“You know the old joke,” begins David Dayen of The Nation. “How do you make a killing on Wall Street and never risk a loss? Easy—use other people’s money” (13). Dayen’s article is about J. P. Morgan’s settlement on a case of misconduct when they “robo-signed” possibly thousands of foreclosures after the housing crisis of 2008. By “robo-signed,” Dayen means that J. P. Morgan did not investigate the contents of the foreclosure documents. In a 2013 settlement, J. P. Morgan was required to forgive $4.2 billion worth of foreclosures and pay another $4 billion in consumer relief for deceiving mortgage investors. In order to comply with the settlement, however, J. P. Morgan “was forgiving loans on properties it no longer owned” (13; original emphasis). J. P. Morgan had sold tens of thousands of toxic loans years before at bargain rates in order to get the loans off its balance sheet (1st Fidelity Loan Services is the buyer that Dayen focuses on in a deal arranged by Nationwide Title Clearing, associated with, weirdly enough, the Church of Scientology) and yet had not taken the properties out of its secret “dump” of distressed properties and had not even provided full documentation on the properties to those who bought the loans, even admitting that they were still collecting payments on those properties. They then proceeded to “forgive” the loans they no longer owned in order to honor the mortgage forgiveness requirements in the settlement. Dayen concludes that the Justice Department under the Trump administration is unlikely to pursue litigation.
The issue here is not only that bankers have been profiting from using other people’s money by expanding debt. Dayen’s story also shows that bankers have taken over the sovereign state’s role of creating money by creating characters who hold the same money that they do at the same time as they do1—this made it possible for them to own the same money twice. In other words, the old joke really is that bankers are making money by using nobody’s money or, rather, using no thing that still has the name of money in order to create more money for themselves under a different name. That is, bankers are profiting from using their own money multiple times by distributing the same money to multiple fictional entities with multiple fictional personalities under multiple fictional names: they are, in essence, sharing the profits from their properties with multiple versions of themselves. J. P. Morgan could then claim (e.g., if a payment came in) that they were the owners of the loans even while they could also claim (e.g., if there were an enforcement issue or an associated cost) that another company was responsible. The practice of expanding the money supply by expanding debt—that is, of expanding the money supply by representing money in multiple money endeavors at once—is not aberrant or criminal but quite simply the rule of capital.
J. P. Morgan was the company that came up with the idea of what is now broadly called the credit default swap (also known as “synthetic collateralized debt obligations” or “securitization”). The credit default swap is an instrument that furthered the excesses that most people believe led to the 2008 financial crisis. It basically allowed financial companies to reduce their reserves and transfer the risks of the loan to another company. According to British novelist John Lanchester in his nonfiction account of the crisis, I.O.U., in 1989, Exxon needed to open up a credit line to fund cleanup after the Exxon Valdez spill. J. P. Morgan had a long-standing relationship with Exxon and wanted to help them out, but the money could be better spent elsewhere, since the cleanup was not likely to be lucrative. So J. P. Morgan came up with the idea of selling the loan to the European Bank for Reconstruction and Development for a fee. That way, J. P. Morgan did not need to hold reserves against the loan and could still use their reserves to loan out the same money to someone else, and the regulators looked the other way because the banks could say they were maintaining the legal level of reserves (remember, all this was to cover the costs of a sinking ship, so to speak). “J.P. Morgan,” concludes Lanchester, “had found a way to shift risk off its books, while simultaneously generating income from that risk and freeing up capital to lend elsewhere” (70). This mechanism could succeed in a time of growth, but if money were receding, the banks could not pay because they were overleveraged.
