Payday Lending: The Loans With 350% Interest and a Grip on America

By David Dayen, Guardian UK

24 March 14

 

While politicians bicker, regulators are taking a closer look at payday lenders – and their shady relationship with big banks

rive down the main streets of the more depressed cities in America, and you probably won’t encounter the logos of Bank of America, Wells Fargo or JPMorgan Chase. Instead, you’ll be bombarded by signs that read more like demands: Instant Loans Here! No Credit Necessary! Payday Advance!

These billboards turn out to be a good way to find customers. People are broke: payday lending and other high-cost, small-dollar loan businesses have grown along with the economic desperation caused by the Great Depression and its aftermath. The economy is rough, joblessness is high, and wages are low. The US banking system doesn’t embrace everyone – the high fees and minimum balances imposed by Chase, Wells Fargo, Bank of America and others mean that someone on minimum wage, or living paycheck-to-paycheck, can’t afford to keep a bank account.

But this creates a problem: the US government believes payday lending is predatory, and it is combing the financial system to find ways to do it; the Department of Justice’s attempts to shut down payday lenders and their access to money have stealthy spy-novel names like Operation Chokepoint. The payday lending industry, surprisingly nimble and sprawling in its scope, keeps outrunning the government. In the middle are working-class Americans – shut out of the bland, comfortable worlds of drive-in bank branches and looking for ways to make ends meet while their salaries fall and expenses rise.

Still, anyone in the middle class, accustomed to the bland comfort of a bank branch on every block, the idea of taking out a payday loan seems baffling, or even repellent.

The long and short of payday lending

qualify for a payday loan, you only need two things: to be too broke to pay your bills, and willing to pay high fees to get money to bridge the gap.

Cash-strapped borrowers go to payday loan shops because they can get money, quickly, without showing their credit score or proving an ability to repay.

“People go into these stores with financial desperation and the loans make it worse,” says Ann Badour, a senior policy analyst with the Texas branch of the Appleseed Network, a public interest legal group.

get the money, you agree to pay the equivalent of interest rates up to 350% on a two-week loan. Borrowers pay a high upfront fee of between $15-$20 for every $100 they need, and agree to pay the balance within two weeks – which is usually the next payday.

One payday loan won’t kill you, but getting behind on your bills tends to be a chronic condition. Most borrowers use payday loans for basic needs, and the more they borrow, the deeper they go into the hole. Invariably their balance gets rolled over into a new loan, with each additional round inflicting more and more fees.

“The business model is to identify customers and lend to them as much as possible,” said

m Feltner, director of financial services at the Consumer Federation of America.

It’s designed to be a cycle: two-thirds of the Americans who signed up for a payday loan took out seven or more loans per year, according to a study by the Consumer Financial Protection Bureau. In most cases, the new loans are made the same day as the previous loans are closed.

Nor is payday lending a small niche. It’s sweeping America’s working class. Over 12 million Americans use payday lenders each year, taking out almost $30bn in loans in 2010, according to The Pew Charitable Trusts. That’s three times as many Americans who took out payday loans in 2000.

Payday lenders increasingly force their customers to give them automatic access to their bank accounts to ensure payment. When the borrower renews the loan, the fees come out automatically. This is precisely what makes payday lending so profitable: the guaranteed ability to collect fees. And by the time borrowers get off this debt treadmill, they’ll have paid much more in fees than their initial loan balance.

Reining in a predatory practice

Despite renewed regulatory efforts at the state and federal level to protect consumers, the battle to contain payday lending sometimes looks like an endless race that regulators can never win. When regulators ban one aspect of the short-term loans, another crops up.

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Regulators have been busy. Fourteen states have banned the core aspect of payday loans – the “balloon payment” that requires borrowers to pay the entire balance at once when the loan comes due. Other states have capped interest rates at a certain annual percentage, which would make payday lending unprofitable. Other states have targeted how often consumers can take out payday loans. Washington state limits payday loans to five per year, and Illinois mandates that customers in debt for 45 consecutive days must get a one-week break. These state-led efforts are ongoing.But they have to catch up to changing trends in the industry. For example, payday lenders have recently shifted into larger installment loans, which get paid back in increments over time. While this should lead to more completed loans, “the end result for the borrower is no better,” says Baddour. Customers inevitably get trapped into the same cycle of continual refinancing, with installment lenders pressuring customers to roll over loans and buy unnecessary insurance products that can double the effective interest rate.

