26.99 percent interest, compared to an average of 16
percent for regular credit cards. Consumers who aren’t able to pay off the charges before the deferred interest kicks in end up paying about one-quarter more than the original amount they were charged. American consumers paid $1 billion in deferred interest between 2018 and 2020.
Then there are the junk fees. “There’s a lot of money in late fees,” said Chi Chi Wu, a senior attorney at the National Consumer Law Center. So much so that Synchrony Bank joined the Fort Worth Chamber of Commerce just ahead of a lawsuit against the CFPB’s rule that would have capped credit card late fees at $8 in a possible effort to help give the group standing in its favored court. That was before the agency, during President Donald Trump’s second administration, abandoned it.
Synchrony reported in a Securities and Exchange Commission filing that it made $3.7 billion in interest and fees from CareCredit accounts last year. In response to a request for comment, the company said,
“Our financing offers include a variety of clear disclosures as part of the application process and on monthly statements that help consumers understand their deferred interest, individual payment terms and the length of their promotional period.”
There are other dangers for consumers. Once someone uses a card to pay for services, they give up the ability to negotiate over charges and dispute any billing errors, or even to have insurance coverage like Medicaid retroactively applied once they get it. Nonprofit hospitals are barred from aggressive debt collection tactics, but the financial institutions that collect on medical credit card debt don’t have to adhere to those rules. Some patients have been billed for future work they ultimately decided not to get—but still had to pay the charges anyway.
Medical credit cards can really ding credit scores, and not just by showing a hard credit inquiry. Wu pointed out that many patients are given lines of credit that
match up exactly with the cost of a procedure, immediately maxing them out, which harms a credit score.
Medical credit cards originated to cover socalled “elective procedures” that were unlikely to be covered by insurance. They’re commonly pushed in dentists’ offices and at veterinarians, where insurance coverage is spotty to nonexistent. Jeannie Lisak, a former dog groomer, opened a CareCredit card to cover care for her own dogs—she had five at the time, and now she has nine—because sometimes she just couldn’t afford the bill. “I’d do anything for them,” she said. “I would go without before my dogs would.”
Lisak thinks it’s possible she had the terms explained to her, but “I didn’t totally understand it,” she said. She kept using the card whenever one of her dogs would need something, typically once a month, and each payment would start a new interest-free period that would eventually end and hit her with interest. “The interest keeps adding on and adding on,” she said. She estimates she’s paid $5,000 in interest at this point.
Paying off that kind of amount means “I forgo things,” she said. “I would rather be pocket poor than not pay my bills.” She’d love to close out the card and not have to keep paying interest, but she needs it to cover the vet bills she can’t afford up front.
The cards have grown in usage dramatically in recent years. In 2013, 4.4 million people had a CareCredit card; that number jumped to 11.7 million ten years later. CareCredit is the most common medical credit card, but they are also offered by Wells Fargo and Comenity. There has been a “surge” in the last four or five years in particular, Shah said.
One reason for this growth is that medical credit cards are moving further and further into all parts of the health care system, including in hospitals and at primary care doctors’ offices. They’ve even started to expand into the “wellness” space, and cover products like weight loss semaglutides.
The cards offer concrete benefits for the providers who push them on patients. Although providers don’t receive the entire amount on the card, given that the bank takes its cut, the CFPB found that financial
institutions market the cards as a way to get paid quickly, and to get people to approve costly care they might not otherwise agree to, or care that wouldn’t be covered by insurance. Instead of having to deal with the labyrinthine bureaucracy of health insurance billing to get paid far in the future, or even having to eat the cost entirely if someone fails to pay out of pocket or qualifies for charity care, practices get paid up front immediately. They don’t have to spend any time or resources chasing patients for payment and collecting on medical debt. Providers are also incentivized to get patients on cards with worse terms by being promised a bigger cut for certain interest rates or other features. CareCredit paid providers $12 million to promote its product in 2018. In a statement to the Prospect , CareCredit said that it “requires all our partners to undergo training to learn how and when to discuss the CareCredit credit card clearly and transparently with consumers. This required training, as well as provisions in our contracts, prohibit partners from presenting our financing solutions to patients while they are being treated or during any type of impairment, to ensure that CareCredit is offered in a fair and compliant manner.”
The CFPB has previously taken action to curb the abuses consumers can face. After receiving hundreds of consumer complaints, in 2013 it forced CareCredit to pay $34 million back to consumers for “deceptive credit card enrollment tactics” that left consumers uninformed about the deferred interest. “Deferred-interest products can be risky for consumers in the best of circumstances, and today’s action ensures that CareCredit will no longer profit from consumer confusion,” then- CFPB Director Richard Cordray said at the time. In addition to reimbursing consumers, the company, owned at the time by GE Capital Retail Bank, also had to enhance its disclosures with better descriptions of deferred interest and warn consumers before the promotional period ended, as well as train anyone who marketed the cards.
But that order sunsetted under the first Trump administration. Complaints from consumers and lawyers started to recur. So
in 2023, the CFPB, along with the Department of Health and Human Services and the Treasury Department, launched an inquiry into medical credit cards. Last June, the agency said it was “continuing to assess how financial institutions offer these products and whether they put borrowers at risk.” That was a signal that the agency was planning to supervise financial firms’ actions around the cards, as well as health care providers’ role, potentially teeing up enforcement actions against both.
But now the CFPB barely exists, an early victim of President Trump and Elon Musk’s DOGE operation. The new leadership has attempted to halt work and lay off most of the staff repeatedly, only to be stopped, at least temporarily, by federal courts. But even if the employees are saved, the agency is disavowing many of its powers and dropping its existing enforcement cases. The potential of the agency acting to protect new categories of consumers is dim at best.
“There are these really important protections that the agency has,” Shah said. “By gutting the agency, it really puts individuals at risk.”
A CFPB with an interest in protecting consumers could simply ban cards with deferred interest under the existing Credit Card Accountability Responsibility and Disclosure Act. Wu pointed out that the Federal Reserve did in fact ban deferred interest under the law after it was passed, before later reversing course. The law “prohibits retroactive increases in interest rates, but they wrote regulation to allow it,” she said. “It’s been really harmful.”
Michael Tomaso was disappointed to hear that the federal government isn’t likely to crack down on medical credit cards, even if he wasn’t surprised. He showed up at a Florida dentist in 2019 in search of preventative care. A specialist took him into a treatment room and began listing off all the services she said he needed, totaling $5,718 worth of work. She told him his dental insurance wouldn’t cover any of it, and then she mentioned opening up a CareCredit account, he said. The specialist started applying for him without explaining the terms. When he asked for copies of the
Medical credit cards are moving further and further into all parts of the health care system.
paperwork she had shown him on a screen, she refused to give any to him.
“This was a way for them to get me to pay for some of the work, which would go into their pocket even if they knew I couldn’t pay it all off,” he said.
The amounts he had to put on the card kept stacking up. The dentist eventually decided to stop taking insurance, which meant Tomaso was on the hook for $63 for every regular cleaning. He had a few cavities filled at a cost of over $1,000, and multiple times he had to go back within a year because the fillings fell out, costing him more. The dentist pressed him into getting add-ons like $50 fluoride treatments. “All that extra stuff is just a money grab for them,” he said.
Tomaso is on a fixed income, and he wasn’t able to pay off the charges before the deferred interest kicked in. That meant he paid $1,244.13 in interest in 2024 alone, according to a statement he shared with the Prospect. Since opening the account in 2019, “I probably have paid $5,000 or $6,000 in interest on about maybe $2,500, $3,000 worth of work,” he said.
He finally decided to pay off the card, which was no small feat—it meant reducing what he spent on food and clothing. “There was a period there where I was eating ramen noodles because that was all I could afford after I paid my credit card bill,” he said. He couldn’t always afford to put gas in his car. After it was all said and done, he estimates he paid four times as much as the original charges. That’s money he could really use today. “I’m still living with the consequences of it,” he said.
Some consumers have turned to private attorneys in an attempt to get relief. Last year, a class action lawsuit was launched against Synchrony Bank, the parent company behind CareCredit. Plaintiff S.G. opened a CareCredit card in 2021 to cover $2,000 in order to get emergency veterinary care for his cat, Pumpkin. According to the lawsuit, if he made the minimum payments on his bill, it would take him 14 years to pay it off and he would end up paying $7,752.
The lawsuit, which purports to cover anyone who has signed up for a Care Credit card and accrued interest at a rate of more than 16 percent, alleges that the bank is
engaging in “unfair and deceptive business practices,” said Marc Dann, a lawyer representing the plaintiffs, and gets people to sign up “under duress.” The lawsuit also alleges that the interest rates the cards charge after the zero-interest period is over are usurious, in violation of some states’ interest rate caps and other protections. Sometimes, Dann’s firm will file a class action lawsuit and no other potential plaintiffs will speak up. That’s not been the case with this one: “We’ve gotten dozens and dozens of calls from people who are similarly affected,” he said.
CareCredit declined to comment on any pending litigation.
Synchrony includes a “very strong” arbitration agreement in its terms, a high hurdle for plaintiffs to overcome for class action status, Dann noted. Synchrony has already filed a motion to dismiss the case and to compel arbitration. The CFPB isn’t bound by such terms and could take enforcement action to protect all consumers—if it were interested in acting.
Before Trump was re-elected, the CFPB was focusing a lot of its attention on the instances where consumers were signed up for medical credit cards when they shouldn’t have even had to pay out of pocket, such as those who qualified for financial assistance or were covered for the procedure through insurance, Morgan said. Those are “straight-up unfair or deceptive practices,” she said.
Venus has brought her own lawsuit after going through that very experience. Venus, who asked to use only her first name out of embarrassment about what happened to her, went to her dentist in California in 2022 for two teeth she thought were infected, and was told she needed to have multiple teeth pulled and to get dentures. The cost, she was told, would be $14,000, an amount she simply didn’t have. Her only source of income is $1,500 a month in disability benefits. An employee from the office told her she could apply for “credit” to cover it, which she was told was interest-free. She assumed it was some sort of loan or financing. She doesn’t remember being asked if she wanted to sign up. The employee just filled out paperwork for her on a tablet while Venus’s mouth was
open with the dentist’s tools in it. She never got the chance to read the details or even sign her name.
She had both Medicaid and Medicare and told the dental office staff so, handing them her cards when she arrived. But the office never filed any charges at all with her insurance, even though the work should have been covered, according to her lawsuit. And because she had already paid for the procedure, she wasn’t able to submit her own claim afterward.
“I was expecting them to be honest,” she said. “I’m trusting them to know what they’re doing.”
When Venus went back into the office a few days later, she told them she had changed her mind and didn’t want her teeth pulled. But she was told it was too late to change her mind. Not only did they pull teeth, but they pulled far more than she expected, including a tooth that had been fixed at her previous appointment and a tooth that hadn’t been bothering her at all. “When I found out, I was really upset,” she said. Venus wasn’t even able to use the dentures made for her against her will—they didn’t fit properly, which meant she couldn’t fully close her mouth and they cut into her gums when she ate. She said they made her look like “the donkey on Shrek.”
It was only about a month after her first appointment—before she had actually received the dentures—when she received her CareCredit card in the mail, with a lump-sum charge of $12,000, that she realized she had been signed up for a credit card.
Venus did what she could to pay it off, spending hundreds of dollars a month that sometimes ate up nearly a third of her monthly income. She had never before put more on a credit card than she could afford when the bill came due. To make payments, “I robbed Peter to pay Paul,” she said. Because her money was “tapped out” after CareCredit payments, she couldn’t afford groceries, so she started frequenting food banks. She had to borrow money from a friend to make her rent and car payments. She had to miss church events because she couldn’t afford the gas to get there. At one point, she was threatened with having her utilities shut off because she couldn’t pay the bill given how much she was paying to Synchrony.
The growth in medical credit cards is fed by the fact that so many people in the U.S. are uninsured or underinsured.
Synchrony Bank, which makes cards for retail brands, is the parent company of CareCredit, the biggest medical credit card.
“It made me feel kind of helpless,” she said. “I saw myself as stupid because I just got sucked into it.”
Eventually she was forced to stop paying because she couldn’t afford her basics. Venus’s lawsuit is a cross-complaint, filed after Synchrony Bank sued her to collect the debt, which it says is $5,045.81. Her complaint asks for a public injunction that would block her dentist from applying for financial products on behalf of patients while they’re being treated and for failing to bill insurance, plus another to block Synchrony from marketing and selling products through California dental providers. The bank hasn’t responded to Venus’s complaint yet.
California passed a law that went into effect in 2020 that bans deferred interest on medical credit cards, while barring providers from filling out applications and signing
people up for cards in treatment areas or while sedated. Venus’s lawsuit accuses her dentist of violating the law’s provisions. The original version of California’s bill would have gone further, by prohibiting providers from offering or promoting the cards at all. But the credit card industry and dentists lobbied to water it down.
With the CFPB dismantled and disempowered, “it’s up to the states now,” Wu said. States likely can’t go after the banks issuing the cards because they are preempted by federal regulators, but they can regulate whether, when, and how health care providers market the cards and sign patients up. Besides California, Illinois and New York have passed laws that rein in those practices. Lawmakers in Maine considered doing something similar, but Synchrony fought hard and, in the end, defeated the bill.
Ultimately, the growth in medical credit
cards is fed by the fact that so many people in the United States are uninsured or underinsured. “They’re filling a void left by our incomplete health system,” said Elisabeth Benjamin, vice president at the Community Service Society of New York. In 2023, 26.4 million Americans were completely uninsured. Medical credit cards initially thrived in dental offices because so few people have dental insurance. A handful of states leave it out of Medicaid coverage, and Medicare mostly doesn’t cover it; dental isn’t a required coverage in Affordable Care Act plans.
High deductibles and co-pays leave even the insured with bills they can’t afford, and medical credit cards are pitched to fill in the gap. Meanwhile, as health care costs grow, so too does the ability to pitch a patient on paying for procedures with a credit card.
If the country had universal health care, as virtually every other developed country does, medical credit cards would likely have no market. “The reason that this is happening in the United States is that we have a for-profit health care system,” Shah said.
The surprise $700 in interest Christopher Crim said he had accrued after his interestfree period ended was money he simply didn’t have. His husband receives Supplemental Security Income, while Crim receives disability benefits. Crim has back problems that keep him from working, not to mention that he cares for his husband full-time.
“He’s my whole life,” he said. They live in a rented garage in their landlord’s backyard. To feed themselves, Crim buys six-packs of steaks and they eat them with rice every day. “We don’t go out, we don’t spend money on gas unless we absolutely have to,” he said.
Today, he still owes about $2,000. Had he known that he was at risk of owing interest if he didn’t pay off the charges within a year, he never would have signed up, he said. “I would have found some way to pay it.” Or, at the very least, he would have made sure to pay off his balance in time to avoid the interest. “I’m not dumb,” he said. “I’ve never missed a payment on any of my credit cards.”
“I cut the card up,” he said. “I’ll never use that card again once I pay it off. I’m done with it.” n
Bryce Covert is an independent journalist writing about the economy and a contributing writer at The Nation . Follow @brycecovert.
Borrowers Besieged
Student debtors are under attack on all sides. Government contractors make their life miserable, and financial predators are poised to capitalize.
By David Dayen
In April, the Department of Education announced that it would resume collection on defaulted student loans for the first time in five years. Loan collections were paused during the pandemic in 2020 to offer some breathing room, but once confirmed as education secretary, Linda McMahon put a stop to that. “American taxpayers will no longer be forced to serve as collateral for irresponsible student loan policies,” she vowed in a statement.