Eventually, the third-party bank that held the loan was replaced by financial instruments that bundled up the loans, mixing different levels of risk assessed not by evaluating a person or company’s financial records and histories2 but rather through complex mathematical models that referred to constructed averages, composites, and bell curves rather than to actual financial actors. The bundles of loans absorbed risk by dispersing it throughout the system to a variety of named entities.3
These J. P. Morgan incidents divulge a trend in financial methods: that is, finance is indebted to literary practices. In this instance, profits are made by constructing believable characters who transact on a believable financial stage. They are made as characters by holding money, as their personalities are built on traditions of securing value that literature has developed as well as on literary traditions that envision characters as a composite of social positions and averages so that they seem compelling, identifiable, and sympathetic across a broad array of types of readers. Similar to the way J. P. Morgan created shells to hold value, for nineteenth-century novelists like Anthony Trollope, for example, mentioning the value of a person’s assets and annual income did a lot of the work of establishing character traits, often stood in for explaining the character’s moral positions, and also revealed the character’s social networks and place in the community (in terms not only of class but also of influence, trustworthiness, political potential, and connections). “The revenues from the Scotch estate,” The Eustace Diamonds narrator tells us about the recently widowed Lizzie Eustace, “—some £4000 a year—were clearly her own for life” (52), whereas her sometimes lover Frank Greystock, “at present . . . was almost nobody;—because he was so poor, and in debt” (255), and her one-time fiancé Lord Fawn “had declared to his future bride that he had half five thousand a year to spend” (114). Additionally, nineteenth-century writers like Trollope were interested in how new forms of property ownership, not based in land or objects but rather in finance, might require new types of narrative framing and characterization, which destabilized the “intrinsik value” in things (established in their price), just as J. P. Morgan was able to untether value from actual things by transferring that value onto an imaginary elsewhere: a bank or, later, a bundle of debts. In fact, what J. P. Morgan and Trollope share is a grappling with the question of the imaginary as necessary for constructing real value. Promissory Notes focuses on a historical relation between fiction and finance, where the line between them is blurry. In effect, it considers how financial instruments appropriate techniques of fiction and literary representation to build the representations of value that organize their systems.
There is no doubt that the beginning of the twenty-first century was marked by crises of debt. Student debt is the highest in history, reaching $1.3 trillion in 2017, according to Zack Friedman of Forbes. As Maurizio Lazzarato notes of US universities, “This temple for the transmission and production of Western knowledge is also a model of the financial institution, and, with it, of the debt economy . . . On the one hand, the American university is the ideal realization of the creditor-debtor relationship. On the other hand, the American student perfectly embodies the condition of the indebted man by serving as paradigm for the conditions of subjectivation of the debt economy one finds throughout society” (Governing 64). In addition, according to Jessica Silver-Greenberg and Stacy Cowley in the New York Times, outstanding credit card debt in 2017 reached its highest point in history at $1 trillion, with more Americans holding credit cards than ever before. Though Republicans (and many Democrats) have been campaigning against national deficit spending for decades, the tax reform bill they passed at the end of 2017 is predicted to raise the deficit by more than $1 trillion, according to the nonpartisan Congressional Budget Office (CBO), reaching record highs. Debt in neoliberalism underlies what Lazzarato identifies as “an asymmetrical class struggle” (Governing 12): “What is expropriated by credit/debt,” he continues, “is not only wealth, knowledge, and the ‘future,’ but more fundamentally the possible” (Governing 23). Such national debts are paid for with austerity policies, cuts to safety nets and education, and cuts in wages and benefits. In an interview with Jeremy Scahill of The Intercept, geographer David Harvey has called these practices “debt peonage” and their enforcement “the militarization of social control, and the intense militarization and the super-militarization of it”: “One of the ways in which social control is exercised,” he asserts, “is to get people so deep in debt they cannot imagine anything in the future other than simply living in such a way as to pay off their debt.”