But because the loans are different, they throw regulators off the trail long enough for companies to profit without interference. “In states like Illinois who put on restrictions, you see a dramatic shift to installment loans,” said

m Feltner of the Consumer Federation of America. “It’s made us have to broaden what we would consider to be a regulatory response.”

The forever loan

The internet, with its crannies and shadowy alleyways, provides another place where payday lenders can hide from the law. Online payday lenders say they have the right to lend in states where payday lending has been banned or interest rates have been capped, because the physical site of the lender is outside the state; many of them are even on tribal lands outside of US territory.

The online payday loan is a dangerous thing. A borrower can sign up online to get his initial loan deposited into his bank account. The loan gets rolled over automatically, repeated into perpetuity – unless the borrower has the presence of mind earlier to go through a complicated, burdensome process to contact the lender directly. The fees get deducted directly from the borrowers’ bank accounts, even though federal law allows account holders to stop such automatic transactions.

Wall Street and payday lending

While payday lending is typically regulated at the state level, the Consumer Financial Protection Bureau now has the ability to supervise the industry. But unlike the states, CFPB is prohibited from capping fees or interest rates, and the agency runs into the same problems of regulating one product and watching payday lenders switch to offering another.

So the newest effort at regulatory enforcement takes aim not at payday lenders, but the Wall Street banks that assist them. Wall Street banks have provided $5.5bn in credit to the payday lending industry over the past several years, according to a recent report from the advocacy group Reinvestment Partners. Many current or former executives from banks like Morgan Stanley, Credit Suisse and Bank of America serve on the corporate boards of the biggest payday lenders.

It becomes a symbiotic relationship. Most big banks long ago fled impoverished neighborhoods: 93% of bank closures since 2008 were in zip codes where the median income sits below the national average.

Payday lenders thrive in communities with the fewest banks, according to a study from the Milken Institute. They like having low-income communities to themselves. The banks, having abandoned that turf, profit indirectly by funding the payday lending industry.

The pipes of payday lending

But where banks really offer a lifeline to payday lenders is by controlling the way the lenders process payments. Banks process the payday lenders’ fees through the Automatic Clearing House, or ACH, the national system for verifying and clearing financial payments. The banks work through intermediaries called third-party payment processors; that means the banks and the payday lenders never technically touch each other. That comes in handy for the banks, who are largely already finding it difficult to cope with the cost of reporting suspicious activity in any financial transactions they’re involved in, under anti-fraud and money laundering laws.

The idea that banks and payday lenders are separate is, some say, a polite fiction. Only banks can give these businesses the access to the payments system that allows the whole scheme to work. The end result is that payday lenders can access customer accounts whenever they choose, and in exchange, the banks pocket handsome fees from a business that’s considered dodgy.

The cases are already piling up. In January, Four Oaks Bank in North Carolina paid $1m in fines to settle Justice Department claims that they gave direct access to a third-party payment processor to process dubious payments for online payday lenders. In exchange for $800,000 in fees, Four Oaks was “knowingly providing banking services in furtherance of unlawful conduct”, according to the complaint.

The Justice Department found that Four Oaks facilitated loans to people in states like Colorado and Georgia, which have prohibited payday lending.

Internal documents show the bank ignored multiple widespread warning signs of fraudulent activity, such as protests by individual customers contesting unauthorized withdrawals from their accounts. The settlement was part of a broader Justice Department initiative called “Operation Choke Point”, designed to penalize banks for failing to perform oversight of this sketchy lending. Over 50 subpoenas have been issued to banks and payment processors in the investigation.

