If you shop at Whole Foods, you've probably seen the ads at the cash register for Conscious Capitalism. Cowritten by the store's founder, John Mackey, and Raj Sisodia, chairman of a nonprofit called Conscious Capitalism Inc., the book bills itself as a tale of "Mackey's own awakenings as a capitalist." While Mackey serves up plenty of cheerful exhortations and pithy self-help tips, however, the only "awakening" that you're likely to get from reading this 313-page apologia for libertarianism is a sense that he ought to stick to selling groceries. (Read my interview with Mackey here.)
To give Mackey his due, he proved that many shoppers are willing to pay a premium for foods that are healthy, sustainably produced, and sold by workers who earn decent wages and health benefits. His book strives to show CEOs in other industries that they can follow his lead. "We need a richer and more ethically compelling narrative to demonstrate to a skeptical world the truth, beauty, goodness, and heroism of free-enterprise capitalism," he writes. "Otherwise we risk the continued growth of increasingly coercive governments, the corruption of enterprises through crony capitalism, and the consequential loss of both our freedom and our prosperity."
"Ethical vegan" John Mackey dishes on Obamacare, labor unions, and government meddling.
Josh HarkinsonJan. 18, 2013 7:01 AM
In 1978, John Mackey and his girlfriend used $45,000 in seed money to start "Safer Way," a natural-foods store in Austin, Texas, that was supposed to offer shoppers an alternative to "evil" profit-seeking corporations. But soon the long-haired 25-year-old found himself lumped in with the people he was supposed to be fighting. His customers complained that his prices were too high. His workers thought they weren't being paid enough. Austin nonprofits said he should give them more money. And government regulators were slapping him with fees, fines, and taxes. He lost more than half of his investment before renaming the store Whole Foods and reconsidering his take on corporate America. "My worldview underwent a massive shift," he writes in Conscious Capitalism, a new book about his business philosophy that Mackey coauthored with Raj Sisodia, cofounder of the nonprofit Conscious Capitalism, Inc. "I had become a businessperson and a capitalist, and I had discovered that business and capitalism, while not perfect, were both fundamentally good and ethical." (A book review is forthcoming.)
Mackey responded via email to my questions, dishing on Obamacare, the relevance of labor unions, and the overheated rhetoric concerning climate change—which is, after all "perfectly natural."
"I reject the premise that liberal and libertarian values are necessarily in conflict. The truth is that I don't fit into a simple ideological box."
Mother Jones: You run Whole Foods Market as a liberal might—with generous wages and worker benefits and progressive environmental policies. Yet when it comes to politics, you are essentially a libertarian.
John Mackey: I reject the premise that liberal and libertarian values are necessarily in conflict. In fact, I often self-identify as a "classical liberal." I am pro-choice, favor legalizing gay marriages, protecting our environment, enforcing strict animal welfare protection laws (I've been an ethical vegan for 10 years), marijuana legalization, having a welfare safety net for our poorest or disabled citizens, and a radically reduced defense budget and military presence around the world. However, I'm also a conscious capitalist—I believe economic freedom and entrepreneurship are the best ways to end poverty, increase prosperity, and evolve humanity upward. I believe that all forms of socialism have been proven over time to result in a loss of both economic and civil liberties, with increasing poverty. The truth is that I don't fit into a simple ideological box. I read widely on issues, try to think carefully about them, and then I make up my own mind.
The NRA may or may not be a gun club for whiners, but it does have a wine club. The NRA Wine Club, as it is known, offers "limited collector's editions NRA wines." If you sign up, you'll also get a "Custom NRA Engraved Wine Box."
Sadly, the NRA does not offer a domestic-beer club. Yet in one sense, marketing alcohol of any kind to hard-core gun owners is a stroke of brilliance: According to a 1997 study in the American Journal of Public Health, owners of semi-automatic weapons are more likely than other gun owners to report binge drinking.
Now if only the NRA could start a tobacco club, it would be primed for a raid by the "jack-booted thugs" in the Bureau of Alcohol, Tobacco, and Firearms.