Literature has played a historical role in defining and teaching debt to the public. Realism in the novel developed in the nineteenth century alongside the standardization of such monetary instruments as paper currency, coin, balance sheets, stocks, and credit bills and shared with credit culture the need to produce a belief in something that, by definition, is not there. For example, in Anthony Trollope’s 1873 novel The Eustace Diamonds, the plot begins with a debt that takes the form of a necklace whose ownership and value cannot be traced. Much of the plot of The Eustace Diamonds focuses on how legal language unsuccessfully describes what objects such as the diamonds—like debt, of negative content—are within a property framework based in concrete materials. The loss of value in landed properties meant that the source of value, like meaning in language, came to seem shifty as value was increasingly transferred onto moveable objects or investment speculation such as the diamonds. In The Eustace Diamonds, nineteenth-century Britain witnesses a transition from an eighteenth-century idea of property, where value is intrinsic to the object, to an idea of property whose value is representational and whose representation can lie or prove empty, without reference. Dependent effectively on establishing connections between fiction and belief, literature adds credibility to finance: finance’s elusiveness requires the types of speculative narrative, readers, predictable characters, and abstract social worlds developed in realist and postrealist forms. The nineteenth-century British realist novel was often a place where the effects of these changes on social relations could be considered, experimented with, and tested and where readers could be taught to believe.
Indeed, literary figuration is central to testing, teaching, and recognizing the political imposition of debt. Early twentieth-century literary writers recognized debt as a fiction wielded to extend imperial power and exposed such practices, creating a new awareness and somewhat of a backlash leading to new legislation, federal personnel changes, and even some criminal charges. In 1932, for example, the African American poet Langston Hughes wrote a newspaper polemic about the early twentieth-century crisis and military occupation of Haiti, explaining, “You will discover that the Banque d’Haiti, with its Negro cashiers and tellers is really under control of the National City Bank of New York. You will become informed that all the money collected by the Haitian customs passes through the hands of an American comptroller.” With an even greater impact, in 1920, African American author and educator James Weldon Johnson wrote a four-part series of articles for The Nation in which he spotlighted the military invasion and occupation of Haiti as defending the interests of the National City Bank of New York, which controlled the ports, the treasury, the issuance of bonds, and the importation and exportation of currency. Leading into the third article, which recounts the history of the New York Bank taking over the Haitian public and private financial system, Johnson writes, “This Government forced the Haitian leaders to accept the promise of American aid and American supervision. With that American aid the Haitian Government defaulted its external and internal debt, an obligation, which under self-government the Haitians had scrupulously observed. And American supervision turned out to be a military tyranny supporting the program of economic exploitation” (38–39).
The practice continues. Just to mention a few titles published in the wake of the 2008 crisis, Jess Walter’s 2009 novel The Financial Lives of the Poets tells of a financial reporter / poet who loses his newspaper job as well as his own blog site/start-up business (which he calls “money-lit”  because it uses poetry to explain finance) just when his house goes underwater. His cool, sardonic narrative voice—as well as his adventurous exploits, upon unemployment, as a pot dealer who eventually falls in with large suppliers and growers and then with the FBI as an informant—turns what should realistically be a tragic tale of national need and instability into a comedic jostle through drugged-up desperation and adorable failure. Martha McPhee’s 2010 novel Dear Money features a formerly semisuccessful novelist who, when her house quite literally goes underwater (“Water from the storm that had draped Connecticut in glistening beauty on our return had penetrated the roof of our apartment building and dripped through the ceiling and onto, and then into, our mattress” ), is seduced by a bond trader who solicits her to work for his Wall Street firm. The novel has interspersed informational asides that explain from the future the development of shady financial instruments, often punctuated by the narrator’s own cute naïveté as an outsider to the industry, like this one: “Most of all the idea of pooling people, of trying to understand how they operated psychologically . . . as a collective lot . . . was better than the plot of any story I’d read in a while . . . This was imagination at work, imagination with consequences—nothing less” (48).
Some postcolonial literature has also taken on narratives of debt, teasing out the conventions of imaginative writing embedded in the social relations of debt emerging in postcolonial space and evolving into neoliberal globalization. Indeed, The Eustace Diamonds compares the diamonds to the status of India in a subplot about the legitimacy of its principality after the 1857 Indian Mutiny. As with the diamonds and debt, such a formulation of colonized space as particularly exploitable due to its alienated, fictional, or negative status in relation to legal norms repeats today. As the late nineteenth century started to experience an unraveling of the moral logic of the British Empire, it is hardly surprising that the alienated legal framework of Victorian possessions acquired a place in the fictions of dispossession produced by Britain’s former imperial possessions.