Now add a dash of Congress

This has touched off a partisan food fight. House Republicans recently charged in a letter to the Justice Department that Operation Choke Point signified an effort to “inappropriately target two lawful financial services: third-party payment processing and online lending”, with an “indiscriminate dragnet that is wholly decoupled from any concrete suspicion of fraud”.

Congressional Democrats answered with their own letter in defense of Operation Choke Point, arguing that banks have a responsibility to report fraudulent activity occurring in the parts of the payment system they control. “We urge the department to continue its vigorous oversight,” the letter says.

So far, the Justice Department’s inquiry continues.

How to protect the consumer

Consumer advocates see the crackdown on banks as a good sign for consumers.

The Office of the Comptroller of the Currency, or OCC, which regulates most national banks, delivered guidance on banks’ own versions of payday loans, known as “deposit advance” loans.

The OCC argued that these emergency lines of credit for bank customers must be affordable and take into consideration the borrower’s ability to repay. As a result, three of the largest banks offering deposit advance loans dropped the product.“The dissolution of bank payday product is an excellent opportunity,” said Adam Rust of Reinvestment Partners, who authored the report detailing links between payday lenders and Wall Street banks. “Now there’s this window to act.”

Increased awareness can also play a role: after Reinvestment Partners released their report, Bank of America announced they would stop funding the payday loan industry.Recently, some policymakers have floated another option to drive out payday lending: competition.

The Inspector General of the US Postal Service recently authored a white paper suggesting that they could offer small-dollar loans at a dramatic discount, with rates as low as 28%, a relative bargain for low-income people lacking access to credit. Many post offices internationally provide similar services, and here in America, millions use the Postal Service for money orders each year. And over half of all post office branches are in “bank deserts”, – zip codes containing one bank branch or less.Consumer advocates are naturally wary of a government agency profiting from low-income communities. But if they can deliver a product that would save the working poor thousands of dollars a year in interest and fees, Baddour of Texas Appleseed thinks it could work.

“The most expensive part of the industry they already have in their pocket, a vast network of locations,” Baddour says, citing the 35,000 storefronts, including in rural locations. “It’s an intriguing idea that deserves serious consideration.”

The biggest problem with payday lenders is their ability to grow and spread their branches, blocking out light from other and better options.

“When you have a market dominated with these products, the better options are harder to find, harder to see,” says Baddour.

How Waco Went Wrong

By Malcolm Gladwell, The New Yorker

24 March 14

 

hen Clive Doyle was a teen-ager, in the nineteen-fifties, he and his mother met an itinerant preacher outside their church, in Melbourne, Australia. He was a big, gruff Scotsman named Daniel Smith. The Doyles were devout Seventh-Day Adventists. But Smith was the follower of a self-proclaimed prophet named Victor Houteff, who became an Adventist just after the First World War and parted ways with the Church a decade later. The Doyles listened to Smith’s account of the Houteff teachings until the small hours of the morning and were impressed. “We were taught that if someone comes with a message based on the Bible, instead of trying to fight it, instead of trying to put it down or trying to prove it wrong, we should study the Bible to perceive whether the message is true,” Doyle writes in his autobiography. “Study to see if it’s so.”

The Houteff group held that those in the mainstream Seventh-Day Adventist Church had lost their sense of urgency regarding the Second Coming and would soon face the judgment of God. To the Doyles, however, this presented a problem: where did it leave Seventh-Day Adventists who hadn’t heard the Houteff message? The Doyles knew, for example, that no one had taken the Houteff teachings to Tasmania, off Australia’s south coast. So, in 1958, Doyle quit his job as an apprentice in a cabinet shop, and he and his mother took the overnight boat to Tasmania, where they spent a month trudging around the back roads of the island, going from one Seventh-Day Adventist church to the next. “My mother had borrowed the biggest suitcase she could find,” he writes. “We had packed it full of books because we thought: They’re going to want to know what we believe, so we’ll give Bible studies . . . and we’ll use the Bible to prove our points. I was just a teenager lugging this huge suitcase all over the island. It weighed a ton.”