Roughly 5.3 million student borrowers who haven’t paid for more than 360 days were thrown into collections on May 5, and government data shows that another 5.59 million could hit default status within six months. And the federal government’s powers to force repayment far outstrip those of private businesses.
The Treasury Offset Program matches borrower information with government payments, and commandeers those funds to pay the loans. Tax refunds (including from lowincome supports like the Earned Income Tax Credit) can be taken entirely, and so can a portion of monthly Social Security payments for retirees and people with disabilities. As a cherry on top, the Offset Program charges the borrower a $20 fee for the privilege of having their money taken. The Education Department also uses a different program, after giving 30 days’ notice, to garnish up to 15 percent of a borrower’s weekly wages.
Because federal collections statutes have not changed since 1996, only $750 per month is protected from Social Security seizures, meaning that the Offset Program
can push borrowers into poverty. None of this requires a court order, and there is no statute of limitations on collections.
But it’s misleading to say that the government is grabbing wages and tax refunds and Social Security checks. A private company known as a loan servicer handles dayto-day operations on every federal student loan. But when borrowers slip into default, loans get transferred to the Default Reso lution Group (DRG), managed by a private company, a contractor called mus. This creates borrower confusion about who the point of contact even is.
McMahon’s Education Department has urged borrowers in default to the DRG to understand their options. But Maximus has been sued improper information to borrowers look ing to escape default, and for refunds of borrowers who should have been excluded from collections; the latter case reached an undisclosed settlement
In a third lawsuit, then-Education Secretary Betsy DeVos was found in contempt of court in 2019 for failing to stop Maximus collec tions against defrauded borrowers. Maximus reportedly failed to hire enough staff erly tag borrowers who should have had their wages and government payments protected. It would be incorrect to identify Maximus as a uniquely poor student loan servicer. Virtually all companies contracted by the government to manage student loans have been found to violate standards and prac tices. Navient, once the largest, was even
barred from servicing entirely. And several state attorneys general are inves, another large servicer, over miscalculating billing payments and mishandling paperwork, following up on a lawsuit filed by the American Federation of
The basic problem is that servicers lack any incentive to help borrowers deal with loans in distress. “One student loan servicer employee once told me that the goal was to get the borrower off the phone as fast as possible,” said Rohit Chopra, former director of the Consumer Financial Protection Bureau ) and prior to that the agency’s student loan ombudsman. The endless passing of borrowers between servicers and the financial imperative to rush borrowers into bad options turns the process into something Kafka would recognize.
The failures of contracted private companies boosts the fortunes of a separate set of private companies that are primed to prey on borrowers. For those in or nearing default, this could take the form of “debt relief” operators that pledge to improve a borrower’s situation, but which offer nothing that someone isn’t already entitled to under the law. As the $1.6 trillion federal student loan system erodes—which could accelerate if Republicans in Congress follow through on their intention to make loans more expensive and more punitive—would-be students seek-
ing skills could be overrun by private lenders with even shoddier financing options, forprofit education programs dangling worthless degrees, or a combination of both.
Many of the worst abuses in higher education were contained by regulatory safeguards in the past several years. But those protections are under threat of being rolled back. And the watchdogs enlisted to look out for students have been effectively recalled by the Trump administration, precisely at the moment when collections are back and repayment pressures are rising.
“It’s sort of a perfect storm facing borrowers,” said Abby Shafroth, director of the Student Loan Borrower Assistance Project at the National Consumer Law Center. “As they restart this process, they will have no help.”
One problem facing borrowers is the sheer complexity of the process, and the incentives of the contractors involved. The Education Department terminated contracts with private student debt collection agencies in 2022, after years of evidence of unlawful behavior. But payment seizure and garnishment practices are now in the hands of Maximus, which effectively operates as debt collector and servicer, two tasks that often come into conflict.
For example, borrowers threatened by wage garnishment have the right to request a hearing to contest collection. But responses to that request go through Maximus, which is paid per loan in its portfolio, and therefore has a financial interest to keep people in default. The wage garnishment hearing process “has never worked,” said Thomas Gokey, co-founder of the Debt Collective, a student borrower advocacy group. “If you submitted a request for a hearing, it was getting flushed down a black hole.” A 2020 law review article by Deanne Loonin reinforces this claim, arguing that the hearings “offer no more than an illusion of due process.”
In 2019, the last time collections were turned on, 1.2 million borrowers made voluntary payments, according to a CFPB report . But that does nothing for their default status unless the payments are routed through loan rehabilitation , a process where borrowers can avoid default if they
agree in writing to make nine payments over a ten-month period. The company in charge of explaining that is … Maximus.
“I don’t think anyone feels responsible for borrowers in default,” said one government source who works on student loans.
The rules themselves can harm borrowers. In loan rehabilitation, involuntary garnishment of wages or government benefits can continue during the first five voluntary payments. Borrowers can also consolidate defaulted loans into one payment, including income-driven repayment, which limits payments to a percentage of wage income, often lowers payments to $0 for the lowest-income borrowers, and forgives the balance after 20 to 25 years. But because loan consolidation cancels credit toward debt forgiveness and capitalizes interest into the unpaid balance, the amount owed gets higher, and if borrowers are steered by selfinterested servicers into the wrong option, their monthly payment could go up
Given the availability of affordable options like income-driven repayment, the number of borrowers in default should really be zero. But the Trump administration’s actions aren’t helping. In response to a court order blocking the Biden administration’s generous income-driven repayment plan in February, the Education Department pulled down applications for three other IDR plans and loan consolidation, while issuing a memo to stop processing nearly two million existing IDR applications. (The department announced it would restart processing those applications, but not before collections begin.)
The last round of student loan debt collection also demonstrates the dangers of expecting private companies to administer public processes fairly. When the COVID pandemic hit in March 2020, Congress turned debt collection off for defaulted student loans in the CARES Act, and the Education Department promised to follow through. But Elizabeth Barber, a 59-year-old home health aide earning $12.89 an hour, explained in a federal lawsuit that her paycheck continued to be garnished repeatedly. Her hours were cut during COVID, and the money being taken was critical to her survival, as her checking account was empty and she was past due on water and electric bills.
“I don’t understand why the government keeps taking my money away after it passed a law that says they will stop,” Barber said at the time.
In the first six months after passage of the CARES Act, the Education Department’s inspector general reported, more than $582 million was illegally garnished from over 390,000 defaulted borrowers. And though the Biden administration was more sympathetic to the plight of student debtors, it took them a while to wrap their arms around a devilishly convoluted system on autopilot. Some garnishments continued to August 2021, 17 months after the CARES Act became law, according to internal documents uncovered by the Student Borrower Protection Center. Some loans being garnished were already paid in full.
Atrocious recordkeeping was to blame. Maximus, which manages wage garnishment, conceded to the Education Department that most employer addresses where it was sending stop-garnishment letters were invalid. At one point, the servicer started googling employer phone numbers and cold-calling, and later resigned itself to “hav[ing] done what we can” to stop garnishments in an email to the department in February 2021. Some collections continued for six months after that.
Yet when the Education Department needed to find a loan servicer in 2021 to take over Navient’s portfolio of 5.5 million loans, it allowed a transfer to Aidvantage, a division of Maximus , making Maximus America’s largest student loan servicer. Almost immediately, Aidvantage was accused by borrowers of not contacting them in a timely fashion and issuing incorrect demands for payments.
In a statement, Maximus spokesperson Eileen Rivera called the company “a conflict-free partner to government” and directed all specific questions to the Education Department. Questions for the Education Department were not returned.
“It raises questions about how the department is communicating with borrowers in default, or handling requests for review,” said Shafroth. “Will borrowers have opportunity to challenge the debt and get into repayment?” If not, bottom-feeders from the outside are circling.
The watchdogs enlisted to look out for students have been effectively recalled by the Trump administration.
There’s a small bit of text at the Office of Federal Student Aid’s (FSA) website about getting out of default, several screens down the page, that advises, “If you are contacted by a company asking you to pay ‘enrollment,’ ‘subscription,’ or ‘maintenance’ fees to help you get out of default, you should walk away. Your loan holder will help you with your defaulted loan for free.”
Those 39 words buried on a government website are unlikely to provide enough protection. “This is going to be a massive opportunity for debt relief scammers,” said Sam Levine, who ran the Bureau of Consumer Protection at the Federal Trade Commission (FTC) during the Biden administration. “They are going to say, ‘This is last chance to get Biden debt relief, call us now.’ They’re going to impersonate the Department of Education. They always take news events as hooks.”
Several separate schemes uncovered by the CFPB in recent years demonstrate how they work. Debt relief companies obtain leads, including from credit reporting agencies, to identify distressed student borrowers. They then use direct mail, telemarketing
calls, or online advertising to reach those borrowers, offering to help them navigate the admittedly byzantine student loan process for an up-front fee. Performance SLC, for example, charged between $1,000 and $1,400 to file applications for loan consolidation, income-driven repayment, and other options. Another scheme, GST Factoring, charged up to 40 percent of a borrower’s outstanding debt , plus a monthly processing fee.
Some companies actually perform document preparation for borrowers, which is a better outcome than others who appear to do nothing at all other than take fees. But it shouldn’t cost anything to file student loan repayment applications with the government. “Debt relief companies collect the same information from borrowers that the borrower would be inputting from their own computer on studentaid.gov,” Shafroth said. In some cases, companies ask for borrowers’ credentials to log in to the government portal for them, which makes it difficult for borrowers to wrest back control of the loan once they realize they’ve been scammed. In one of the worst examples, Prosperity
Benefit Services mailed “Time Sensitive” notices promising “complete loan forgiveness,” with a telephone number to call. When borrowers made the calls, representatives would claim they were affiliated with the Department of Education, and that they could offer “guaranteed” forgiveness in as little as a few months. All borrowers had to do was hand over personal information and bank account authorization for the up-front monthly payments. According to a lawsuit from the FTC, Prosperity frequently did no work to secure any payment modifications. Because the scheme took place during the COVID -era student loan payment pause, some borrowers only found out years later that they still had loan obligations. Over $20 million was siphoned from consumers before the government learned of it.
The FTC mostly enforces debt relief scams under the Telemarketing Sales Rule, which prohibits up-front fees and misrepresentations about savings. But the agency put in place an Impersonation Rule to stop companies pretending to be from the government or other businesses. Its first use was in
Up, Up and Away
Under a proposed Republican bill, monthly payments on student loans would be much higher.
Republican Plan Obama Plan Biden Plan
Expected payment for a family of four with two dependents under income-based repayment plans. Analysis via the Student Borrower Protection Center.
the Prosperity case, and last June, a federal court immediately halted the scheme and froze the company’s assets. A later settlement permanently shut down the enterprise.
Under President Biden, the FTC and CFPB did a lot of work to root out student debt relief scams. The FTC employed additional tools, like the new Impersonation Rule and a provision of the Gramm-Leach-Bliley Act prohibiting anyone from falsely obtaining a consumer’s financial information. Agencies also began to name individual defendants in their lawsuits. But with the Trump administration’s zeal for deregulation, these tools could disappear, and scam artists could work their way back to victims. “You do wonder, will there be a cottage industry of people wanting to profit off people’s pain?” Chopra asked.
While bringing cases provides a deterrent effect, Levine says that it’s so easy to set up one of these operations that law enforcers are constantly running a losing race. Defunct companies also sell their leads to upstart firms, who rerun and replicate the scams. Levine thinks enforcers need to go one step further. “They should look where there are patterns of payments and processors who are serving the debt relief operators,” he said. The FTC did this in 2021, banning Automatic
Funds Transfer Services (AFTS) from processing payments after uncovering its participation in a student debt relief scheme.
Levine doubted that the Trump administration would go there, given Republican resistance to a similar initiative in the Obama years that tried to stop banks from processing payments for payday lenders and other high-risk businesses. But FTC spokesperson Nicole Drayton told the Prospect that going after companies like AFTS that “substantially assist or facilitate unlawful telemarketing activity such as a student loan debt relief scam … is often important to stopping the fraud and returning its proceeds to consumers.” She added that the FTC would continue to police debt relief scams, including by using the Impersonation Rule and naming individual defendants, as it did in a recent case in March.
Meanwhile, the legitimate system for getting student loan assistance is so difficult to navigate that borrowers may be attracted to other options. “The best strategy to stop scammy debt relief is to have good student loan servicing,” Levine said.
Millions of student borrowers can’t keep up with their loan payments now, but House
Republicans’ solution is to price out the borrowers of the future. On April 29, the House Education and Workforce Committee marked up its contribution to the giant budget reconciliation bill, aimed mostly at reducing $330 billion in college financial aid over a decade, and funneling that money into tax cuts for the rich.
The Republican bill eliminates all but two repayment programs. A standard plan with a fixed interest rate would last between 10 and 25 years, depending on the amount borrowed. Single debtors carrying the average amount of student debt as of the end of 2024 ($38,374) and the current 6.3 percent interest rate would owe $432 a month, and would pay close to $3,000 per year more than under the cheapest Biden-era plan, according to an analysis by the Student Borrower Protection Center. The alternative, an income-driven repayment plan, would last 30 years before the balance is extinguished, and offer little assistance to most borrowers unless they don’t earn much.
More important, the Republican bill imposes a lifetime cap on available loan amounts: $50,000 for undergraduates, $100,000 for graduate students, and $150,000 for students in professional pro -
grams like medicine or law. These figures are almost certainly inadequate to cover a full course of study, and other financial aid would be harder to access as well. Pell grants would only be available to “full-time” students with 30 hours of coursework per academic year. Part-time students who must work to sustain themselves would be locked out of those grants.
Democrats on the committee outlined the stark choices facing aspiring college enrollees if the bill were to pass. “Students would be forced to turn to predatory lenders looking to profit off the desire to get an education,” said Rep. Jahana Hayes (D-CT). Corporate lobbyists seem to agree, though they put it differently. “It’s a victory, and it certainly opens up market opportunity,” Robert Moran, who represents private student lenders, told Politico.
Since changes embedded in the Affordable Care Act of 2010 established direct federal lending, private student loans make up only about 7 percent of the market . But the corrosion of direct lending offers private actors a ray of hope. SoFi, the leading private refinancing company for student loans, saw originations increase 71 percent year over year in the fourth quarter of 2024, and stay at roughly that level in Q1 2025.
“I think the old Sallie Mae is the new Sallie Mae,” said Julie Margetta Morgan, president of the Century Foundation and a former CFPB and Department of Education official. She’s referring to the largest private student lender in the U.S. prior to 2010, which benefited from a government guarantee that backstopped losses on its portfolio. After direct lending, Sallie Mae immediately fired 30 percent of its staff The company got into servicing—under the name Navient, which was kicked out of the servicing market. “They wanted to retain elements of the business that could be the ticket to success,” Margetta Morgan said. “The hot new idea is the old 2007 idea, let private lenders back into the space.”
Indeed, in a February note on its website, Sallie Mae rebranded itself as an “education solutions company” that offers planning resources and “responsible private student loans to cover any gaps in financing.” The note warns that federal student loans allow families to “overborrow” and lead to “unsus-
tainable levels of debt.” The implication is clear: make the federal system stingier so families will be forced into the arms of lenders like Sallie Mae. There’s even been talk about selling off the entire student loan portfolio to the private market.
One hurdle is that students, particularly ones who can’t afford their loans currently, will not be seen as a solid credit risk. Interest rates will be much higher than what’s available in the federal system. Teaser rates and other enticements could attract borrowers, but without the government backstop, it’s hard to see how legitimate private lenders can find success.
Illegitimate ones, however, might have a shot, especially in the regulatory free-fire zone the Trump administration is establishing. “I definitely think it’s true that you’ll see people turning to payday loans, or the equivalent of a payday loan but it’s on an app,” said Thomas Gokey of the Debt Collective.