“Third World” literatures of debt are very aware that the abstract worlds developed in imperial finance are disconnected from the social and cultural experiences they are said to reference. Moshin Hamid’s 2013 novel How to Get Filthy Rich in Rising Asia is a mock-up of a financial self-help book with no advice and no address. The “you” the text speaks to is not the reader but rather a fictional “you” with a life story of his own, a dialogical doubling of the author: “We are nearing our end,” the narrator warns, “you and I, and this self-help book too” (177). The story is not a “self-help” after all but rides a fictional plotline, where the “you” is given someone else’s story, gaining leverage by borrowing against physical reality: “‘If we don’t borrow,’ he says, ‘we’ll die’” (178). Teddy Wayne’s 2010 novel Kapitoil relates the story of a coder from Qatar who, working in a New York bank and deciphering Jackson Pollock’s philosophy, discovers an algorithm for investment returns that would also serve as an algorithm to end disease in the “Third World.” His boss tries to entice him into signing over his intellectual property rights in order to bank on the algorithm’s supercompetitive profit margins, but the coder refuses and returns to Qatar. Amitav Ghosh’s 2008 novel Sea of Poppies recounts how the British Empire forced opium production on Asia by forcing debt onto their local rulers. “Your debts to my company,” says the British merchant Mr. Burnham to the Raja, “would not be covered even by the sale of the estate” (119). In these novels, finance is what splits and alienates the subject, the point of irresolvable antagonism between the direction of profit and the space from where profit is drawn as debt, between the realities of the built world and the fictions of its promise.
“Third World” debt literature, though, does not begin post-2008. Wole Soyinka’s 1965 play The Road, for example, tells of a group of Nigerian drivers, or touts, who steal the sign “BEND” by the side of the road and then resell the items left behind by those who crash and die as a result of the sign’s removal. As with the legal protocols surrounding the property of Lizzie’s diamonds, the sign is removed as a descriptor of the territory, and without that marking, the road itself becomes unpredictable, and life itself is indebted to the controllers of symbols. Whereas The Road is about the loss of metaphysical belonging with the postcolonial state corrupted by development, Kenyan Ngugi wa Thiong’o’s 2006 novel Wizard of the Crow refashions The Road’s nationalist critique into a neoliberal mythology. Wizard is a comedy of errors telling of a fictional “Third World” nation trying to debt finance a large but useless project to build a replica of the biblical Tower of Babel in order to commemorate the corrupt Ruler and attract foreign investors. This novel mocks governance in the neoliberalized indebted nation by showing its state bureaucracies standing on fictions of power produced by the financial take-over of its sovereign institutions: the nation as such, like the sign “BEND” in The Road, is in a sense emptied of meaning and therefore agency as well. Straddling a time when finance was turning away from investments in production in order to focus on representations of value outside of production, these texts explore the nexus between increasing debt and the shrinking credibility of the promise of the material world, its cultures, and the lives of its producers.