The Doyles were neither wealthy nor well educated. Clive Doyle’s mother worked in a garment factory. His father had left before he was born. Doyle once came home from Sunday school and solemnly greeted his mother with: “You’ve shaken hands with a servant of the Lord.” He writes, “I was two or three years behind everybody. I was never in the ‘in’ crowd in school.” He and his mother were religiously committed, and indifferent to what others thought of them. Matters of religious doctrine, in their view, required action and commitment. In Tasmania, Doyle was looking for people who wanted to “actually get down to the nitty-gritty” and study the Scriptures with him. That search would end up consuming Doyle’s life, leading him clear across the world to a religious retreat founded by Houteff, just outside Waco, Texas. The group that Doyle joined was called the Branch Davidians. Their retreat was called Mount Carmel, and the most famous of its leaders was a young man named David Koresh.

“A Journey to Waco,” Doyle’s memoir, is an account of what it means to be a religious radical—to worship on the fringes of contemporary Christianity. Doyle takes the story from his childhood in Australia through the extraordinary events of 1993, when some eighty armed agents of the Bureau of Alcohol, Tobacco, and Firearms raided the Mount Carmel community, in an effort to serve a search and arrest warrant on Koresh, on suspicion of violating federal firearms rules. “I want you all to go back to your rooms and stay calm,” Doyle recalls Koresh saying, as federal agents descended on Mount Carmel. Doyle goes on, “I could hear David’s steps going down the hall toward the front door. . . . Then all of a sudden I heard David say: ‘Hey, wait a minute! There are women and children in here!’ Then all hell broke loose—just a barrage of shots from outside coming in. It sounded like a bloodbath.”

In the resulting gun battle, four A.T.F. agents and six Davidians were killed. The F.B.I. was called in. The Davidian property was surrounded. An army of trained negotiators were flown to the scene, and for the next fifty-one days the two sides talked day and night—arguing, lecturing, bargaining—with the highlights of their conversations repeated at press conferences and broadcasts around the world. The Waco standoff was one of the most public conversations in the history of American law enforcement, and the question Doyle poses in his memoir, with genuine puzzlement, is how a religious community could go to such lengths to explain itself to such little effect.

“If people read this account, they will at least gain a different perspective on who David Koresh was, where he was coming from, who we were, and why we believe the way we do,” he begins. “Most people think ‘cult’ about us and think we are people who were brainwashed and deceived. They think our church members don’t know what they’re doing or where they’re going. Hopefully, my story can open their eyes.”

The Branch Davidians belonged to the religious tradition that sees Christ’s return to earth and the establishment of a divine Kingdom as imminent. They were millennialists. Millennial movements believe that within the pages of the Bible are specific clues about when and how the Second Coming will arrive. They also rely on what the Biblical scholar James Tabor calls “inspired interpreters,” prophets equipped with the divine insight to interpret those clues and prepare their followers to be among God’s chosen. Mormonism began, in the nineteenth century, as a millennial movement; its “inspired interpreter” was Joseph Smith. Jehovah’s Witnesses began as a millennial movement, as did the Pentecostal Church.

Of all mainstream contemporary American churches, though, the Seventh-Day Adventists have the strongest millennial tradition. The Church—which has around eighteen million adherents worldwide—was formed by followers of the early-nineteenth-century evangelist William Miller, who prophesied that the world would end in 1843. During the next century, the Adventist community produced one “inspired interpreter” after another. Ellen G. White laid down the foundations of the Church in the eighteen-sixties. Victor Houteff broke away to start the Davidian movement at Mount Carmel, and after he died, in 1955, the movement splintered again, creating the Branch Davidians, headed by Ben and then Lois Roden. Doyle came to Mount Carmel during the Roden era and stayed with the group as it underwent its final iteration, under the leadership of David Koresh.