Chopra believes that paying for student lending could drift into other credit markets. Credit cards could see rising balances, or there could be increases in home equity loans, eroding the transparency we currently have into the student loan market. “When you squeeze someone who can’t pay, they might meet that obligation by getting on a treadmill of debt,” Chopra said.
Sketchy lenders aren’t the only entities that could see new life under the Republican student loan overhaul. The bill repeals two critical regulations aimed at ensuring colleges and universities are high-quality. The gainful employment rule requires that program graduates can get employed in their field of study and earn enough to pay off the debt. The 90/10 rule forces educational institutions to derive at least 10 percent of their revenue from something other than federal financial aid, requiring schools to find legitimate tuition sources and not just feed off student loans.
These rules attack the for-profit college sector, which dates back to the 19th century but which really ramped up after the Higher Education Act of 1965 authorized federal assistance for college students. During the Obama years, rampant abuses at for-profit colleges piled up, including high-pressure sales tactics that misled students about job placement, substandard coursework, piles
of forced debt, and diplomas with no value for career advancement. Amid state and federal enforcement and tightening regulatory standards, dozens of campuses went out of business.
That was a win for students and taxpayers, Chopra explained. “If we care about stopping waste, fraud, and abuse, we cannot allow forprofit schools chowing down on public funds to not deliver something of value to students.” But removing the gainful employment and the 90/10 rules while also diminishing the federal student loan system could bring forprofits roaring back. Worse, while during the previous for-profit college bubble, students who were defrauded by their schools were able to eventually have their loans canceled, another provision of the Republican bill would block such loan forgiveness. Victims of crime would have to essentially pay for the crimes committed against them.
Of course, for-profits of the past relied entirely on federal loans, and if that system breaks, the economics may not make sense anymore. But at the nexus of shady private lenders and shady education programs are companies that do both. And even before Congress succeeds in wiping away regulatory obstacles, these innovators are inching their way back onto the field.
Chris Belcher was an ex-Marine selling windows who wanted to break into software sales. Ads kept popping up in his Facebook feed promising exactly that, and he bit. Prehired touted a six-week training course that would guarantee a tech sales job with $60,000 in earnings.
The coursework was online, self-directed, and somewhat rudimentary; Belcher told me the first class involved setting up email signatures in Microsoft Outlook. Recruits could go at their own pace. “Basically it was like, you take care of what we’re telling you to do, and we’ll help you get a job,” he said. But the way Prehired structured payment was noteworthy: A contract entitled the company to 12.5 percent of their graduates’ eventual income , until they paid off $30,000.
The concept is known as an income share agreement (ISA), a privatized version of income-driven repayment with vague and sometimes harmful terms. Purdue Univer-
“The hot new idea is the old 2007 idea, let private lenders back into the space.”
sity experimented with them, but among the earliest adopters were Silicon Valley venture capital firms. “You had people who thought they would hack higher education by offering these companies that were both student lender and education provider,” said Mike Pierce, a former CFPB official and executive director of the Student Borrower Protection Center, which has warned of the dangers of ISA s.
Along with allegedly deceptive marketing tactics and more aggressive debt collection buried in the contractual fine print, ISA providers were insistent that they weren’t offering loans, and therefore didn’t have to provide several borrower protections. When the Education Department issued guidance in 2022 that ISA s actually were loans, following on similar guidance from the CFPB, many of the programs dried up, including at Purdue Prehired was founded in 2017. Recruits were told that they wouldn’t start paying part of their incomes until they finished the course and earned the $60,000 salary promised in the pitch within 12 months. Belcher never finished the course, but he became a recruiter for the company, targeting the program to the military, which was his background. Belcher brought a few companies to Prehired that were seeking sales recruits, but none would ever convert. Meanwhile, students found him on Linked In and reached out, complaining that Prehired wasn’t helping them land a job. Belcher was being paid on commission, and also wasn’t making any money.
Belcher quit after a few months and went back to the window industry. “I got a callback from Prehired and they said, ‘Hey you got a job.’ I said, ‘I didn’t finish the course and the window industry isn’t the same as software sales.’ But they wanted their money.” Evidence later showed that Prehired debt collectors tried to coerce students into converting their ISA s into settlement agreements that would be “beneficial” for them. But the settlements would make the payments contractually obligatory with little recourse.
The phone calls continued until early 2022, when Belcher and more than 280 other Prehired students became defendants in simultaneous debt collection lawsuits filed in Delaware, where the company was incorporated but nowhere near many of
the defendants. Prehired claimed the loans were in default and sought a $25,000 judgment against each borrower, giving them 15 days to respond. When Delaware’s consumer protection unit questioned the lawsuits, Prehired voluntarily dropped the cases, but then refiled them through a private arbitration platform, despite no student ever signing an arbitration agreement.
By this point, Prehired alumni were organizing through posts on LinkedIn . Some appealed to then-Washington state Attorney General Bob Ferguson, who filed a lawsuit in June 2022 to shut down Prehired; three months later, the company filed for bankruptcy. The CFPB and 11 states sued Prehired, eventually leading to a settlement whereby the bankruptcy court ordered Prehired to shut down, return $4.2 million to students, and cancel another $27 million in ISA s.
This all seemed like old news until late last year, when Prehired somehow resurrected under the name FastTrack . Virtually everything about the FastTrack sales pitch is identical to Prehired; in its testimonial section, it includes comments from students who explicitly reference Prehired. Initially, the website included blogs authored by Prehired founder Joshua Jordan, though if you look at the site now, the blogs are attributed to Tre Scinta . It is not clear whether FastTrack has any students or if they’ve just set up the website, which claims that “hundreds” have been helped.
Pierce’s Student Borrower Protection Center informed state AGs who settled with Prehired that the company appeared to have popped up with a new name, which they claimed could be a violation of the settlement. But after everything was documented in The Verge, Bill Stiber, who identifies himself as co-founder of FastTrack and a successful Prehired graduate, insisted that the company is a wholly separate entity that merely licensed Prehired’s intellectual property from the bankruptcy estate. Stiber added that Jordan was not involved with the company.
Stiber and Jordan didn’t respond to questions from the Prospect
During Chopra’s tenure, the CFPB was not only active in shuttering Prehired, but taking action against other ISA schemes arising
from Silicon Valley accused of deceiving students, like BloomTech. But when advocates saw Prehired transformed into FastTrack, they did not take their concerns to the CFPB, which by that point had been shut down itself for two months. In fact, state attorneys general who settled the Prehired case in 2023 recently asked Vought why consumer refunds for students have still not been processed, and why he hasn’t answered emails about the matter.
Enforcement of financial scams has withered under acting CFPB director and Project 2025 architect Russ Vought, and student loans are no exception. The agency’s student loan ombudsman, Julia Barnard, was initially fired in a mass purge before being reinstated by a federal judge. Barnard was not part of the second attempted mass purge in April, also blocked by the same judge, but her entire staff was. Among the dozen-plus enforcement actions left over from Chopra’s tenure that Vought has dropped is a proposed $2.25 million settlement with the National Collegiate Student Loan Trusts, a servicer of private student loans accused of improper debt collection. And in an April memo announcing enforcement priorities, acting CFPB chief legal officer Mark Paoletta stated that the bureau would “deprioritize” student loans.
President Trump said in March that, in conjunction with closing the entire Education Department, he would move the student loan portfolio to the Small Business Administration, an agency with a tattered history of managing federal credit programs. It’s unclear whether that has moved forward, and it would likely require congressional action. But the Education Department has fired the entire staff at the Office of Federal Student Aid charged with oversight of student loan servicers.
There’s a clear through line between sending cops off the beat and inviting would-be thieves to come out of the shadows. “I think there’s clearly a Trump effect on these kinds of operations,” said Pierce. “You have Linda McMahon making the case for short-term workforce training as a substitute for higher education. That’s an open sign for scammers.”
Economic hardship offers a target-rich environment for financial schemes. Credit reporting on student loan delinquencies,
which resumed during the Trump administration, was responsible for an overall drop in U.S. credit scores for only the second time in a decade. Over 26 million borrowers are not current on their student loans, and credit hits make home mortgages, auto loans, and even renting more expensive. Consumer debt overall has hit an all-time high, and more than 40 percent of Americans under 30 say they are “barely getting by” financially, according to the Harvard Youth Poll. And that’s before tariffs and supply shocks could tip the economy into recession.
When I wrote about for-profit colleges a decade ago, I talked to a corporate finance manager at one of the biggest networks,
Corinthian Colleges, who told me that during the economic carnage of the Great Recession, her bosses were thrilled. Economic precarity leads to people seeking new skills, and desperation breeds susceptibility to pitchmen promising an escape hatch into the middle class.
Restarting student debt collections, limiting financial aid, and tossing out anyone who would monitor whether the alternatives borrowers seek out are legitimate seems like what a financial predator would do to lay the groundwork for a crime wave if they were in charge of the government. And it’s worth pointing out that Donald Trump paid a $25 million settlement before win-
ning the presidency in 2016 over his own for-profit real estate training enterprise, called Trump University.
But even before the Trump tsunami, borrowers weren’t exactly having an easy time. The agencies manning the student loan program are underfunded, and their contractors are borderline indifferent. The rules are complicated and not well articulated. At least the predators have good marketing and slick communications.
The situation is a classic case of privatization ending up worse for everyone involved, because of the profit motive’s inevitable conflicts with the public interest. The IRS is the biggest payment collector in the world, and could easily do the job of handling monthly student loan checks. In 2014, the Obama administration even tested eliminating servicer middlemen and taking student loan operations in-house. But fully undoing privatization would take manpower and money, and Washington’s allergy to any of that means the broken system keeps rolling along.
When you recognize the deep anger borrowers have about their student loans and the unfairness of the system, you begin to understand why they’ve given up on government fixes and could be attracted to snake oil. In a viral TikTok video, a social worker with the handle @themath_aintmathin explains how she’s been in an income-driven repayment program since 2011, in which time her loan balance nearly doubled due to interest accrual, from $46,000 to almost $90,000. “You want to know why people are pissed off about their student loans? It’s not because we can’t get anyone else to pay them for us. It is because you have set it up where we can never pay them off ourselves … Anyone who still doesn’t see that this is rigged against us can get fucked!”
Why would anyone caught up in what they see as a rigged game expect the government to help them? Isn’t it logical for them to pay for assistance they could get for free, if it means someone will actually answer the phone? Doesn’t it make sense for them to run screaming from a perceived public-sector fraud, even if the result could be an actual private-sector one? The consequence of hollowing out government is a loss of trust, a core desire of anti-government ideologues. Rather than seeing what’s happening to the student loan system as a confluence of disconnected horrors, it may just be a plan working to perfection. n
A viral TikTok video shows a student borrower explaining how her loan balance doubled while making all her payments.
Usury in the Water
There’s never been a better time to be a loan shark for small businesses.
By Maureen Tkacik
Mike Lindell has been neck-deep in debt more times than you have probably been to a doctor. The beleaguered founder of Minnesota bedding manufacturer MyPillow still has a Hardee’s bag that a Mafia-connected loan shark left on his car windshield back in 1981, after he wagered $25,000 on bad sports bets. “ MIKE: CAME TO GET OUR MONEY—Book was with me—Physical Force May Be Needed. CALL ME!”
In 2003, Lindell took out a loan with 50 percent interest, secured by a promissory note on the bar he owned, from a friend of his bookie’s stepson. He planned to use the proceeds to launch a card-counting business that would dig him out of debt he had amassed becoming addicted to crack, but he could never accurately count the cards enough to make it work. By 2023, he owed his various lawyers so many millions of dollars in fees that he was forced to essentially replace them with AI.
But until last summer, Mike Lindell had never borrowed money at a 441 percent interest rate. Was that even legal? (No, but neither is unilaterally dismantling the federal agency charged with enforcing the Truth in Lending Act, and yet here we are!) Lindell desperately needed money to—among
other things—hire a few lawyers to whom he didn’t already owe money to explain to the various institutions and individuals suing him that he was too broke to pay them. He met a broker at an event who said he could help. Suddenly, companies he’d never heard of were offering to advance him large sums without credit checks or balance sheets, so long as he agreed to allow them to deduct daily payments from his bank account.
Lindell ended up borrowing more than $4 million from close to a dozen lenders that all seemed indistinguishable from one another, in transactions hashed out with men who sometimes seemed like they each had two or three different names. Mike Kandhorov of Lifetime Funding, for example, was speculated in a lawsuit Lindell later filed to be the same person as Mike Kand, a different funder.
“It was a classic bait and switch,” Lindell said during a brief conversation in early May, while he was walking through an unidentified airport. A broker told him he could obtain a large term loan secured by some of MyPillow’s real estate, or possibly some of its pillows. There was just one condition: He had to take out a short-term cash advance, “kind of like a bridge loan,” while
they underwrote the larger loan. “Naturally, the second one never materialized. It’s a whole corrupt industry!” he exclaimed. “They prey on companies that are struggling, and you’re never gonna get that real loan. But if you tell them you’re going to default, how about another [advance]?”
The mustachioed Minnesota pillow magnate, who owes some of his legal woes to a $5 million bet he made that a 23-gigabit file furnished by a serial con artist contained data suggesting Chinese interference in the 2020 election, seemed borderline impressed by the audacity of his lenders. “I mean, the Mafia has much cheaper interest rates.”
Lindell, admittedly not the most sympathetic character, had stumbled into the world of “merchant cash advance,” a form of small business loan-sharking that emerged just before the financial crisis and exploded in the years following it, surpassing Small Business Administration loans in volume in 2014. Like just about everything else involving merchant cash advance, the industry sometimes goes by an alias: “revenue based financing,” as one of Lindell’s lenders, Shine Capital, uses.
In recent years, these ultra-high-interest, thoroughly unregulated loans, projected to be a $25 billion business in 2025, have
become a major profit driver for Silicon Valley middlemen. But they were pioneered by convicted criminals and appear to still be dominated by organized crime–adjacent networks of operators who exploit archaic practices, obscure laws, and labyrinthine networks of shell companies to unilaterally seize and freeze the bank accounts of small
businesses and extract triple-digit interest rate returns, often without so much as revealing their names.
The first Trump administration worked in concert with Democratic state attorneys general to investigate and sue the most abusive MCA lenders, in actions that won broad bipartisan support. But then the
father of the single most notorious of all the loan sharks, a scrawny chain-smoker from Staten Island known for pushing interest rates into the quadruple digits and facing long-awaited accountability for his drug trafficking past, hired Alan Dershowitz to put in a good word with Trump’s pardoning committee.
In the last week of Trump’s first term, as Mike Lindell paced the White House floors, urging the president to declare martial law to avoid ceding the White House to Joe Biden, Trump issued pardons to a cornucopia of privileged deplorables, including a nursing home boss convicted of kickbacks and known for opening understaffed nursing homes to psychiatric patients and excons who would physically abuse the seniors, and a bank fraudster who would soon resurface in another MCA scandal. Among them was Jonathan Braun, the chain-smoking Staten Islander, who at the time was serving a ten-year sentence for trafficking 110 tons of marijuana on behalf of Canadian organized-crime syndicates.
What looked from a distance like an ad hoc act of petty corruption now seems like a microcosm of Trump’s maximally Darwinian second term. The Braun pardon derailed a nascent federal investigation of the MCA industry, and restored to his perch the biggest loan shark in the game, just in time for COVID -era Paycheck Protection Program funds to run out for small businesses.