Whenever the National Rifle Association is accused of extremism, it trots out the claim that it represents a large chunk of America's gun owners. Last week, it said it has 4.2 million members and counting. Though the group doesn't publish its membership rolls and didn't respond to questions about its size, there's a lot of anecdotal evidence that it is making itself out to be bigger than it truly is.
Estimates of the size of the its membership have varied widely over the past 20 years. At different times in 2008, for example, it pegged its membership at 3 million and 4.3 million—a difference of more than 40 percent. A 2012 document for prospective sponsors of the NRA's annual meeting (PDF), found by Bloomberg News, said the group had 4 million members, of which 2 million were the "most active and interested."
During the early 1990s, the NRA's membership peaked at around 3.7 million before plunging to 2.6 million in 1998, according to newspaper stories at the time. The shrinkage coincided with criticism of the group's extremist rhetoric around the time of the Oklahoma City bombing. If the NRA is to be believed, it quickly began replacing those lost members. But did it? After the late '90s, reports of its size start to spread out like buckshot from a sawed-off bird gun.
In March 2001, the Denver Post pegged the NRA's membership at 2 million. A few months later, an NRA spokesman put the number at 4.5 million; the Columbus Dispatch and Colorado Springs Gazette put it at 3 million. What was going on here? One possible explanation comes from Richard Feldman, a former NRA lobbyist who wrote the 2007 book, Ricochet: Confessions of a Gun Lobbyist. After George W. Bush was elected, Feldman recently told Bloomberg, "there was no perceived national threat to gun ownership. The NRA's membership dropped to under two-and-a-half million, although they never admitted it."
Writing in 2000, when the NRA claimed to have 3.6 million members, journalist Osha Gray Davidson speculated on some of the group's strategies for fluffing itself up:
Two years ago, David Gross, then an NRA board member, confided to me that a substantial number of the group's 1 million Life Members are, well, dead. "There just isn't that much incentive to go find out when someone passes away," Gross explained. "Not when the cost of maintaining (a dead member) is minimal and when they add to your membership list."
Who else is included in that figure of 3.6 million? I may be—although I haven't been a member for years. Not long ago, I received an NRA form letter stating that in recognition of my previous commitment to the Second Amendment, the gun group had granted me an honorary membership. The mailing even included an NRA membership card embossed with my name.
It's all part of the NRA's campaign of smoke and mirrors to make itself appear more formidable in Washington, where appearance often trumps reality. The NRA leadership must offer a silent prayer of thanks to the gods of journalistic sloth and credulity every time a reporter repeats that figure of 3.6 million members and the words "record high."
An ad for a Taurus pistol in the NRA's American Rifleman
magazine offers free membership in the group. American
The NRA has boosted its membership numbers in other ways. A 2008 issue of the NRA Recruiter, a newsletter aimed at the association's evangelists, proudly noted that weapons makers and outfitters such as Browning, Beretta, Taurus, Tactical Rifles, and Wilson Combat were offering free NRA memberships to anyone purchasing their products. The newsletter also talked up the benefits of "Join NRA, Get in Free" promotions at gun shows. "This is, by far, the most effective way to substantially increase your numbers," it said. "…[A]ll you have to do is 'sell the sizzle.' People are always looking for a bargain."
In 2008, Josh Sugarmann, executive director of the pro-gun control Violence Policy Center, came across more evidence of the NRA's fuzzy math. He pointed to a piece of junk mail that the NRA's treasurer had sent to members peddling a specialized insurance plan aimed at gun owners. The pitch stated that "with about 3 million NRA Members 'on our side of the table,' we negotiated a bargain price." Sugarmann has an intriguing theory why this number may be more credible than the one that the NRA routinely gives the press: The underwriter for the insurance plan was in California, where making "untrue, deceptive, or misleading" statements in insurance materials is outlawed.
Last week, the NRA claimed that it had added 100,000 new members in the weeks following he Sandy Hook massacre. "Our goal is to get to 5 million before this debate is over," a representative of the group told Politico. If all of the NRA's numbers are to be believed, it will hit its target by this fall.