David Koresh was born in Houston in 1959, to a fifteen-year-old single mother. He arrived at Mount Carmel at the age of twenty-two, pulling up to the retreat in a yellow Buick—another in the long line of disenchanted Seventh-Day Adventists in search of a purer church. Koresh was not slick or charismatic, in the conventional sense. He was thin, with long wavy dark hair and a gentle manner. He was good with engines and guns, and he played in a rock band. His formal education was limited. His vocabulary was full of words of his own invention. He wore dirty jeans, T-shirts, and sneakers, and, after study sessions, would gather some of the other young men and head into Waco, as another survivor’s memoir, by David Thibodeau and Leon Whiteson put it, to “kick back, swallow some suds, play some tunes.”

When it came to the Bible, however, he was without peer. Doyle had heard Koresh’s predecessor, Lois Roden, speak and had “wrestled” with her message. But, the first few times he heard Koresh speak, he was convinced that “this was of God.” Koresh, he writes, “made scripture come alive. He showed that all of the prophets in the Bible were writing more for our day than for their own time.” Koresh would speak of obscure Old Testament kings like Ahaz and Hezekiah as if they were household names. He didn’t preach. He threw out theories and ideas—inviting argument and discussion.

To the Branch Davidians, who walked and talked and dreamed about the Bible, this was intoxicating. “We thought of Mt. Carmel as a training ground and haven,” Doyle writes. By the early nineteen-nineties, the community consisted of about a hundred and fifty people—many of them sleeping in spartan dormitories. Doyle continues, “A lot of them came with their heads in the clouds or with cameras, thinking they were tourists, if it was their first time. David straightened them out pretty quick.” Koresh told them, “You should come here to learn, that’s why you came. If you want to do those other things, you might as well leave now and go have your fun. . . . But if you are here to study, you need to get your priorities straight.” There were Bible studies at night, and smaller group studies during the day. As another Branch Davidian put it, “Lots of times, maybe he would say, ‘I am tired of giving Bible studies to you guys. I wish you would learn Bible studies.’ So everybody would hang around. And he’d say, ‘What is it that you want? More Bible study?’ And everyone would run and get their Bibles and come down. We might sit there for fifteen, nineteen hours, ten hours, six hours. It would depend, it was never a bore.”

Koresh’s focus, like that of many millennialists, was the Book of Revelation—in particular, the difficult passages concerning the Seven Seals. There God is described as holding a scroll, locked by seven seals, on which is written prophecies about the end of time. “Who is worthy to open the book, and to loose the seals thereof?” the passage asks. The answer given is “the Lamb.” But who was the Lamb? The question was a crucial one for the Branch Davidians, because they believed that whoever unlocked the seals and revealed the secrets written on those scrolls would set in motion the end of time. In “Armageddon in Waco,” a book of essays about the Davidian conflict, James Tabor writes:

In Isaiah 48:14 we read, “The LORD has loved him: he will do his pleasure on Babylon, and his arm shall be on the Chaldeans.” Koresh would ask, who is the “him,” here, who is the “arm of Yahweh,” who is to destroy Babylon? The text goes on to say, “I, even I, have spoken, yea, I have called him: I have brought him, and he shall make his way prosperous . . . and now the Lord GOD, and his Spirit hath sent me.” Psalm 80:17 states “Let thy hand be upon the man of thy right hand, upon the son of man whom thou madest strong for thyself.” Who is this man of God’s right hand?, Koresh would ask. He would painstakingly take his followers through these and other related sections of Scripture, repeatedly asserting that this mysterious figure could not have been Jesus of Nazareth, who fulfilled none of these prophecies.

Koresh’s answer to the puzzle was simple: he was the Lamb. That’s why he was so good at making sense of the Seven Seals. This exalted station was how he justified his most controversial practice—taking numerous “spiritual wives” from among the daughters and wives of his followers. At least a couple of these “wives” were reportedly as young as twelve and thirteen, in a state where the legal age of marriage with parental consent was fourteen. Psalm 45 speaks of a great king, anointed by God, who marries many princesses and creates a mighty dynasty that will one day command the world, and Koresh argued that his “spiritual wives” had been taken in fulfillment of that prophecy.