Merchant cash advance traces its origins to a guy named Shmuel “Sam” Chanin, an Orthodox Jewish central Brooklyn entrepreneur who spent the Bush administration selling credit card processing machines to small businesses as an affiliate of a Long Island City firm called Cynergy Data. At that point, credit and debit card interchange fees were not capped, and Cynergy enabled Chanin and his sales reps to take a small cut of every fee that was processed on the machines they sold. In 2005, Chanin decided to start offering his clients small loans that could be clawed back over time by siphoning a portion of their credit card transactions. He wasn’t the first to have this idea: Another Brooklynite named Melvin Chasen offered cash advances to restaurants as part of a loyalty club business as far back as the 1980s, and centuries before, Jews circumvented the Torah’s strict prohibition against charging interest for loans by pioneering a concept called “heter iska,” in which moneylenders bought stakes in companies in exchange for a share of the profits later on. But Chanin’s was the training ground for a great post-crisis MCA boom, headquartered in some of New York’s least desirable office space.
Chanin called the business Second Source Funding, and back when it was the
only game in town, the cost of its loans was usually double the amount borrowed for a four- or five-month repayment schedule, or well over 200 percent interest. Crucially, none of the paperwork codifying these transactions referred to them as “loans”; they instead represented them as the discounted “purchase” of future accounts receivable, language that theoretically enabled the operation to ignore anti-usury laws and strict caps on consumer interest rates.
This was a dubious proposition to bring into a courtroom. When Chasen’s company used this argument in a 2005 class action lawsuit filed by a few of its restaurant clients, the judge deployed the company’s own logic from earlier lawsuits to ridicule the notion that its advances weren’t usurious, and the company soon negotiated a settlement of around $30 million. And where Chasen’s company was a publicly traded loyalty program with millions of members it touted as a valuable asset to its restaurants, Chanin’s shop was much more like a classic boiler room—in fact, one of his trainees was the real-life stock scammer on whom Giovanni Ribisi’s character in the movie Boiler Room was based.
Yet throughout the subprime mortgage boom and bust, Chanin’s sales floor bustled with mostly Chabad-affiliated teenagers and twentysomethings, who spent their days making small fortunes hawking smallbusiness payday loans and returned to their parents’ homes every night. For a couple of years, Second Source was the place to be for a certain kind of rebellious, grindsetaddicted Orthodox youth. But Cynergy Data fell on hard times in 2008, and its bankruptcy ended up screwing over hundreds of merchants, distributors like Chanin and ambitious sales reps alike. In a nostalgic 2014 thread about Second Source on the MCA message board DailyFunder, many former employees still voiced bitterness about the commissions they were shorted after Cynergy went bust.
Perhaps the most bitter were two inseparable twentysomething Second Source loan gurus named Meir Hurwitz and Abe Zeines, whom friends sometimes called “Meyer and Bugsy” after the legendary mobsters Lansky and Siegel. According to a profile of the duo published years later, Chanin and Cynergy had stiffed them out of millions of dollars in commission. So they started their own MCA venture, with fundraising from David Glass, the aforementioned Boiler Room figure who had just pled guilty to participating in a sprawling insider trading conspiracy, and Hurwitz’s brother-in-law Jonathan Braun, who had just pled guilty to conspiracy charges to import massive amounts of marijuana and launder the proceeds. Eventually, there were conflicts over profit-sharing and the optics associated with all those felonies, and the four men split their opera-
MyPillow founder Mike Lindell ended up borrowing more than $4 million from close to a dozen lenders.
tions into three companies: Hurwitz and Zeines’s Pearl Capital, Glass’s Yellowstone Capital, and Braun’s Richmond companies. It was Sam Chanin’s turn to be bitter; in 2014, he sued Glass and Yellowstone for “orchestrat[ing] a scheme to steal SSF ’s revolutionary business model.” A judge ultimately dismissed the suit with prejudice. Yellowstone introduced its own revolution to 21st-century loan-sharking, in the form of a draconian 19th-century contract called the “confession of judgment” it began requiring most borrowers to sign around 2013. In a confession of judgment, a guarantor essentially agrees to not only pay for their loan sharks’ legal fees in the event of default, but waive all of their own legal
protections and essentially designate their lender as their legal representative if a conflict arises. A signed confession of judgment is all a lender needs to obtain a court order freezing a borrower’s bank accounts and seizing funds far in excess of what they owe; judges rarely even look at the documents, allowing their clerks to sign off on them.
In the early 1970s, the plight of Nellie Swarb, a bedridden septuagenarian in Philadelphia who almost had her house foreclosed upon after she missed one payment to a debt consolidation service whose sales representative had physically guided her hand while she signed such a document, shamed many states, including Swarb’s own, into curtailing the use of the contracts. But the
Legal Aid Society of Philadelphia hit a wall when it asked the Supreme Court to deem confessions of judgment unconstitutional. That was a determination, the Court ruled, better left to Congress—which, to be fair, had just passed the Truth in Lending Act and could have easily amended it to explicitly ban the practice. Instead, Congress left the issue to the agency charged with enforcing TILA , the Federal Trade Commission, which embarked upon a robust effort to research consumer credit abuses and issue detailed new rules laying out what it did and did not determine to be predatory and deceptive behavior. That effort stretched on for more than a decade, but in 1984 the agency finally announced it would be banning confession of judgment clauses from all consumer credit agreements.
Which meant that small-business agreements were fair game.
Somehow, no one noticed the loophole until a lawyer for David Glass brought up the idea, and Yellowstone Capital made them a fixture of their cash advance agreements. In 2018, Bloomberg Businessweek published an entire issue dedicated to the booming new industry of small-business loan-sharking; the magazine found all of 14 confessions of judgment used to obtain default judgments in New York courts from the years prior to 2014; in 2015, they found about 1,000, and in the three years that followed, more than 25,000.
The stories behind the court filings were grim. A Florida couple who owned a real estate agency lost hundreds of thousands of dollars despite making every payment; an Irish bar owner was forced to move in with his in-laws and work retail after two advances swallowed his bar, house, and livelihood; an always-busy Union Square bakery disappeared overnight to a plague an employee likened to “quicksand” in a hasty Instagram post. And yet the state’s courts often proved alarmingly resistant to interpreting merchant advances as loans that definitionally violated New York usury laws, even as their rulings created a cottage industry of minor millionaire state marshals who spent their days collecting debts on behalf of the loan sharks.
But all was not well inside the boiler
Yellowstone introduced its own revolution to 21st-century loan-sharking: the “confession of judgment.”
Joseph and James Laforte
rooms. As early as 2016, an MCA sales rep on DailyFunder was wondering how the industry would stay afloat if it continued burying its customers. “Most merchants I speak to have taken the cash advance under the pretense of a … Lie that they will get Progressively better pricing and Better terms, yeah right you will get stacked on until you go bankrupt how is this business sustainable or scalable if your [sic] killing the life line of the business the merchant,” wondered a user named bigrnyc. “I’ve been in this business for a year and I can say this is the hardest thing I’ve ever done from a business perspective.”
An Orthodox rabbi with 70,000 YouTube subscribers began posting monologues
lamenting the moral ills of merchant cash advance brokers, and warning his followers that the industry posed as great a threat to the Jewish community as secularism and intermarriage. “People are just completely robbing people blind believing it’s permitted,” Rabbi Yaron Reuven, who is also known as something of a cryptocurrency evangelist, mused in one sermon. “They say, but Rabbi I’m only charging 50 percent, oh so you’re only taking half his life? But Rabbi he’s a goy—that’s even worse! … But rabbi, you’re allowed to charge the goyim interest …” He shook his head, urging followers to read Mein Kampf before they became predatory lenders, or at the very least, look to the Mafia. “This business of merchant cash
advance is so horrible, the Mafia shut down. Do you know how they lend money today? They open up a merchant cash advance. If the Mafia is your co-worker, that’s a good sign you’re not in a good business.”
The rabbi was not exaggerating. Another MCA empire, Par Funding, was giving Yellowstone and Richmond a run for their money. As with the latter two, Par’s founders had grown up in Staten Island. But Joseph and James LaForte were not Yeshiva boys gone bad; they were the grandsons of a well-known soldier in the Gambino crime family who’d been nicknamed “Joe the Cat.” (Lawyers for Par Funding deny this.) A Staten Island contractor who sued Joe LaForte Jr. over an investment fraud in 2000, then
An Orthodox rabbi warned that merchant cash advance
posed as great a threat to the Jewish community as secularism and intermarriage.
mysteriously retracted his allegations in a letter claiming he had made up the whole thing, told Philadelphia magazine last year that his lawyer, also an indicted loan shark, had forced him to sign the retraction letter, which he believed had been drafted by a mobster, saying, “You gotta sign this or I can’t guarantee your safety.”
When the LaFortes first hatched the idea for Par they were both serving time in prison: Joe for orchestrating a complex mortgage fraud scheme and operating an illegal gambling enterprise; James for multiple acts of loan-sharking and extortion and one audacious automobile arson. Upon their release, the LaFortes hooked up with a Main Line Philadelphia financial adviser who was a ubiquitous presence on AM radio, airing dubious commercials that promised free dinners at Ruth’s Chris and guaranteed double-digit returns. Together they solicited more than a half-billion dollars in funds from retail investors to put to work peddling cash advances to struggling
businesses, and quickly made a name for themselves as willing to fund just about any loan a broker sent their way.
The industry had already established a reputation for extralegal enforcement mechanisms: According to multiple published reports, Jonathan Braun had allegedly whipped a deputy in his weedsmuggling business with his belt, his codefendant was murdered execution-style and burned alive in his car in 2014, and he regularly threatened delinquent borrowers with promises to have their kids kidnapped and such. A rabbi who had taken out an MCA to renovate his synagogue’s nursery said Braun had warned him: “I am going to make you bleed.” In 2018, a pair of lawyers who have been some of the industry’s most persistent courtroom foes found little “messages” in the mail: a piece of paper with the word “prey” cut from a magazine and pasted onto it in the mailbox of Shane Heskin, a dead rat on top of the mailbox of Justin Proper. The Par Funding
guys kept an aging bodybuilder and ex-con named Renato “Gino” Gioe on hand to run its robust intimidation efforts. Gioe made unannounced visits to homes, offices, retail stores, barbershops, and even a beach house, to threaten clients with physical harm when they fell behind on payments. In 2018, Gioe told Bloomberg he had made 700 borrower visits on Par’s behalf. How effective those threats were is hard to say, given the underlying economics at play.
Gioe’s indictment documents some of the businesses he showed up to hector: a barbershop owner who borrowed $8,000 that somehow turned into well over $100,000. A tech firm that took a $118,000 advance and ended up owing $3.6 million. A plumber with a terminally ill wife in Roanoke, Virginia, who took out about a quartermillion dollars in MCA s from six different companies, including Braun’s Richmond and Glass’s Yellowstone, and paid back $600,000 before he gave up completely and decided to take the advice of Yellowstone rep Steve Davis, who had advised him to win the lottery or commit suicide if he wanted to liberate his children from the debt. The plumber overdosed on pills and passed out in the woods near his house, but was found alive after a friend saw his farewell message on Facebook and called the police. He later told his story to Bloomberg, and at a congressional hearing to discuss a possible national confession of judgment ban.
The Small Business Finance Association, the MCA industry’s official lobby, which had theretofore mostly showed up in the media attempting to distance itself from the antics of the Staten Island gang, quickly endorsed an official ban; alas, only New York ended up banning the practice.
But both regulators and law enforcement authorities got to work after Bloomberg published its findings. The Federal Trade Commission, late in Trump’s first term in 2020, sued both the Richmond and Yellowstone empires, while the SEC and FBI zeroed in on Par Funding, and the New York and New Jersey attorneys general launched comprehensive investigations into the broader industry. Over and over again, investigators and regulators made the same determination: MCA s, at least the ones being peddled by the giants of the business, were definitionally fraudulent. The contracts brokers furnished to merchants claimed that funders “advanced” an “investment” to borrowers in exchange for a fixed percentage of
Jonathan Braun
their sales, which could be interpreted as an equity investment or an asset purchase. But everyone knew they were loans. Brokers secured them by filing legal claims on clients’ assets, repayments deducted from a merchant’s bank account had no relationship whatsoever to the business’s sales, and most of all Gino Gioe doesn’t get sent to break the legs of CEOs whose stock prices go down. Merchant cash advances were loans, subject to all the relevant state and federal restrictions, and if David Glass and Joe LaForte wanted to sidestep New York’s 16 percent usury caps, shouldn’t they at the very least have to move to South Dakota like the credit card companies?
Jonathan Braun didn’t think so, and he had established a pretty impressive track record of impunity since being mysteriously released from prison in 2011, just a few months after he was indicted and locked up for the marijuana trafficking. He fled to Israel, presumably to cooperate with the government in investigations of co-conspirators that supposedly included the Hells Angels and three of the leading Canadian organized-crime syndicates. Braun still had not been sentenced when Bloomberg published its issue on the MCA industry in late 2018, and massive chunks of the criminal case remain sealed in spite of the efforts of FOIA attorneys working for The New York Times and Bloomberg; what little is public is heavily redacted. During the headiest days of the MCA business, the docket was all but abandoned; a year and a half passed between his business partner’s gruesome murder in 2014 and the DOJ ’s motion to dismiss him from the indictment in 2016.
But after Bloomberg’s investigation, the case got rolling again. Sealed anonymous letters about Braun’s abuse of delinquent borrowers were filed with the court, as was a sealed letter from Yellowstone Capital. The judge, whom Braun had reportedly expected to go easy on him given his years of service as an informant, finally sentenced him, eight years after he’d been released: ten years in prison.
His family “looked shocked,” according to a dispatch from the hearing, but they also had a few aces up their sleeves. Braun’s sister had gone to high school with Jared Kushner, whose family put his dad in touch with Alan Dershowitz, the unofficial ringleader of the Trump clemency effort. Just a year into his sentence, it was commuted, and Braun was the guest of honor at a triumphant “Free -
dom Bash” welcoming him back to Brooklyn. Almost immediately, Bloomberg reporter Zeke Faux caught him parking his Bentley at an MCA boiler room in Brooklyn.
For reasons that remain a mystery, while the Biden DOJ made attempts to re-indict certain Trump pardon recipients, the agency made no attempt to charge Braun criminally for any of his actions. An acquaintance surmised to Faux that Braun was being somehow “protected” by the feds, and the prosecutor who showed up to his sentencing hearing did nothing to throw cold water on that presumption. Meanwhile, Braun dug in for a long legal battle to defend his right to do legalized loan-sharking, appealing a federal judge’s decision in favor of a golf course contractor that had spent more than $117,000 paying off a $50,000 “advance” over a five-month period. But in 2023, the Second Circuit upheld the lower court’s ruling that the contractor’s advance was indeed a loan, and Richmond’s elaborate attempts to claim otherwise nothing more than a fraudulent racket.
Loan sharks are an invasive species that can eradicate decades-old small businesses in a
matter of weeks. A 2018 McClatchy analysis found 700 bankruptcy filings over the preceding decade by debtors who had borrowed from a list of major MCA s featured on the website deBanked. But the absurd profit margins in MCA also poisoned the entire landscape of small-business finance. Just as regulators had finally begun to clamp down on 400 percent APR small-business payday loans, investment banks and private equity firms became eager to conquer their virulent strain of “fintech.” A private equity firm called Capital Z Partners bought Braun’s brother-in-law’s company Pearl Capital, and American Express bought a venturebacked small-business lender called Kabbage that used a Utah-chartered bank to make merchant advances at interest rates of 95 percent.
Around the same time, the pandemic and its attendant bailout programs triggered a mass liquidity crisis and subsequent frenzy to accelerate cash to struggling businesses to offset the damage. Underwriting standards plunged.
For many industries like restaurants and gyms and barbershops, the government’s
Hundreds of small businesses have gone bankrupt from taking on merchant cash advance debts.