J. P. Morgan’s practice of putting the costs of accumulation onto a fictional character might apply not only to shell companies. Finance also depends on creating a character out of the “Third World” that would hold negative value as the “dump” of toxic value. The creation of the “indebted character” of the “Third World” is tied to a nineteenth-century construction of indebted persons as sitting in an off-kilter relation to the legal parameters of the citizen-persona most often marked by race or culture. My point in crossing from the Victorian novel into inflections of finance in a more contemporary novel and a play is to show how the “Third World” is constructed within narratives of debt as an unsignifiable object, a negative identity. Historian Peter James Hudson4 has documented how Wall Street dominated the Caribbean, “guaranteed by force” (21), operating in a zone beyond legal reference that Hudson calls “racial capitalism,” where “banking and finance capitalism also emerged as an attack on black bodies” (256). “Racial capitalism” developed first in the “loose regulatory environment” (25) of the American west, with high-risk investments fraudulently secured through land theft and dispossessions enabled by jurisdictional gaps and regulatory ambiguities. Banks acquired land by emptying it of its aboriginal inhabitants, using mortgages on the “financialized space” (24), operating between legality and illegality and guaranteeing the acquisitions through force. Just as financial abstractions such as mortgages were used to displace aboriginal holdings on land, the North American Trust Company, preceding the National City Bank, “leveraged the Cuban government deposits to finance personal enterprises” (39) and preempted Cuban sovereignty by rewriting Cuban constitutional law while supporting possibly illegal regimes.
“Third World” as an identity can be said to be retrofitted into the negativity of financial representations of value that debt introduces. Because the benefits of capital accumulation are removed and alienated from the place of their extraction, debt is what Lazzarato calls “asignifying semiotics,” which “function whether or not they signify something for someone” (Governing 24). As Lazzarato goes on to explain, “In capitalism, sign flows (money, logarithms, diagrams, equations) act directly on material flows, bypassing signification, reference, and denotation, all of which are linguistic categories incapable of accounting for the operations of the capitalist machine” (Governing 24). That is to say that finance follows the logic of the “signifying economy” as analyzed by a whole host of structuralist and poststructuralist thinkers, such as Saussure, Lacan, Lévi-Strauss, Derrida, Barthes, Kristeva, Foucault, and Deleuze (Lazzarato’s analysis builds mostly on the work of these final two). This critique taught generations of literary and cultural scholars that linguistic signs—words but also syntax, form, concept, and structure—were defined in relation to their difference from other linguistic signs rather than in relation to social relations in the world. Signs deferred engaging in objects indefinitely, postponing and then postponing again decisions on definitive, enduring meanings. The economic turn of this deferral of attributing absolute meaning or value is particularly evident in a neoliberal era, when institutions of state sovereignty, with their impetus toward development and their promise of progress, are being turned into financial products by financial actors and sold off to other financial bidders whose interests lie elsewhere. As in Cuba and Haiti, Hudson resumes, in Puerto Rico, “the City Bank served as the depository of government funds while hampering the development of a truly national institution” (265). Neoliberalism can be understood as a historical stage of capitalism that has turned away from workers, local cultures, and the commodity form, including social safety-net policies that support working lives, avoiding the slowdowns and stoppages entailed when capital needs workers to reproduce themselves for production. Neoliberalism thus forces debt on the “Third World” by its disinvestments in reproduction that make “Third World” countries into high-risk areas, increasing profitability.
David Harvey has dated this shift toward neoliberalism from the 1970s with the bankruptcy of New York City. Before then, deindustrialization, says Harvey, and the consequent depletion of the economic base (giving rise to the term the urban crisis) led to social unrest that was met with public spending to solve the problems. Richard Nixon, however, declared the end to the crisis in the early 1970s and diminished federal aid to the city. Though at first the banks were willing to cover the differences that ensued between spending and revenues, in 1975 Citibank decided to push the city into bankruptcy and then bailout, and other banks followed suit. The terms of the bailout were that the bankers “had first claim on city tax revenues in order to first pay off bondholders . . . The effect was to curb the aspirations of the city’s powerful municipal unions, to implement wage freezes and cutbacks in public employment and social provision (education, public health, transport services), and to impose user fees (tuition was introduced into the CUNY [City University of New York] university system for the first time)” (Harvey 45). According to Harvey, “the Chicago boys” who followed Milton Friedman at the University of Chicago looked at this response to New York City’s crisis in order to build the blueprint for their brand of neoliberalism. New York City’s bankruptcy inspired the similar market fundamentalist reforms implemented in Chile under the regime of Augusto Pinochet, which would be the first iteration of Latin America’s debt crisis in the 1980s. It also underlaid the market restructuring of New Orleans after Hurricane Katrina in 2005 and of Iraq after the US invasion of 2003. And, I would add, it closely resembles the transformations in sovereign control of institutions happening currently in the corporate-managerial take-over of Detroit’s and Puerto Rico’s governance. Promissory Notes explores the case of Puerto Rico to show how debt’s construction of the “Third World” as a negative identity gives rise to material effects of neoliberal debt.