Koresh’s status as “the Lamb” also explains the nature of the Branch Davidians’ relationship to him. The F.B.I., to justify its decision to bring about a sudden and violent end to the siege, believed that the Branch Davidians were dangerously in the thrall of Koresh; it feared a catastrophic act like the mass suicide, in 1978, in Guyana, of the cult leader Jim Jones and his followers in the People’s Temple. But the Davidians weren’t like the People’s Temple. Doyle’s memoir emerged from an oral-history project conducted by the religious-studies scholar Catherine Wessinger, who maintains that the People’s Temple was an example of the “fragile” subset of millennial groups: defensive and unstable, and willing to initiate great violence in response to an outside threat.

The Branch Davidians, however, were far from fragile. They engaged freely and happily with the world around them. Doyle went to California periodically to work for an audiotape-dubbing company and make money. Other Davidians started small businesses around Waco. Wayne Martin, a prominent member of the community, was a Harvard Law School graduate with a legal practice in town.

They did not worship Koresh, the way you would a deity. He was just the latest of many teachers, in a religious tradition that dated back half a century. “I’m just a messenger of the truth,” Koresh would say. “I’m like a Dixie cup that God will crumple up and throw away when he’s done with it.” Or, as his deputy, Steve Schneider, put it, “All of these places talk about a man in the last days that’s a sinner. He can do one thing, open up the words of the book, open up the Seven Seals. Can’t do any miracles, doesn’t raise the dead, heal the sick, isn’t a psychic but . . . if people have questions about life and death, eternal life, no matter what the question is, he will show it in context from the book.”

There is a telling moment during the siege when Schneider is talking to an F.B.I. negotiator about an undercover A.T.F. agent who used the name Robert Gonzalez. The A.T.F. believed that the Branch Davidians—who ran a small business selling weapons at gun shows—had converted a batch of firearms from semiautomatic to automatic without the proper permits. Gonzalez’s job was to infiltrate the Davidian community and look for evidence. (He found none, a fact that—along with the A.T.F.’s bizarre decision to serve a warrant on Koresh by force, rather than arresting him on those numerous occasions when he ventured into town—loomed large in the many Waco postmortems.) Here is Schneider and a negotiator talking about what happened after the Davidians realized that Gonzalez was not who he said he was:

F.B.I.: Why didn’t you have a confrontation [with Gonzalez] and say look, l just . . . don’t appreciate you being here?

SCHNEIDER: Well . . . because here’s a possible guy, here’s a soul maybe, here’s someone like myself—

F.B.I.: Yeah. But he wasn’t there to have his soul saved, right?

SCHNEIDER: Well, who knows, though? You never can tell.

F.B.I.: Wait a minute. I know . . . I worked under cover years and years ago and I wasn’t there to have somebody save my soul.

The F.B.I. agent expected that the Davidians, like a fragile cult, would turn paranoid and defensive in the presence of a threat. He didn’t grasp that he was dealing with a very different kind of group—the sort whose idea of a good evening’s fun was a six-hour Bible study wrestling with a tricky passage of Revelation. It was a crucial misunderstanding, and would feed directly into the tragedy that was to come. The agent continued: Did the Branch Davidians realize that Gonzalez, as a government investigator trained to uncover criminal evidence, was an unlikely prospect for conversion?

SCHNEIDER: I realize that. . . . [But], still, we love people so much, you give them the opportunity. . . . Even if it’s one out of a million, even if it’s that, whatever it might be, he’s still a person that was made, created by an authority above himself and we loved the guy. I mean . . . we spent enough time with him where we really do appreciate the man’s character and personality.

At one point during the siege, Koresh made a home video. He is sitting down, wearing a white tank top. He was wounded in the raid and looks worse for wear—thin and unkempt. Next to him is a young woman. On both their laps are small children, and Koresh announces that he wants to introduce the world to his family: “These children that I have are for a reason, and unless we really have the ear and the eyes to open ourselves up and understand the prophecies in a lot of the Seven Seals the explanation would seem almost foolish.”

A young boy with long blond hair comes into the frame. Koresh introduces him as Cyrus. He waves at the camera. Then a young girl climbs onto Koresh’s lap, followed by a boy named Bobby and a girl named Holly—and then, one after another, come a parade of toddlers and babies, accompanied by two other young women, one of whom looks no older than sixteen.