PPP loans were woefully insufficient to offset the hit to their revenues. It was the pandemic that sent attorney Barbara Berens, the owner of a Minneapolis law firm best known for representing the NFL players union in various legal disputes, into the throes of the MCA scam back in late 2020. “Litigation just fell off a cliff. The courts were closed, and there weren’t any cases,” she said, in part because of the sweeping pandemic liability shields swiftly enacted in most states. After hearing about MCA from an employee, Berens quickly found herself well over $10 million in debt to a half dozen mostly Florida-based MCA shops. Finally, she confided in a friend who had read some of the Bloomberg stories and advised her to stop paying and sue. “It probably should have occurred to me that the loans were illegal, but when you’re in this kind of situation it’s hard not to become preoccupied obsessing over how stupid you’ve been.”
Before long, small business–oriented marketplace platforms began dabbling in the space, with Shopify, DoorDash, Square, and Amazon all announcing their own MCA products, as part of a new phenomenon aptly called “embedded finance.” One of the biggest small-business payment platforms in the country, the insurance giant UnitedHealthcare, even got into the act in 2023, offering a service called Optum Pay Advance to tide over physician practices navigating the enervating process of appealing claims it had denied . The verbiage was eerily familiar terms: Don’t think of it as a loan, but the purchase of future reimbursement revenues at a 35 percent discount to their future value.
The insurance behemoth would relax the terms of those “advances” the following year after a ransomware attack on one of its subsidiaries brought huge chunks of the medical payment system to its knees for several months. But now, even though the debilitating problems from the attack still haven’t been totally ameliorated, it is aggressively collecting on those loans by, among other methods, unilaterally garnishing doctors’ reimbursements. Two medical practices in Minnesota, out of the 10,000 practitioners on the hook for about $9 billion, have filed suit in federal district court, and other
providers have asserted that they’ve been asked to hand over hundreds of thousands of dollars in a matter of days, an impossible option that would lead to mass layoffs or bankruptcy if forced to do so. “Optum, in my opinion, is acting like a loan shark trying to rapidly collect,” Dr. Catherine Mazzola, a pediatric care specialist in New Jersey, told The New York Times.
As skyrocketing interest rates led more and more small-business owners down the same path, President Biden’s Consumer Financial Protection Bureau began looking for a fix to spotlight and hopefully deter the worst MCA abuses. Last year, it told the industry it would have to comply with a provision of the Dodd-Frank Act requiring all lenders to collect and disclose extensive data on their small-business borrowers: industries, demographics, ZIP codes, revenue and loan amounts, and perhaps most relevantly, the interest rates at which they had borrowed the funds.
That last disclosure crossed a red line for the CFPB. In an earlier disclosure battle with the California legislature, the MCA industry’s trade association had promoted an alternative annualized metric called “annualized cost of capital” that resulted in a claimed percentage of between 40 percent and 50 percent lower than the equivalent APR . So the MCA loan sharks, like the payday loan sharks and the rent-to-own sharks before them, sued the CFPB, claiming as it had before that its “advances” were not loans.
At the time, it seemed like a Hail Mary pass. If anyone in the industry had any inkling that the Trump administration intended to nuke the agency within days of his inauguration, they weren’t telling their colleagues in the DailyFunder forums.
But there was more. Trump’s newly appointed Federal Trade Commission chairman tapped a literal used-car salesman to lead the agency’s consumer protection division, which had banned Braun and Glass and their cronies from the business. His name is Christopher Mufarrige, and before getting his master’s in economics at the anarcho-capitalist hotbed George Mason University, he had owned a Houston used-car dealership that spe -
cialized in high-interest “Buy Here Pay Here” installment loans. A colleague who had worked with him at the CFPB during Trump’s first term had written a lengthy whistleblower memo detailing his attempts to undermine payday lender regulation and “advocate for conclusions based on presumptions.”
Whatever remains of the federal government’s attempts to rein in the MCA sharks will be led by Mufarrige, who most recently served as general counsel of a fintech specializing in “embedded finance.” A recent FTC settlement with a subscription-based consumer cash advance company called Cleo AI provides a window into what is likely to come: While the agency convinced the company to offer a $17 million settlement, the accompanying complaint makes no suggestion that the sums Cleo advanced were actually loans; if the agency had made such an argument, the APR on many of the referenced transactions would rise to quadruple digits.
Still, there are a few rays of hope for the victims of MCA loan shark extortion. Jonathan Braun is back in jail after assaulting a three-year-old at a Shabbat dinner, groping his nanny, pushing his father-in-law down the stairs, and assaulting a nurse at a hospital. It was Braun’s fourth arrest since having his sentence commuted by Trump in 2021, and along the way a New York judge actually banned him from operating a lending business, in a sign that someone in the judiciary still has a pulse when it comes to these products.
And perhaps in Mike Lindell, the loan sharks have finally met a merchant with a deeper-seated sense of impunity than theirs. In a twist of fate befitting a man who has escaped death countless times, Berens agreed to take Lindell’s cases against the MCA s in spite of the well-documented credit risks involved, after the two connected through Shaya Baum , a Michigan financier whose Wing Lake Capital Partners specializes in restructuring MCA debt. If he has time while reviving his pillow business and defending himself in his multitude of legal disputes, Lindell intends to crusade against the industry, he told the Prospect. “I’m not going to give up, I’m going to fight for what’s right.” n
Shopify, DoorDash, Square, and Amazon have all announced their own MCA products, aptly called “embedded finance.”
Sunburnt
How door-to-door solar salespeople can scam homeowners,
and what the government could do to stop it.
By Emma Janssen
An 81-year-old woman living on Social Security, told to press her finger to a tablet, not knowing what she was signing. Forged signatures. A 78-year-old native Spanish speaker locked into a $48,000 loan. Sales made in Spanish but documents only provided in English. Sales pitches full of misleading information, if not outright lies.
These are just some of the many horror stories that have come out of the door-todoor solar sales industry in recent years, according to interviews with advocates and attorneys. The tactics read like the work of faceless internet scammers, but are actually being used by charming men and women promising homeowners cheaper, more energy-efficient lives that can go a small way toward saving the planet. In reality, these salespeople often target the elderly or nonEnglish speakers, and trap consumers into loans that they can’t afford.
During the Biden administration, it looked like the Consumer Financial Protection Bureau (CFPB) was going to step in and regulate aspects of the solar sales and lending industry. But now, under the Trump administration, the CFPB has largely been gutted, and the hope of regulatory change has been snuffed out. That leaves advocates
and lawyers in limbo, but most importantly, leaves scam victims vulnerable.
The average residential solar panel installation costs $25,000, which few homeowners can afford to pay out of pocket. That makes taking out loans a popular option; 58 percent of households with solar panels used loans to finance them.
“Our mission is to connect a world in which everyone can live sustainably,” reads one header on the website of GoodLeap, a financial technology firm that provides financing for the construction of residential solar panels. GoodLeap is one of many firms that work with solar contractors to finance solar projects for homeowners—and they’re also the subject of a class action lawsuit for allegedly not complying with California consumer protection law. But before firms like GoodLeap can secure a financing deal, solar salespeople have to go out on foot and pitch homeowners.
The “solar bro” salesman has become a well-known archetype in the world of doorto-door sales. On TikTok and Instagram, young men show off their sales techniques and boast of lavish lifestyles. One solar bro films himself pitching a homeowner who calls herself “broke,” complaining about her high utility costs. He pitches solar to her, promis-
ing to save her money. In the video caption: “#millionaire #motivation #salesman.”
“If you look at the solar bros’ Instagrams and all that stuff, you know, it almost reminded me of Wolf of Wall Street where it’s like: OK, make as much money as you can, because there’s no regulation,” said Bryant Dunivan, an attorney in Florida who estimates he’s worked on over 150 solar loan–related cases. To Dunivan, this hypermasculine sales culture is one of the reasons that solar scams have become so prominent. “Once you create a sales culture and it’s all about ‘sell, sell, sell, sell, sell, who’s our highest performer, here’s your bonuses,’ of course you’re going to have people take advantage of that system,” he said.
But advocate after advocate emphasized to me that on-the-ground solar salespeople are just one element of a deeply interwoven business model that involves salespeople, solar contractors, and fintech lenders. In an issue spotlight on the solar loan industry, the CFPB summed up this three-sided business: “For general-purpose loans and home equity financing, there is typically a clear dividing line between the financing contract and the installation contract. For solar-specific loans, the sales, installation, and financing often blend into a single interaction, as salespersons, installers, and lenders may work in concert to consummate the sale of a solar system and financing.”
This business model serves to keep the consumer out of a direct relationship with their contractor. The lending companies serve as intermediaries between the consumer and the contractors, taking money from the consumer and then handing it over to the contractors. Audrey Thornton of Housing and Economic Rights Advocates (HERA), a California-based legal service and policy organization, explained that this arrangement takes power away from consumers.
“The consumer doesn’t have control over when the contractor gets paid or whether the contractor has completed the project before they get paid. So often, in many cases, the lender will release the loan proceeds to the contractor before the project is finished,” she said. Once that happens, Thornton explained, some contractors may simply stop work, leaving homeowners with nonfunctional solar panels, no financial benefits, and a hefty loan to pay off.
One of the most pernicious sales techniques in the solar industry is the misuse of electronic signatures. In videos of solar salespeo-
ple, they’re almost always carrying around a tablet. That’s because many of their sales take place digitally, allowing them to misrepresent the contracts homeowners are signing and even forge signatures entirely.
In one particularly egregious case (de Moura Castro by Hilario v. Loanpal, LLC), a senior citizen with Parkinson’s disease who is “legally blind” and unable to “sign documents, speak coherently, or care for himself” was allegedly duped into a loan by a doorto-door salesperson who sold him on a free government program for senior citizens designed to reduce utility bills. In reality, the senior was signed up for a loan that cost over $50,000. A judge also found that the salesperson used an incorrect email address for the homeowner, who clearly was not technologically literate himself. With that email address, the salesperson allegedly forged the homeowners’ signatures, and even went back in to modify the contract after the fact.
This case is one that claims outright forgery—the consumer says that she never even signed a contract. But some electronic signature cases take a different form, with salespeople presenting only a portion of the contract on the tablet screen and asking homeowners to sign with their fingers, or misrepresenting what exactly they were signing altogether. In some cases, these signatures would be copied and applied to other parts of the contract without the homeowner’s consent.
In response to these varied forms of e-signature fraud, the National Consumer Law Center (NCLC), a legal advocacy organization, sent a letter to the CFPB last October asking the agency to issue guidance on e-signatures in the solar industry. The letter outlines the legal basis for a new regulation, citing the Truth in Lending Act, the Electronic Fund Transfer Act, and the federal E-Sign Act. Crucially, the E-Sign Act requires that consumers clearly demonstrate to salespeople that they are technologically literate and can easily access any documents they e-sign. The NCLC wants the CFPB to spell out how the E-Sign Act applies to solar loan companies.
As the NCLC tells it, the reason solar companies are able to get away with so many scams, simply put, is that nobody is telling them not to.
There are no federal laws telling salespeople that they must provide contracts in the consumer’s primary language. Nor are there laws against the use of iPads and e-signatures instead of paper contracts. These are regulations that consumer protection advocates and lawyers have been pushing for, and under the Biden administration, they looked like a possibility. Last year, the CFPB issued a report about the solar loan sector, detailing the kinds of scams consumers have encountered and encouraging others to submit complaints if they have been harmed.
“With sweltering heat across America this summer, many families are installing solar panels to save on energy costs to cool their home,” then- CFPB Director Rohit Chopra said in a press release. “The CFPB is closely scrutinizing solar lenders to make sure that Americans don’t get burned.”
But now, under the Trump administration, the likelihood that the CFPB would rein in these scammers seems close to zero, and the likelihood that everyday Americans will get burned has only gone up.
Alongside Elon Musk’s Department of Government Efficiency representatives, Russ Vought, the current director of the CFPB, has tried to gut the agency and fire most of its workers on multiple occasions, before being temporarily blocked by a federal judge. But even with staff intact, the agency has not written any new regulations since Trump took office and has dropped enforcement of several existing rules. In an enforcement priorities memo in April, acting CFPB chief legal officer Mark Paoletta wrote, “The Bureau’s primary consumer enforcement tools are its disclosure statutes.”
The solar industry has been rife with scammy tactics for years. In 2015, then-President Obama signed legislation that created the Property Assessed Clean Energy (PACE) ini-
tiative. On the surface, the program sounds not just harmless, but beneficial: It helps homeowners finance green-energy projects like installing solar panels or energyefficient windows with no money down. Homeowners pay for the projects through a surcharge attached to their property taxes. PACE attempted to get past a key hurdle to reducing greenhouse gas emissions in buildings: Many of the people with the least energy-efficient homes don’t have the money to upgrade them. Financing that can install energy-saving and money-saving improvements was thought to be a win-win.
But the program was quickly exploited by companies that wanted to make money off of unwitting homeowners. Aggressive salespeople went door-to-door, convincing homeowners to upgrade their homes and
promising that they would only have to pay small amounts each month—around $100 in the case of Leonard McBean, one homeowner quoted in Vice. What the salespeople often didn’t include in their pitches is that, by signing their contract, homeowners were consenting to have liens placed on their houses. That means that the county could foreclose on the home for lack of payment, and liens also make the home more difficult to sell. In the case of McBean, the escrow payment attached to his mortgage ended up jumping up $400 a month.
Despite the fact that PACE was a federal program that worked through local tax systems, the salespeople pitching solar as part of it were not affiliated with the government. But that distinction could sometimes be difficult for consumers to parse—Obama’s name on the program and talk of proper-
On-the-ground solar salespeople are just one element of a deeply interwoven business model that involves contractors and fintech lenders.
“Solar bro” salesmen boasting lavish lifestyles have become ubiquitous on TikTok and Instagram.
ty taxes gave some homeowners a sense of trust. But really, projects went through private-sector companies that contracted with on-the-ground salespeople.
The federal government and a number of states realized that PACE was becoming riddled with fraud, and worked to reel in scammy companies. In late 2024, Chopra’s CFPB finalized a rule that applies the same layers of protections to PACE loans that exist for residential mortgages. The rule ensures that PACE borrowers receive standard mortgage disclosures that allow them to compare the cost of the PACE loan with other financing options. The rule also places the burden of ensuring that the borrower can afford the loan on the lender, so borrowers aren’t set up to fail.
In the decade since PACE loans came onto the market, they’ve gradually become less and less common as local, state, and federal governments realized the extent of the program’s controversies. Los Angeles County, for one, ended their PACE loan program in 2020. But the solar sales business has continued to thrive and skyrocket in years since.
Dunivan sees today’s solar loans as just a different manifestation of the problems with PACE loans. With the end of many PACE programs, he said, “the solar industry had to pivot, and that’s when we started seeing what we see now, which is people going door-todoor saying, ‘Solar panels are great! It’s going to totally eliminate your electrical bill!’”
The solar industry is on an upward trajectory. That’s in no small part due to the federal government’s past efforts to stave off climate change and shift the country’s power grid toward renewable energy. Solar is now leading the push to renewables; in 2023, solar energy was 55 percent of new energy capacity added to the U.S. grid. In 2010, that number was just 4 percent.
Much of that has come from industrial solar arrays with battery storage, fueled by tax incentives from the federal government. But for two decades now, policymakers have realized that America has an enormous, mostly untapped resource that can help add fantastically massive amounts of renewable energy to the grid without needing acres of new space: the roofs of millions of houses, apartment complexes, and other buildings. That’s not to say they’ve done all they can to make it customer-friendly.