At the same time in the early 1970s, in the wake of successful decolonization struggles and national liberation movements in the 1960s, global economic relations were entering a new phase of capitalist organization. As economist Samir Amin argues, this new phase witnesses “the erosion of three subsystems that formed the basis of postwar [World War II] growth (the national welfare state in the West, the national bourgeois project of Bandung in the Third World, and Sovietism in the Eastern bloc)” (34). In all three of these geopolitical scenes, state power was considerably weakened, particularly in what is generally called its “soft arm,” or its reproductive functions, in favor of its “strong arm,” or military and security functions, including its functions in securing and strengthening the economic base of the political elites through the polarization of national income. This transfer of more of the national wealth toward the wealthy (through cuts to welfare and education, for example, and increases to military technologies, as well as tax policies and the like) resulted in a stagnation of wages across the spectrum and—at least in the West—an explosion of debt as workers made up for their loss of real income by borrowing.
The depletion of state reproductive power in the neoliberal West and in the US “urban crisis” thus paralleled the depletion of state power in the developmental state. As workers in the West borrowed against the losses of their share of the national wealth in the form of decreases to social spending, aid and assistance to social and government projects in formerly colonized states, states of the Global South, or (labor and raw material) supplier states also borrowed, often with strings attached to the loans that demanded even more austerity.5 The emptying out of New York City’s governing power by predatory financial profit seekers coincides with the same sorts of rearrangement of state redistribution in other places, and particularly in the “Third World,” with the end of the development state and the rise of structural adjustment policies (SAPs) designed to manage debt, even at the expense of the population’s economic well-being. Samir Amin enumerates the effects of structural adjustment as “a sharp increase in unemployment, a fall in the remuneration of work, an increase in food dependency, a grave deterioration of the environment, a deterioration in healthcare systems, a fall in admissions to educational institutions, a decline in the productive capacity of many nations, the sabotage of democratic systems, and the continued growth of external debt” (13). These are also structural adjustment’s causes: the apparent expansion of the needs of the population fuels the claim of their exorbitant cost and the necessity of reining in the public spending on their behalf, even when the absence of capital investments or fair division of the profits produced the need for public spending in the first place. Neoliberalism’s culture of debt appropriates increasingly more of the workers’ share of the profits of their production: through debt, financial institutions are, more or less, charging workers for the right to collect their own wages.
Promissory Notes does not set out to blame literature for the financial crisis. It does, however, show literature’s relevance to the political-economic situation that makes sense of debt. In a post-Saussurian, post-Lacanian understanding of the literary text, representation is put under the spotlight not as a worldly reflection but rather as, on the one hand, distanced from the world of social relations that is, on the other, pointing toward the creation of a world of social relations that could be. Marx explains that under capitalism, the product of production—which has in it a part of the life of the worker—is taken away from the producer, and this might be particularly true in neoliberal finance. Literature forces us to be wary of the way representation is removed from the context it affects, how it speaks and who controls that speaking, and how representation divides the sayable from the unsayable as well as the possible from the impossible. While politicians and pundits alike are telling us that the economy is a field that requires expertise to understand, that the only ones smart enough to fix the economic debacle are the same ones who were smart enough to have caused it, literature can play a pedagogical role through its deep, self-reflective analysis of representational abstraction and linguistic play as a technique of power. Literature teaches us, in fact, that representational forms, as sites of struggle (not just expertise), produce the worlds of social relations that they seem to reflect and that those with control over the representational instruments are the ones who get to decide what the future of social relations will be.