UPDATE: A source writes in with another strong indication that the NRA's true size is closer to 3 million. The NRA gives members a free subscription to one of four magazines: American Rifleman, American Hunter, America's 1st Freedom, or NRA InSights. The first three magazines are audited by the Alliance for Audited Media, which as of July gave them a combined paid circulation (including newsstand sales) of 3.1 million. NRA InSights is an online-only magazine for kids, with a circulation of 25,000. Though some NRA members may opt out of a free magazine, it's likely that others pay to subscribe to more than one of them. Add in the fact that non-NRA members can pick up the magazines on the newsstand, and the 3.1 million figure is almost certainly an upper-bound for the NRA's true size.
Steven Gluckstern says cities can save struggling homeowners by seizing their loans from lenders. First he has to convince one of them to take on Wall Street.
Josh HarkinsonJan. 7, 2013 7:01 AM
On a drizzly November morning, Steven Gluckstern speeds through the half-empty subdivisions that spread out for miles as you head east from San Francisco into California's Central Valley. Taking the exit in downtown Merced, a small city that's hit hard times, he passes a grizzled panhandler holding a sign that says, "Will work to get out of Hell." The 61-year-old venture capitalist taps the steering wheel of his Volkswagen SUV and hums along to "Like A Rolling Stone," getting himself psyched up to make his pitch.
He parks and bounds into Merced's modest city hall to speak to a small gathering of city council members, realtors, and housing activists. "If we sit around and wait for the solution to come from Washington, DC, or Sacramento, it will not come," Gluckstern tells them between deep dives into stats on underwater mortgages, negative home equity, and loan default rates. "It will not come! It hasn't come in five years."
Merced, whose foreclosure rate is twice the national average, is just the latest stop as Gluckstern crisscrosses California to sell struggling cities on a radical, untested way to fix the mortgage crisis. His scheme is almost as complicated as the derivatives and collateralized debt obligations that caused this mess to begin with. However, its underlying mechanism is simple: Cities should use the power of eminent domain to seize troubled mortgages from the bondholders that own them.
Steven Gluckstern in his San Francisco office
That's where Gluckstern's firm, Mortgage Resolution Partners, enters. It would arrange the funding for these eminent-domain purchases and then help a city like Merced reduce the loans' principal and resell them to new investors, who'd cover the city's costs and MRP's brokerage fee. In this scenario, Gluckstern calculates that a family in Merced that bought a $200,000 house that's now worth $100,000 (a common situation here) would see its monthly payments decrease from between $800 to $300.*
"Everybody is better off," Gluckstern says as he clicks through slides detailing how preventing a single foreclosure could save the city nearly $20,000 in lost taxes and other expenses. "Grandma is better off because she stays in her house. The community is better off because you avoid all of those costs." It's also a good deal for the investors who own the mortgage, he continues: "But you know something? Even the owner of that mortgage is better off, because that's otherwise going to be a foreclosure. And we know there are 8 chances out of 10 that they are going to be foreclosed!"
Even as housing prices slowly rebound across the country, the situation in California's Central Valley is not unique. Four million Americans have lost their homes since 2005, and 3 million home loans are currently at or near foreclosure. Moreover, 12 million borrowers collectively owe $600 billion more than their homes are worth, a debt load that threatens to stall the shaky economic recovery.
Dozens of cities and counties have expressed interest in pursuing the eminent domain option with MRP, including Chicago, Berkeley, and New York's Suffolk County, though nobody wants to be the first to try it. Last April, officials in California's San Bernardino County appeared ready to work with MRP until the securities and banking industries bombarded them with threatening letters. Last month, the central California farming town of Salinas quietly solicited a bid from MRP, but has yet to pull the trigger.
Former San Francisco Mayors Gavin Newsom
and Willie Brown are among Gluckstern's
influential Democratic allies. Thomas Hawk/Flickr
Politicians are understandably reluctant to resort to what is essentially the nuclear option for rescuing beleaguered homeowners. In August, the Federal Housing Finance Agency (FHFA), which oversees Fannie Mae and Freddie Mac, posted a notice expressing its "significant concerns about the use of eminent domain to revise existing financial contracts." In September, the Securities Industry and Financial Markets Association warned that any city that seizes a loan will face a crippling legal battle as well as a "chilling effect" as banks hike interest rates or pull up stakes entirely.