In 2005, the Energy Policy Act created a tax credit tied to residential solar installation. Homeowners who install solar can use the credit, often called the “Investment
Contractors have been known to stop work, leaving homeowners with nonfunctional solar panels and a hefty loan.
Tax Credit,” to reduce the taxes they owe by a percentage of the solar project’s cost. The tax credit was set to expire in 2024, but President Biden’s Inflation Reduction Act renewed it through 2034. The exact size of the credit has varied over time, but it never exceeds 30 percent of the solar project’s cost. It also only reduces the amount of taxes homeowners owe—if a homeowner owes nothing to the federal government, they won’t receive any money from the credit.
Unsurprisingly, many solar salespeople misrepresent the benefits of the Investment Tax Credit to convince homeowners to take out a solar loan. In the CFPB’s 2024 issue spotlight on solar loans, they laid out the most common misrepresentations that salespeople have been using to dupe consumers. According to the CFPB, salespeople will sometimes try to convince homeowners that the tax credit is guaranteed—when in reality, it depends on the borrower’s income and tax liability. In fact, low-income homeowners are less likely to receive the credit. Despite this, solar salespeople will often present materials with the actual loan principal in a “small, light font” and put the “net system cost” (the loan amount minus the presumed 30 percent tax benefit) in a “large, bright font,” says the CFPB. Unless consumers read the fine print or footnotes, they may not understand that the “net system cost”
is likely to be a major underestimate of the cost of their solar project.
The CFPB cited one homeowner’s experience from their consumer complaint database: “I believe that the sales representative knew that the tax credit is usually NOT cash received as he made me believe. But as I have since learned the tax credit is used to pay down any tax liability that I may owe at the end of the year. Had that been made clear to me I never would have agreed to the loan,” the complaint reads. “I am willing to pay the loan. I’m just not willing to pay the loan inclusive of the $19000.00 tax credit.”
It turns out that home solar is becoming increasingly common among lower-income homeowners. Researchers at Lawrence Berkeley National Lab found that, in 2022, 45 percent of solar adopters had incomes below 120 percent of their area median income. And 23 percent of adopters were below 80 percent of the area’s median income. In 2010, the median income of households adopting solar was $140,000, but in 2022 that number was $117,000. The same study found that, while non-Hispanic white homeowners were still the likeliest racial demographic to adopt solar, “minority households collectively have a greater propensity to adopt” residential solar projects than their white counterparts. Changing demographics means changing
sales strategies. Or maybe the sales strategies are driving the changing demographics. Some of the most pernicious solar scams in recent years have targeted two vulnerable populations specifically: non-English speakers (or those who speak English as a second language) and the elderly.
Dunivan shared one particularly harrowing scam that targeted a Spanish-speaking family in South Florida. According to publicly available court documents, the family received a letter in the mail with the header “Programa Latino De Asistencia.” As Dunivan explained, “When you look at the letter, it had a very official-looking seal on it and it was written in Spanish.”
Court documents describe how the homeowner was swayed by the letter, believing it was official: “Plaintiff believed that the PLA solicitation was an official government program because of its name and the official-looking seal appearing on the correspondence,” the document reads.
Dunivan recounted the rest of the letter, which told the family that not only would the solar panels be free, but they would actually receive a rebate. When the family called the number on the letter, a solar salesperson signed them up for a $60,000 loan with financing through GoodLeap, while assuring them that it was just in furtherance of the program mentioned in the letter. After six months, GoodLeap contacted the homeowner to begin collecting payments and the family realized that they had unwittingly signed up for a loan, and they sought legal relief. A representative from GoodLeap said that the company cannot comment on ongoing litigation.
“It turned into two years’ worth of litigation, which ultimately sent them over to arbitration,” Dunivan said, referring to a legal process that often favors corporations over consumers. When cases are sent to arbitration, as is mandated in so many solar loan contracts, there is no discovery process, no right of appeal, no rules of evidence, and no rules of civil procedure, and the arbitrators are often handpicked by the corporations. “Even with that set of facts, that family is still forced to jump through the hoops and gets no real relief other than being sent to arbitration.”
The CFPB noted this targeting of Spanish speakers in their issue spotlight, citing a
Univision report that some solar salespeople conduct sales pitches in clients’ preferred languages, yet provide the solar purchasing contract only in English. This means that homeowners could hear an excellent sales pitch in Spanish, and then sign a completely different contract in English, like what happened to Dunivan’s clients.
Octavio Cardona-Loya II, a lawyer who has represented victims of solar scams in Southern California, notes that non-English-speaking homeowners are often easy targets for scams. “When you’re dealing with older, non-English-speaking, lowerincome clientele, depending on where it’s happening, there may be less of a chance of them actually being able to access attorneys or legal assistance that would be able to deal with it,” he said. Even if they are able to obtain legal assistance, as in the case of Dunivan’s clients, they can be embroiled in a long and expensive process, and may not ever recoup the money they lost.
There are no laws telling solar salespeople that they must provide contracts in the consumer’s preferred language, which Dunivan sees as a major problem. He also would like to see a regulation that requires solar financing companies to determine whether homeowners can actually afford loans before they take them out, much like the “ability to pay” rule in place for mortgages.
That policy recommendation is echoed by Margot Saunders of the NCLC: “That’s what we are pushing for,” she said. “For the CFPB to issue a guidance saying, ‘These programs are governed by the requirements of the federal law that require lending only based on the ability to afford payments.’”
Saunders and the NCLC are also fighting to get rid of the mandatory arbitration clauses that are in so many solar contracts. She believes that arbitration makes it much harder for consumers to win back enough money to cover their losses and even to pay their legal fees. Other advocates agree that stopping mandatory arbitration would help consumers, like Dunivan’s Spanish-speaking clients, have a better chance at legal recourse.
When Trump won the presidency and, three months later, fired Chopra from his role at the CFPB, advocates’ hopes that the federal government might regulate solar were
stamped out. According to Saunders, the solar industry is “right at that critical point where the advocates—us, other national groups—were just bringing the problems to the attention of the federal government and asking them to try to address it.”
She suspects that the CFPB was close to intervening. “This is hearsay, I can’t prove this, but I’m assuming based on the questions that [the CFPB was] asking us, and so on, they were in the process of seeing what they could do.”
Without rulemaking from the federal government, companies insist they have things covered. When asked about the court cases GoodLeap has been involved in and measures they take to prevent scams, a spokesperson for the company said that it has implemented a number of steps to protect consumers. That includes a product called Recheck, “which tracks salespeople’s adherence to compliance and consumer satisfaction,” the use of facial recognition technology to validate customer identification, and a requirement that homeowners record a video before installation to prove that they understand the terms of their agreement. But companies regulating themselves has never been their strong suit.
There’s some hope that states might be able to take up the cause and fill in the gaps. In California, the lawyers at HERA are pushing for a bill that would protect California consumers from any sort of home sales scams, not just solar. If passed, the bill, SB 784, would require lenders to call consumers and confirm the details of their contracts before signing, mandate that contracts clearly disclose all hidden fees, give consumers access to all of their account information, extend the right-to-cancel period, and ensure that loan repayments don’t start until the home improvement is operational. Lenders are putting up a strong fight against the bill, said Natasha Blazer, an attorney at HERA , but advocates are hopeful that it will receive support from a broad coalition of lawmakers.
“What we really want is to make it easier for people to not have to sue,” said Blazer about HERA’s policy efforts. That’s what strong policy should do, after all: prevent the problems from happening in the first place. “We are trying to give consumers who are the most vulnerable in these transactions even a foothold of power,” she said. n
There are no laws telling solar salespeople that they must provide contracts in the consumer’s preferred language.
CULTURE
Kamala Could Have Won
She was poised to claim the presidency, but Joe Biden and a disastrous campaign defeated her.
By Stanley B. Greenberg
Uncharted: How Trump Beat Biden, Harris, and the Odds in the Wildest Campaign in History
By Chris Whipple Harper Influence
Fight: Inside the Wildest Battle for the White House
By Jonathan Allen and Amie Parnes
William Morrow
Kamala Harris was poised to win the 2024 presidential election when her message included America getting control of its border and her championing economic and political change.
In her campaign launch addressing the economy and in her DNC acceptance speeches, she made the cost of living singularly important, showed empathy, and offered concrete policy solutions. She promised that Congress would enact the bipartisan border control bill. She embraced President Biden’s expanded Child Tax Credit and attacked Donald Trump’s tax cuts for billionaires. Her speeches made the election a battle for the middle class. She was laser-focused on the cost of living, while portraying—correctly, as we are seeing today—Trump tariffs as an inflationary tax on imports. She made that the principal fight of the campaign.
And after her debate against Trump, Harris moved into a three-point lead nationally and, critically, ahead in Wisconsin, Michigan, and Pennsylvania. But it was not to be.
Two books, one by Chris Whipple, Uncharted: How Trump Beat Biden, Harris, and the Odds in the Wildest Campaign in History, and the other by Jonathan Allen and Amie Parnes, Fight: Inside the Wildest Battle for the White House, show the disastrous decisions that put Donald Trump in the White House. I will also describe my
efforts with various participants to impact those decisions.
You need to read both these important books to understand the 2024 election. Harris could have won, but her campaign had so many 180-degree turns and was so burdened by Joe Biden’s continued presence in the campaign that she lost. The lessons for Democrats are painful.
Allen and Parnes had strong access to the managers and campaign operations for both Biden and Harris, making the book indispensable to understanding the campaign’s many turns. Harris kept on Biden’s campaign manager Jennifer O’Malley Dillon. That fateful decision contributed mightily to the disaster.
But Whipple’s will be the more important book because it had better access to the advisers closest to Biden, understands the implications of changes in message and strategy for the election, and effectively uses other research to tell a fuller picture.
The further I read in these books, the angrier I grew with the Biden advisers who failed to act as his senescence accelerated, while Biden’s deep personal insecurity and paranoia produced a preposterous campaign based on his accomplishments, in what was really a change election. I was also maddened by the apparent sexism of the Biden team that assumed his vice president could not win the presidency, disastrously delaying his exit from the race.
Now, 2024 was a tough year for incumbent parties all over the world. The highest inflation in 40 years rated 20 or 30 points above the next problem in polls. All saw surges in refugees and illegal immigration. Conservatives successfully whipped up a frenzy about the elite’s “woke” liberal policies.
They were all sinking Biden. James Carville and I still speak every morning, and we were depressed, certain Biden would lose. James went on every show to vent. Despite the daunting problems, both books portray Biden—as well as Trump—as men with few
doubts. And the advisers and managers are depicted as “loyalists” helping the leaders achieve their goals. In particular, Ron Klain was depicted in both books as the adviser fighting the hardest and longest to keep the president in the race.
But that does not capture the reality of doubts, fractures, and debates that I saw personally. I sent regular emails to the White House and the Biden campaign, including Anita Dunn, Ron Klain, Mike Donilon, Steve Ricchetti, John Anzalone, and later, Ted Kaufman and Chris Dodd. After Biden withdrew, I wrote to David Binder, Harris’s chief pollster, and later, Lorraine Voles, Harris’s chief of staff.
As chief of staff early in Biden’s term, Klain pushed for economic messages that empathized with voters’ pain and promised to help lower prices. He tried to reverse the changes in immigration policies that were producing millions of new border encounters. He was not alone. And he too felt that President Biden’s legacy could be best achieved by him not running for re-election. By late 2023, two-thirds of the country thought we were on the wrong track, so before Thanksgiving I wrote a report named “ The Change Campaign That Can Contest America .” Klain wrote, “I agree with this 100% and have been pressing an argument similar to this with Jeff [Zients] and Mike [Donilon].” Feel “their pain and stand for change.” But “they are not there. You have to move Mike considerably.”
After watching President Biden praise the economy for two years straight, I responded ironically. How is it going? “You have conducted an experiment—speaking positively about the economy for two years. Your overall approval rating has only declined every month.” Klain agreed but added, “In 2020, Biden was a change candidate. But today, he is the incumbent preaching stability. And a lot of black people in our country want to shake things up.”
The Biden media firm ran ads on how the Inflation Reduction Act saved you money
and raised taxes on big corporations. It got strong positive reactions from voters. But I also tested Biden declaring, “We are now living through the strongest—fastest— most widespread and equitable recovery in American history.” It brought Biden’s approval rating down further.
Finally, in December that year, I wrote a letter to share with the president, saying Biden has a historic domestic legacy and could have an international one as well. Trump will be difficult to beat, and “his sole mission will be the destruction of your legacy.”
Klain responded, “This has been my view for almost a year, but Michael [Donilon] sees it differently.” Who else in the team felt that Biden should retire? Maybe most.
Joe Biden
In February 2024, President Biden’s campaign organized a session at the Democratic House members’ retreat to discuss their election plans. The campaign put sheets listing “Biden’s Top Ten Accomplishments” on all the tables.
Usually, the president loved these meetings with members where he went back and forth on policy and politics, ran late, and did a rope line. But this year, the president took only three softball planted questions, and he answered from a prepared text.
What comes through powerfully in these books is a Joe Biden who is extremely personally insecure and constantly looking for evidence of his success and approval. Accordingly, he blocks out negative infor-
mation, and therefore ended up out of touch with public perceptions in 2024.
As a result, his advisers could not give the honest reason for why he should not have run: He was one of the most unpopular presidents in history; he would certainly lose and take many of his Democratic friends with him. Instead, they pointed fingers, saying Biden had a “path to victory,” but not with a disunited party and so many major leaders saying he should drop out.
That in turn bred an atmosphere of paranoia, and an enemies-list dynamic where critics were booed in campaign offices. It led the president to feel frustrated and unappreciated, wanting to defend himself in public and demanding Harris speak positively of their shared accomplishments. He freely
Kamala Harris couldn’t step outside Joe Biden’s shadow in the 2024 election.
interrupted White House press briefings to talk about good economic news. Biden also wanted to exact retribution for those not loyal, particularly former House Speaker Nancy Pelosi and President Barack Obama. They were not viewed as patriots.
Allen and Parnes’s Fight depends heavily on reports by the Biden managers that treat that side of Biden as normal, while Whipple focuses more on Biden’s aging and ability to do the job.
But I was shocked at Whipple’s account of the debate with Trump—the moment that connected all the dots for many people in the country. President Obama and George Clooney had seen Biden’s aging at a star-studded Los Angeles fundraiser in mid-June, but the debate two weeks later moved them to act.
What I learned is that the Atlanta debate was better than Biden’s debate prep at Camp David two days before. Whipple writes that Klain “was struck by how exhausted he was— and out of touch with his own campaign.” Klain had 3×5 cards with his economic agenda for the second term, but Biden “wanted to talk about how much foreign leaders loved him.” Whipple reports that the president “was fatigued, befuddled, and disengaged.”
Why after Atlanta did the Biden team not stop and conclude there was no way for Joe Biden to wage this campaign against Trump or to serve a second term? What’s more, why weren’t they preparing Vice President Harris to be a stronger candidate?
Allen and Parnes report that “Biden’s team had inflicted serious reputational damage to Harris with Democratic insiders. [It] played on her reputation to help save him.” The Biden campaign conducted its own polls on Harris against Trump and shared them in all their conversations. They created a conventional wisdom that “Harris polls worse than Biden.” They were exploiting the sexism among politicians and voters, and perhaps their own. So, when I began sending my daily emails to the Biden team, I pushed every day against their conventional wisdom. Since the debate, Harris was running two points on average stronger than the president. Their own poll from an affiliated Biden group had her doing three points better. I wrote that Harris’s unfavorable rating was then five points lower than the president’s.
I also wrote that she would gain quickly from consolidated base voters and the Democratic convention. I inserted a graph showing that Al Gore had started nine points
The cost of living was the biggest problem voters expressed during the campaign by 20 to 30 points.
down before his convention and came out tied days after it closed.