“This is my family, and no one is going to come in on top of my family and start pushing my family around. It is not going to happen,” Koresh declares. He puts on a pair of aviator sunglasses. “You come pointing guns in the direction of my wives and my kids, damn it. I’m going to meet you at the door every time.”

Doyle says very little about Koresh’s sexual practices in “A Journey to Waco,” even though his own daughter, Shari, became one of Koresh’s spiritual wives at the age of fourteen. In other memoirs of Davidian survivors, the issue is treated with similar reticence. But Koresh’s behavior seems to have been controversial even within Mount Carmel. It was discussed at length during Bible study. Some people left the Church over it. In a separate interview, Doyle recalled that, at first, “I wondered, I asked, is this God or is this horny old David?” But, in the end, he and the other Branch Davidians who stayed accepted the logic of it: if Koresh was indeed the Lamb, then it followed that he was entitled to the privileges promised to the Lamb in prophecy. It seems not to have mattered that this conclusion was at odds with virtually every social convention of modern life. No one became a Branch Davidian if he required the comfort of religious orthodoxy. One of Koresh’s predecessors, George Roden, had multiple wives as well, arguing his case in an essay on the Mosaic law of polygamy. Roden’s mother, Lois, had advanced an innovative argument that the Holy Spirit was feminine. From the movement’s beginnings, the point of being a Davidian was to be different.

The second, more serious problem with the way the F.B.I. viewed the Branch Davidians was the fact that the agents could not accept that beliefs such as these—as eccentric as they were—were matters of principle for those within Mount Carmel. During the siege, two of the leaders of the F.B.I. team referred to Koresh’s theology as “Bible-babble” and called him a “self-centered liar,” “coward,” “phony messiah,” “child molester,” “con-man,” “cheap thug who interprets the Bible through the barrel of a gun,” “delusional,” “egotistical,” and “fanatic.” For another essay, published in “Armageddon in Waco,” the religious scholar Nancy Ammerman interviewed many of the F.B.I. hostage negotiators involved, and she says that nearly all of them dismissed the religious beliefs of the Davidians: “For these men, David Koresh was a sociopath, and his followers were hostages. Religion was a convenient cover for Koresh’s desire to control his followers and monopolize all the rewards for himself.”

In the government’s eyes, the Branch Davidians were a threat. The bureau trained spotlights on the property and set up giant speakers that blasted noise day and night—the sound of “rabbits being killed, warped-up music, Nancy Sinatra singing ‘These Boots Are Made for Walking,’ Tibetan monks chanting, Christmas carols, telephones ringing, reveille.” Doyle writes, “I got to where I was only getting about an hour or two of sleep every twenty-four hours.”

Outside the Mount Carmel complex, the F.B.I. assembled what has been called probably the largest military force ever gathered against a civilian suspect in American history: ten Bradley tanks, two Abrams tanks, four combat-engineering vehicles, six hundred and sixty-eight agents in addition to six U.S. Customs officers, fifteen U.S. Army personnel, thirteen members of the Texas National Guard, thirty-one Texas Rangers, a hundred and thirty-one officers from the Texas Department of Public Safety, seventeen from the McLennan County sheriff’s office, and eighteen Waco police, for a total of eight hundred and ninety-nine people. Their task, as they saw it, was to peel away the pretense—Koresh’s posturing, his lies, his grandiosity—and compel him to take specific steps toward a resolution.