The hesitancy may also have something to do with Gluckstern and his partners, who, after all, have a lot in common with the bankers they're supposed to be fighting. MRP's CEO, Graham Williams, is the former director of residential lending for Bank of America, and Gluckstern's investors include Donald Putnam, who once managed $15 billion in mutual funds. His allies include business-friendly Democrats such as former San Francisco mayors Willie Brown (an MRP investor) and California Lt. Gov. Gavin Newsom. MRP spokesman Peter Ragone previously served as Newsom's spokesman. MRP's team also includes a prominent real estate developer, the founder of Ask Jeeves, and a former legal affairs secretary for California Gov. Jerry Brown.
In response, Gluckstern's foes in the finance industry are fighting him with rhetoric that sounds like something from an Occupy protest. Writing to San Bernardino officials in July, the Association of Mortgage Investors described MRP's eminent domain scheme as "simply a wealth transfer from everyday Californians to a handful of wealthy, well-connected investment bankers."
Gluckstern's approach isn't as in-your-face as it may sound. In early 2008, the Obama administration considered a bottom-up fix to the foreclosure crisis that had a lot in common with MRP's proposal. The federal government had bailed out the banks but liberal economists were arguing that it also needed to bail out millions of homeowners struggling to stay afloat. Last year, the White House finally began warming up to that idea. But it has stood by as Edward DeMarco, FHFA's acting director, has ignored the entreaties to forgive debt on government-owned loans.
The eminent domain plan was the brainchild of Robert Hockett, a Cornell law professor who specializes in the securitized mortgage market. Hockett originally wanted the government to use its power of eminent domain along with money from the Troubled Asset Relief Program to go after underwater mortgages owned by private investors—namely, the so-called private-label securities that own 10 percent of all mortgages but account for a third of all foreclosures. Hockett describes them as "suicide pacts" because they were devised without any way for their owners to modify the underlying loans. "After it became apparent that the feds weren't going to do this," Hockett says, "I thought, 'Well, let's try it some other way.'"
"I know what threats are. I know what bullying looks like. And I didn't like it coming from the folks that I helped bail out," Newsom says.
That other way became apparent last year when John Vlahoplus, a friend from Hockett's days as a Rhodes scholar, told him about MRP's business plan. Vlahoplus, MRP's chief strategy officer, wanted to make sure that it could withstand a challenge in the Supreme Court. (The Fifth Amendment enshrines the government's right to seize private property for public use, provided it pays just compensation.) Hockett believed it could.
"The broad category of property that we are taking about here is intangible property, and there has never been any question that intangible property can be taken," Hockett explains. He cites examples of eminent domain being used to seize railroad stock and municipal revenue bonds. Of course, cities must demonstrate that taking private property accomplishes a public good, and the benefits of seizing underwater mortgages are somewhat speculative. But so was the public benefit of seizing homes in New London, Connecticut, to make way for a Pfizer research facility—a use of eminent domain that the Supreme Court approved in its controversial 2005 Kelo v. New London ruling.
Lawyers for SIFMA, the securities industry trade group, point out that MRP seeks to cherry-pick performing loans from mortgage-backed securities. That means cities would seize loans whose borrowers are still current on their payments without compensating the bondholders for essentially wrecking the value of their remaining securities, which would be loaded with nonperforming loans that are unlikely to ever be paid off. "The difference between the compensation contemplated by MRP," they write, "and the compensation actually required by the Constitution and state law, is likely to be substantial."
Gluckstern calls this posturing. Studies suggest that 80 percent of underwater mortgages owned by private-label securities will end up defaulting. "We're taking the cherry bombs, not the cherries," he says, "because these are the ones that are going to explode." He argues that MRP isn't seeking windfall profits; it will charge a flat fee of $4,500 per loan it helps acquire, the same fee that the federal government pays loan servicers to modify existing mortgages. The real profiteers, he says, are the speculators who bought mortgage-backed securities on the cheap with the expectation of huge payouts. "The idea that a local community is going to challenge Wall Street's dominance of the financial system? That's why they are in an uproar."