I now doubt that the team was presenting Biden graphs showing Harris running stronger than Biden.
Biden did grudgingly drop out—but not until July 21st. The short remaining time led Harris to keep Biden’s campaign largely intact. Before her debate with Trump, he called her and insisted there be “No daylight, kid.”
Biden felt Harris had underutilized him and did everything possible to be part of the story at the close. That led him to join a campaign call during Harris’s closing speech on the Ellipse to observe that “the only garbage I see floating there is his supporters.” Using actual garbage trucks, Trump was able to fuse Biden and Harris and tie them to Hillary Clinton calling Trump voters “deplorables.”
Jennifer O’Malley Dillon and Wilmington
Jennifer O’Malley Dillon was a strong manager who had built a staff of passionate peo -
ple who loved Joe Biden. She had built a campaign prepared to direct a billion dollars, as well as field offices and organizers across the country. Then Biden withdrew days before the convention and with only 107 days left before the election.
Harris’s prior campaigns and offices had staff issues and departures, and she was worried about “drama” during the transition. With a wink from Harris’s aides, EMILY ’s List had prepared a campaign plan, and as I confirmed, its president Stephanie Schriock was ready to be manager.
But likely because time was so short, Harris told O’Malley Dillon and her staff to stay on, though probably not with everyone staying in their prior roles. Schriock was told, “No thank you.”
That meant they never sat down at the beginning and faced the biggest strategic issue of the campaign: How will you differ from Joe Biden? That produced the nearfatal interview with The View, in which Harris refused to identify any such changes.
In reading the books, I wondered what the Obama advisers who had joined the Harris campaign were doing.
The campaign wrote an economic speech saying, “As president of the United States, it will be my intention to build on the foundation of this progress,” making it easier to brand Harris with “Bidenomics.”
As I saw, the Biden staff didn’t mind her sliding away from the “cost of living.” Biden would not utter the words because he thought it was criticism of the economy.
Finally, the campaign organization turned out to be a little outdated when dealing with the way Trump was reaching persuadable voters. Trump’s campaign manager Susie Wiles, Whipple writes, wondered why O’Malley Dillon’s team ran such a “flawed campaign.” I thought they did not fight to win each day. Wiles concluded “it didn’t seem like she even tried” to win.
Ending the Campaign on Cost of Living and Switching to Democracy
As soon as I listened to Tim Walz’s closing statement in the vice-presidential debate, I knew something had gone badly wrong. He mentioned the middle class and cost of living only once and instead talked about an amazing coalition that brought together progressives and Republicans, like Dick Cheney.
They stopped running the successful ad contrasting Harris and Trump on the cost of living. They stopped talking about an aggrieved middle class and stopped criticizing big business. Instead of talking about their economic plans, they attacked Trump to engage the anti-MAGA majority.
That was the strategy being promoted by Michael Podhorzer, a campaign strategist trusted by many Democrats.
I wrote to David Binder, “It is hard to understand how thick is the campaign.”
I called Lorraine Voles and exclaimed, “What the fuck is happening? Is she trying to lose the election?”
In reading the books, I wondered what the Obama advisers who had joined the campaign were doing. The campaign
changed its main message, but they seemed more focused on adjusting the persuadable voter scale.
In the last ten days, however, Harris returned to talking about the cost of living and middle class. The contrast ad on Harris and Trump on the cost of living was back up. She put addressing the cost of living in first place on her “to-do list.” She did not mention Trump’s name for 24 hours.
Identity Politics, the Immigration Issue, and “Willie Horton”
Soon after taking over from Biden, Harris campaigned and gave speeches in Nevada and Arizona. I was surprised when she only briefly talked about securing the border.
Nevada and Arizona were not even close, unlike the other battleground states. Some of her biggest drops in support came in the Southwest and Mountain States with long borders with Mexico. Trump’s plan to deport undocumented immigrants en masse was popular there, particularly with Hispanics. A poll of Hispanic voters in Arizona and Nevada found that voters prioritized a pathway to citizenship for long-residing undocumented immigrants, cracking down on human traffickers, and expanding border security.
Immigration advocates told her that mentioning border security or the bipartisan bill to fix it would hurt her. That is why Harris gave her conventional speech on finally passing comprehensive immigration reform. They did not talk about the expanded monthly Child Tax Credit, her most popular policy in her communication directed at Hispanic voters.
With both Hispanic and Black voters, the campaign prioritized a cocktail of bizarre issues, like protecting crypto assets, fully forgivable loans for small businesses, and health inequities. Some of the ideas were fine. But what Black voters actually prioritized was affordability provided by the restored Child Tax Credit and lower drug prices, and safety provided by reduced violent crime.
Meanwhile, Trump spent $40 million on an ad attacking Harris for allowing transgender prisoners to get surgery at state expense. It ended, “Kamala is for they/them. President Trump is for you.”
I reached out to both Binder and Voles on the issue. The books made clear that the campaign tested various responses but concluded none was as effective as changing the
subject. I had some ideas. I had developed a response to the actual Horton ad that tested the strongest in California in 1988. You cannot leave such an attack unanswered.
It was emblematic of the entire campaign: unable to focus on the most obvious line of attack, switched between different campaigns, did not battle to win each day, and allowed the opponent to score many free hits. Harris did indeed benefit immensely from her launch, the Democratic convention, and debate. But then it fell apart. In my post-election poll, the top reasons to vote for Harris were to save democracy and stop fascism and to save the Affordable Care Act—not the issues that were at the top of voters’ minds.
And after she lost, Biden said he would have won.
Where 2024 Leaves Democrats
For the past 15 years, the great workingclass majority has heard Democratic presidents and nominees praise the American economy. Along with the mainstream media and economists, they cheer it as “the envy of the world.”
Did our leader notice that the great majority have been largely treading water or worse for 25 years? The top 0.1 percent and 1 percent and 5 percent are devouring a growing share of income and especially wealth. At the same time, the obscene wealth of billionaires gives them tremendous political influence.
We also saw that voters believe Democrats govern unsafe, high-priced cities where mayors have lost control of homelessness, violent crime, and illegal immigrants. They believe “woke” elites prioritize transgender rights and education over breadand-butter issues, and that elites think America’s legacy of slavery continues to limit America’s promise. Voters are not sure Democrats view America as exceptional and a land of opportunity.
Democrats can learn from that moment when Harris was poised to win. She was for the middle class, mainstream on cultural issues, and pushing clearly and consistently for economic and political change. n
Stanley B. Greenberg, a founding partner of Greenberg Research, Democracy Corps, and Climate Policy & Strategy, and Prospect board member, is a New York Times best-selling author and co-author of It’s the Middle Class, Stupid!
CULTURE
Pyramid Schemes Are Eating American Capitalism
Multilevel marketing companies helped produce President Trump, and he is ruining everything.
By Ryan Cooper
By Bridget Read Crown
According to classical Marxism, capitalism is destined to collapse on itself because of its supposed inherent contradictions. As it develops, eventually almost the whole population will end up in the working class, leading to an epic conflict between capitalists and socialist revolutionaries, with the proletariat victorious. Needless to say, this does not seem at all likely.
But there is something that actually is devouring American capitalism from the inside. It’s a sort of mutant simulacrum of business, drenched in hyper-capitalist ideology, but which produces nothing and sells to no one. It’s called the pyramid scheme.
That’s the story told in Little Bosses Everywhere: How the Pyramid Scheme Shaped America , a superb new book by journalist Bridget Read. She argues persuasively that multilevel marketing companies (MLM s) like Amway, Mary Kay, Herbalife, or Nu Skin operate in a predatory fashion for the benefit of a precious few. She also shows how MLM s were central to the rise of the conservative movement and its anti-regulatory, anti-government ideology.
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Now America has a president in Donald Trump who not only perfectly embodies the fake-business essence of the MLM, but also was literally involved in MLMs himself. He is ripping up the constitutional framework and regulatory state that underpins
American business, and his lunatic tariff policy looks likely to cause a severe recession. The MLM virus threatens to destroy its economic host.
A traditional pyramid scheme is a straightforward fraud in which people are recruited into an organization, requiring a payment to join. That payment is split between whoever recruited them, and whoever recruited their recruiter, and so on up the chain. This unfolds along exponential growth lines until such schemes run out of potential recruits and collapse very quickly. The people at the top get rich, and everyone else loses money. The MLM was developed in the early 20th century by a bunch of losers. “What brought the architects of the MLM plan together was their collective failure. They were middle-aged nobodies,” Read writes. Carl Rehnborg was a repeat failed entrepreneur—one scheme involved attempting to sell dairy products in China, not realizing that most Chinese people are lactose intolerant—who set up a vitamin supplement business called Nutrilite in 1934. This business was not working either until two more struggling men, Lee Mytinger and William Casselberry, hit on the idea of introducing pyramid scheme dynamics to the business.
Instead of selling directly, which is grueling and risky, they would sell Nutrilite as a business opportunity to others. As a distributor, you could become a “sponsor” of other distributors, who would buy their products from you, and sponsor other distributors in turn, creating a “downline.” Higher order volume meant bulk discounts; buy at least $15,000 and you became a “key agent” and got a check for one-quarter of whatever your
downline was buying. If someone in your downline reached key agent status, you got 2 percent of what they got.
Critically, unlike traditional direct-selling companies, Nutrilite distributors would not be required to sell anything—only to buy it. “Mytinger & Casselberry had solved the problem Rehnborg had been struggling with for years regarding Nutrilite, which is that no one wanted to buy it or sell it,” Read observes. “The incentive in their new system was to sell to other distributors; the customer, and any actual demand for vitamins, was an afterthought.”
That basic system persists to this day. MLMs claim “sales” figures in the $40 billion range, but that number is solely based on products bought by their distributors; nobody, including the companies themselves, has any idea how many products are actually sold.
Nutrilite lives on as well. It was eventually folded into Amway, the most successful MLM in American history and an exemplar of the deep intertwining between these marketing schemes and right-wing Republican politics. The two families who built Amway from a peddler of soap and home-care products into a global sensation, the Van Andels and the DeVoses, have been major funders of the GOP and conservative institutions like the Heritage Foundation, the producers of Project 2025. Betsy DeVos, who would eventually become secretary of education during Trump’s first term, wrote in a 1997 op-ed that her family “is the largest single contributor of soft money to the national Republican Party … I have decided … to stop taking offense at the suggestion we are buying influence … They are right. We do expect some things in return.”
Throughout the book, Read shows American regulators constantly struggling to arrest the cancer-like growth of MLMs, and the industry fighting back with heavy lobbying. During the New Deal era from the 1930s to the ’70s, when the power and legitimacy of the administrative state was at its height, the Federal Trade Commission put up a serious fight. Shipments of bunk products were confiscated, and the most openly scammy MLMs were shut down or sued out of business.
But in the late 1970s, the agency lost a critical legal battle. It sued Amway in these years for allegedly running a pyramid scheme. At the same time, it was attempting to crack down on deceptive advertising to children, particularly of sugary cereal. Reactionaries, supported by MLM s and
Little Bosses Everywhere: How the Pyramid Scheme Shaped America
other industries that had run afoul of the FTC, like car dealers and real estate agents, spied an opportunity. They attacked the “KidVid” proposal as nanny-state overreach, and put the FTC on the back foot.
In 1978, administrative law Judge James P. Timony agreed with the FTC that Amway had engaged in price-fixing and restraint of trade, but not that it was a pyramid scheme. He accepted the company’s claims, which became a set of rules to avoid violating the law: Distributors must sell to at least ten people, they must resell at least 70 percent of their inventory each month, and the MLM would buy back any unused and unexpired products.
The following year, an open ally of MLMs won the presidency. Ronald Reagan gave the keynote address at the 1980 Amway convention, right after Jay Van Andel took over as chairman of the U.S. Chamber of Commerce. For the next 12 years, the FTC did not bring a single case against an MLM. “The money siphoned from the millions of Americans churning in and out of Amway had helped fund the New Right political revolution that successfully made big government bad and greed good,” Read writes.
MLMs were central to the rise of the conservative movement and its anti-regulatory, antigovernment ideology.
The 1978 Timony ruling was buttressed by the fact that Amway persisted over time. A normal pyramid scheme should collapse within weeks or months, so surely it didn’t qualify.
Yet sophisticated analyses of pyramid schemes show that they can last indefinitely so long as they don’t grow too fast—and modern MLMs have tremendous churn, with up to 75 percent turnover per year. So long as the scheme sheds enough people who are replaced with constant supply of fresh victims, a pyramid can persist. And without regulatory enforcement getting in the way, that growth is unencumbered by legal risk.
As Read notes, what studies have been done on MLM s show a near-total lack of
legitimate business activity. MLMs, including Amway itself, have been caught repeatedly violating the Amway guidelines, only to face minor fines. Wisconsin sued the company in 1982, and found that while Amway promised an annual income of $12,000 ($25,000 today), the actual average was a loss of $918. Internal data from Mary Kay in Canada, which is required to be disclosed by Canadian law, shows that 85 percent of distributors make nothing whatsoever in sales, and a further 13 percent made an average of $208 per year, not counting expenses. Another outside study of Nu Skin found that 99 percent of distributors lost money.
Most people have probably heard of at least one MLM, given their focus on recruitment. But as Read points out, it is telling that you almost certainly haven’t heard of their products—like her, I’d heard of Amway, but not its toothpaste Glister, or its energy drink XS, or its water purifier eSpring. Very few people are actually using this stuff.
Read illustrates the MLM dynamic with a story told in short segments throughout the book about Monique, an Air Force veteran who got sucked into Mary Kay back in
CULTURE
2013. The vignettes show why so many people—overwhelmingly women these days— find MLMs appealing: The typical recruit is struggling economically, and drawn to the flashy promises that you can get rich and “be your own boss.” In a grim irony, recessions are often great for MLMs, as they increase the population of economically desperate people. Only capitalist business hustle can get you out of a crisis caused by capitalism.
Monique’s story also shows why people can stick with an MLM. Mary Kay has stiff incentives that relentlessly pressure members to buy more product and, especially, recruit more members into their downlines, packaged with constant propaganda asserting that anyone can make it if they try hard enough. Buy enough and you make it to higher ranks, and are celebrated with special jackets at lavish ceremonies. The social pressure to stay and keep grinding is very strong.
Inevitably, Monique ended up buying most of the products with her own money, telling herself she’d sell them later. Eight years later, having spent more than $75,000 on Mary Kay junk, Monique ended up deeply in debt with a house full of makeup that she can’t even use, as it gives her a rash. All available evidence suggests that is roughly the average MLM experience.
A central lesson of economic history is that capitalism cannot work without regulations. Indeed, without property law and corporate law, plus police and courts to enforce those laws, it couldn’t even get off the ground. But more protections are necessary to preserve the integrity of the market and protect the public. Without strong
government oversight, any market will eventually be overrun by lies and fraud, and implode in financial panic, as seen in 1857, 1873, 1893, 1907, 1929, 1987, and 2008.
In all the legal disputes mentioned above, a central question was lost: What is the point of allowing MLMs to exist? The industry is plainly abusive and deceptive, and it’s not as though Americans are lacking for retail shopping opportunities. But as the neoliberal consensus that regulations are bad until proven otherwise took hold, such questions were ruled out of consideration.
Under the Biden administration, things seemed to be turning around. The FTC got its most aggressive leader in decades, Lina Khan, who set in motion and strengthened several new regulations aimed at MLM s. These were in progress until the last days of the Biden administration. Alas, the book was finished before the presidential election, so the note of tentative hope on which Read ends is a sour one.
If an MLM could somehow be distilled into a single human being, it would be Donald Trump. This is a man who, despite inheriting hundreds of millions of dollars almost taxfree, failed at every legitimate business he ever tried. His real estate empire collapsed. He couldn’t even turn a profit with a casino His one true talent, which made him bil-
A central lesson of economic history is that capitalism cannot work without regulations.
lions, was selling the illusion of business acumen, through the press in the 1980s and ’90s and on The Apprentice. That allowed him to license his name and likeness to all kinds of products made by others, to create a scam university, and—of course—to end up in a partnership with ACN, an MLM “selling” telecom services.
Without the national celebrity and reputation created by reality television, buttressed by a national culture of business worship fueled to a great degree by MLM propaganda and lobbying, Trump would never have become president.
And now we are seeing an MLM president in action. Trump is ramping down the agencies designed to protect the American public and the market. He fired Alvaro Bedoya and Rebecca Kelly Slaughter, the other Democratic commissioners at the FTC, after Khan stepped down. The Consumer Financial Protection Bureau is being torn to shreds, and even the Consumer Product Safety Commission is under threat.
Trump’s FTC actually did recently file a lawsuit in Nevada against one particularly egregious MLM called IYOVIA, which markets investment training services and allegedly ripped off customers for $1.2 billion. But oneoff lawsuits against the worst of the worst— literally 21 international agencies had warned populations about IYOVIA, according to the complaint—pale in comparison to stronger rules that could take down the entire industry, as Khan’s FTC was doing. (The lawsuit also makes clear the investigative work was done when Khan ran the agency.)
Every day, more and more of the national income produced by legitimate work and businesses disappears into the maw of innumerable scams and grifts, from phishing emails to scam texts and calls to phone hacks to crypto rug pulls to MLMs. Trump, naturally, has his own meme coin, and publicly advertises that the largest bribes will get you access to the White House. Now he has inflicted perhaps the most crackbrained economic policy in world history on the American public.
One would think that actual capitalists running real businesses would realize the importance of regulation to the functioning of the market, and turn against Trump. But if Read’s book is any guide, they will not. Someone else will have to wage the scorched-earth campaign against dishonest dealing necessary to preserve the American economy. n
Amway is the biggest multilevel marketing company and a global sensation.
60 Minutes’ Scott Pelley criticized CBS’s parent company on-air for seeking to soften coverage of Donald Trump.
Beating the Press
In a time of eroding journalistic freedoms, a new book chronicles the deliberate effort to use libel law to bankrupt the independent media we have left.
By Zephyr Teachout
Murder the Truth: Fear, the First Amendment, and a Secret Campaign to Protect the Powerful
By David Enrich Mariner
CBS ’s 60 Minutes has been the top-rated news show in America since 1974, longer than most Americans have been alive. One in three Americans watched it last year, and it reached 100 million viewers total. It is at the heart of American news, a well-funded and well-regarded powerhouse relied on by working-class, poor, rich, white, Black, Latino, and Asian Americans.
Hoping to get a merger waved through by
Donald Trump’s Federal Communications Commission, Paramount, the parent company of CBS, has apparently pressured the flagship newsmagazine to muffle its reporting to avoid Trump’s displeasure. Credible reporting indicates the chair of Paramount Global, Shari Redstone, told 60 Minutes producers to suppress stories that were critical of Trump. The executive producer of 60 Minutes resigned, saying he was no longer able to do his job, and correspondent Scott Pelley gave an unprecedented on-air statement, noting that the Trump administration had the power to approve a proposed merger between Paramount and Skydance, and then asserting that “Paramount began to supervise our content in new ways.”
not an isolated editorial judgment. It’s a symptom of a deeper, structural crisis in American journalism. Trump started his anti-press campaign by talking about “fake news” in 2016. But in his second term, he has turned from rhetoric to coercive power, wielding threats and lawsuits to attempt to control what is written and broadcast.
While everyone argues about the big-C Constitutional Crisis caused by a break between Trump and the Supreme Court, the small-c constitutional crisis of the press is here. The biggest news organizations are making deals, feeding the incentive for Trump to make more threats and more demands.
Books
He sued ABC News over George Stephanopoulos saying “judges and two separate juries have found him liable for rape,” and ABC folded—despite having the stronger legal case—giving him a multimillion-dollar settlement. Paramount is in mediation to settle a similar Trump lawsuit over how 60 Minutes presented an interview answer by Kamala Harris during the 2024 campaign.
The appalling story of 60 Minutes is
The companies he hasn’t sued, he’s tried to intimidate. Trump revoked the press pool access of the Associated Press as punishment for using the wrong words in February, and
continued doing so even after the AP got a court order to prevent the exclusion. Trump signed an executive order directing the Corporation for Public Broadcasting, a private nonprofit that receives federal money and provides support to public media outlets PBS and NPR, to cease its funding of those organizations. Regardless of how this order survives in court, each attack feeds the devouring antipress machine and can have an effect on the actual news people see and read.
In other words, “fake news” has become a serious and targeted effort to undermine independent journalism and delegitimize investigations, as its ringleader cheers on the destruction of press freedoms.
To understand the forces at work, David Enrich’s new book, Murder the Truth , is an indispensable guide. The word “chill” has become a mechanical cliché in conversations about press freedom. But reading about the growing revolution in libel and
defamation lawsuits against journalists and media companies, that word suddenly recovered its original meaning. With each lawsuit Enrich recounts, it’s as if another cold finger touches the spine. On their own, they are disturbing; collectively, they seize the body politic with dread.
I’m a big fan of Enrich, a business investigations editor at The New York Times He has a rare ability to spot the dramatic stories that underlie and drive significant legal change. His last book, Servants of the Damned , was the best thing I’ve read about the post-1970s transformation of the legal profession. In telling the story of Jones Day, the law firm that had recently become infamous for its MAGA affiliations, Enrich managed to tell a larger story about how law firms were structurally transformed into entities optimized to serve concentrated power, and how such a transformation was not just “same as it ever was,” but a signifi-
cant shift from an earlier ethos of law. That book is also the best guide I know to understanding what came as a shock to many recently: the wholesale capitulation of firms like Paul, Weiss and others under the mildest pressure from Donald Trump 2.0.
In Murder the Truth, Enrich again tells a story of legal structure and cultural change. This time, his subject is the press—and the legal war against it. It is, at its core, a warning about the potential unraveling of New York Times v. Sullivan, the landmark 1964 case that created the modern doctrine of press protections in the U.S. In the Sullivan framework, there are two kinds of libel law: that regarding public figures and that regarding nonpublic figures. When a statement concerns a public figure, a libel case can only be sustained if the press made a false statement with knowledge or reckless disregard of its falsity. After Sullivan, public figures had a more difficult time proving libel claims.
The backdrop of billionaire attacks on the press is the collapse of local journalism.
If a corrupt deal happens in the forest of Mar-a-Lago, and no one reports on it, did it really happen?
Enrich’s book genuinely changed my mind. Before I read it, you could have counted me in the Sullivan-skeptic camp. I didn’t have a full framework, but was open to the notion that the case was outdated, ill-suited to an era of widespread casual lies and clickbait, and likely a shield for carelessness. I tend to think we undervalue the power of common-law torts, and I’ve chronicled how press freedom claims have been exploited by corporations, and helped lead to Citizens United . However, I was persuaded otherwise by the deep reporting and storytelling of what investigations and resources actually look like in the vast majority of newsrooms around the country. As Enrich says in his acknowledgments, he was inspired to write the book by the number of aggressive legal libel letters that come pounding at the door of his employer, The New York Times, and his resulting curiosity about how smaller newsrooms dealt with them.
In gorgeous journalistic detail, he reveals a legal framework that actually mostly works in practice. Courts uphold defamation suits when journalists act with unforgivable sloppiness or malice, and they dismiss suits when reporting is backed by evidence, followed by quick retractions, or conducted in good faith.
But while the doctrine holds, the surrounding infrastructure is collapsing. Enrich moves through the homes and offices of journalists and the extreme financial stress of legal threats. Too many reporters drop out after legal challenges, and newspapers shrink. They quit not because they lost in court, but because the lawsuits themselves, which are expensive and purposefully terrifying, do the work of silencing them. Murder the Truth is littered with the bodies of small papers and independent reporters who couldn’t afford to keep going.
The real breakdown is not doctrinal, but economic. The story Enrich tells is how wealthy plaintiffs are becoming far more systematic in bringing ruinous lawsuits not to win them, but to inflict costs. For some
powerful interests, the goal is not just to kill stories or outlets, but the law that makes the stories possible. A central story is the initially covert role played by Peter Thiel, who funded the lawsuit that led to the end of Gawker.
In the background of Murder the Truth is a catastrophe: the collapse of local journalism. The past two decades have seen the hollowing out of local papers across the country, driven by hedge fund buyouts and monopolistic platforms stealing ad revenues. We are currently losing local newspapers at the rate of over two a week, according to Northwestern University, and have lost more than a third of local news organizations in the last 20 years. The number of communities with no local news reporting at all has been rapidly growing, and while a few elite publications continue to do great investigations, the heart of investigative journalism in America has long been the non-flashy local story. When those local news organizations are being bullied into silence, we lose out on democracy itself, and the capacity to know even our own communities.
I came to understand through these stories that the real problem of defamatory content online is not a Sullivan problem. It’s a Section 230 problem, a reference to the provision in the Communications Decency Act of 1996 that shields platforms from liability for user content. Enrich’s target is not platform behavior or immunity; his indepth reporting is far from the bowels of Zuckerberg’s empire. But this book forced me to confront how I had sloppily conflated Sullivan and Section 230. Undermining Sullivan won’t solve the business model of Big Tech, whose offerings reward inflammatory content with impunity. It would just put the final knife in the daily heroic journalism done all around the country.
Enrich excels at capturing the cast of characters in each of his stories, and he draws a clear through line from the rise of strategic lawsuits, to the well-funded ideological efforts to gut Sullivan, to a coordinated legal strategy to make the press less free, less courageous, and more beholden to power. I don’t want to give away the juiciest details, but there are many, often of just the variety that would land a smaller paper—one without massive insurance and a full-time team of the country’s best lawyers—in litigation. The carefully reported affairs and vandalism for hire seem designed as litigation bait, or a thumb in the nose of public figures who would rather organize their own public image.
Enrich does not cast himself as a Cassandra, but I read him as one. Servants of the Damned forecast the decimation of the legal profession’s moral center. Murder the Truth warns of a different kind of unraveling in the law that protects journalism.
What is an aspiring democracy without a free press? If a corrupt deal happens in the forest known as Mar-a-Lago, or the smaller thickets in state capitols and city council meeting rooms, and no one reports on it, did it really happen?
Elsewhere, the assault on the press is literal, physical, and gruesome, highlighting just how fragile our own press protections are. Since October 2023, Israel has killed over 160 journalists in Gaza, with many reportedly targeted despite wearing press vests or being in marked media facilities. Israel has restricted access for foreign journalists and destroyed dozens of media offices in Gaza. In Indonesia last year, journalists were repeatedly physically attacked in reprisal for their reporting, and the government used spyware to discourage reporting and dissent. In Hungary, the Orbán government has destroyed the press by eating it, while heaping funding on his own propaganda outfits. In Azerbaijan, the government is putting journalists on trial for smuggling. A 2025 report by the Civil Liberties Union for Europe warned that media freedom and pluralism across the European Union is being severely threatened by increased media ownership concentration, government influence on public media, and intimidation of journalists.
And in the U.S.? Well, it might look slightly better, but in the country that truly pioneered the free press as the Fourth Estate, the independent press is looking less like an estate and more like a small ragtag crew of intrepid reporters, and a few large institutional leaders, some of whom are willing to reshape their views to please the King. This is not just a shift in tone—it is a shift in structure, in power, and in law. From 60 Minutes to local papers, the recent and sudden loss of press independence signals deep democratic dysfunction. n
Zephyr Teachout is a law professor at Fordham University and author of Corruption in America: From Benjamin Franklin’s Snuff Box to Citizens United and Break ’Em Up: Recovering Our Freedom From Big Ag, Big Tech, and Big Money.
PARTINGSHOT
A Very Bailey Farewell
Chuck Schumer’s imaginary friends come back to
haunt him.
For decades, Senate minority leader Chuck Schumer has openly spoken about an imaginary couple named the Baileys who are supposed to be some kind of personal bellwether for middle and moderate America. Yes, somehow this is true. But never have the Baileys spoken for themselves. That is, until now.—Francesca Fiorentini
From: joe.bailey59@hotmail.com
To: chuck@schumer.senate.gov
Subject: We need to talk
Hiya Chuck,
It’s Joe Bailey. Eileen and I watched your video the other day about a Trump car tax and you seemed … unsteady. Hope you’re doing OK.
Look, we have to come clean. Eileen and I would really rather you not mention us anymore, to the media or anyone else. I mean, if we’re being honest it’s always been kind of weird. But right now, we don’t feel like you really understand where we’re coming from.
Things have shifted for us. After Kamala Harris lost the election, we were sure that Democrats or the courts would put a stop to Trump somehow. Hell, the guy had 34 felony counts and Project 2025 was a clear-as-day blueprint for what was going to happen. His first week in office, planes were falling out of the sky, and our son Zane’s wife lost her job at USAID. It’s all been too much. But when Elon and his little team of hacker boys locked you and other Democrats outside of the federal buildings, you were on national television saying that “people are aroused.” Come on, man. Aroused? Even when you are aroused, don’t put it that way.
Eileen found out about the Socialist Rifle Association, and it turns out they have a meetup nearby. We’ve been going for a couple months now. I fancy myself a peaceful guy, but as Huey Newton once said: “If you want to get rid of the gun, you have to pick the gun up.” We’re also learning how to block highways, build barricades, make Molotovs, and scrub our biometrics.
All this is to say, Chuck, we’ve changed. We’ve changed ’cause America has changed. We feel like it’s no longer moderate to be moderate. It’s complicity. We’re radicals now, Chuck. And you, Chuck, at best you’re a coward.
they’re in the minority. Not you, Chuck. You seem to enjoy being useless. You’ve let Eileen and me down.
Eileen and I started going to the Tesla Takedown protests. We’re not usually the protesting type, but we started to get a taste for it during the pandemic and all the BLM stuff. Not sure if you knew this, but we believe in defunding the police. Then
Don’t think we didn’t watch you and nine other Democratic senators vote to advance Trump’s budget, refusing to use the power of the filibuster. What did Trump say to you? Did he pull some Upper West Side tough-guy talk and promise you dinner at Cipriani’s? I mean, if you can’t wield power, the least you can do is gum up the works. That’s what Republicans do every time
I can’t figure out why you’re so weak. You’re old and tired—hell, so am I. But I think you don’t understand regular people’s concerns the way the rest of us do. Which is ironic because the whole reason you created us was to keep in touch with regular folk. Of course you had to invent us because heaven forbid you actually talk to real people. You’ve lost touch with us, your imaginary friends. See, you might be doing fine on a senator’s salary, but Eileen and I depend on Social Security. If those checks are interrupted because of what Elon and Big Balls are doing, there’s going to be hell to pay. And we’re tired of paying it! The 2008 recession cost us a third of our savings, and if there’s another recession and my cancer comes back, well, we’ll have to sell the house. Of course, as anarchist thinker Proudhon said, property is theft. Maybe we should just live communally and give our lives to the revolution. Fascism is real, Chuck. And the Democratic Party under your leadership has been asleep at the wheel. It’s time you hand over the keys like Biden should have sooner. That AOC is polling 19 points ahead of you for your own seat, and she isn’t even running. Your time’s up. If you leave now, we might still invite you over for Thanksgiving dinner. Of course, it’ll be tofurkey, on account of us being vegan now.
All the best,
Joe and Eileen Bailey
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