That is standard negotiation practice, which is based on the idea that, through sufficient patience and reason, a deranged husband or a cornered bank robber can be moved from emotionality to rationality. Negotiation is an exercise in pragmatism—in bargaining over a series of concrete objectives: If you give up one of your weapons, I will bring you water. When this approach failed, the F.B.I. threw up its hands. In bureau parlance, the situation at Mount Carmel became “non-negotiable.” What more could the bureau have done? “I guess we could have fenced it off and called it a federal prison,” Bob Ricks, one of the lead F.B.I. agents during the siege, said last year in an interview

But, as the conflict-studies scholar Jayne Docherty argues, the F.B.I.’s approach was doomed from the outset. In “Learning Lessons from Waco”—one of the very best of the Mount Carmel retrospectives—Docherty points out that the techniques that work on bank robbers don’t work on committed believers. There was no pragmatism hidden below a layer of posturing, lies, and grandiosity. Docherty uses Max Weber’s typology to describe the Davidians. They were “value-rational”—that is to say, their rationality was organized around values, not goals. A value-rational person would accept his fourteen-year-old daughter’s polygamous marriage, if he was convinced that it was in fulfillment of Biblical prophecy. Because the F.B.I. could not take the faith of the Branch Davidians seriously, it had no meaningful way to communicate with them:

F.B.I.: What I’m saying is that if you could make an agreement with your people that they’re walking out of there and you could—

KORESH: I am not going to tell them what to do. I never have and never will. I show them out of a book what God teaches. Then it’s for them to decide.

F.B.I.: David, these kids need their parents, and we want everybody to be safe. How about the women? Can—will you let them come out of there? . . .

KORESH: Yeah, but the thing of it is that if they wanted to, they, they could.

F.B.I.: Well, I, I think they feel like they can’t because you don’t want them to.

KORESH: No, no, no, no. Let’s stop that now.

To the F.B.I. agent, Mount Carmel was a hostage situation, and the purpose of the “negotiation” was to get the man behind the barricade to release some of his captives. But Koresh saw his followers as his students. They were there of their own free will, to learn the prophecies of Revelation. How could he release people whom he was not holding in the first place?

On another occasion, the Davidians asked the F.B.I. to bring milk for their children, and the bureau insisted that some of the children be released before the supplies were handed over:

F.B.I.: We got the milk for you . . . we’ll bring the milk down. We’ll drop it off. . . . In return, we want four of your kids to come up, and we’re going to give you the milk for the kids.

This is how negotiations are supposed to work: tit for tat. But what proposal could have been more offensive and perplexing to a Branch Davidian? The bureau wanted to separate children from their parents and extract them from the community to which they belonged in exchange for milk. “That doesn’t make any sense,” a Davidian named Kathy S. tells the negotiator. But the negotiator thinks she means that the terms of the deal aren’t good enough:

F.B.I.: Listen. I’ll, I’ll get the milk to you for two kids.

Again, Kathy S. reacts angrily, and the negotiator gives up. He thinks the problem is that he’s saddled with someone who just isn’t reasonable:

F.B.I.: Kathy, perhaps we’re wasting each other’s time. All right? Put somebody else on.

K.S.: I mean, all you want, all you want to do is bargain?

F.B.I.: Kathy!

K.S.: Are you going to bargain with human lives?

F.B.I.: Kathy! I’ve told you what we’ll do and, and if that’s not agreeable to you, perhaps we’re wasting one another’s time. All right? . . . Why don’t you put somebody else on, please?

K.S.: Look . . . there are babies here that need the milk. Are you that inhumane that you can’t just send us the milk for not sending out kids, or sending out David, or sending out women?

F.B.I.: Our concern, our concern is for those children first and foremost and the rest of you also. All right? The children—

K.S.: So, your concern is that these babies get fed the milk they need?

F.B.I.: Kathy.

K.S.: It doesn’t sound like you are concerned.

Even at the beginning of the siege, in the first call that Koresh made after the A.T.F. attack, the fundamental misunderstanding between those inside and those outside Mount Carmel was plain. Koresh telephoned Larry Lynch, in the local sheriff’s office, and—while the battle outside raged—insisted on talking about the Seven Seals:

KORESH: In the prophecies—

LYNCH: All right.

KORESH: it says—

LYNCH: Let me, can I interrupt you for a minute?

KORESH: Sure.

LYNCH: All right, we can talk theology. But right now—

What Lynch means is that right now there are dead and wounded bodies scattered across the Mount Carmel property and a gunfight is going on between federal agents and Koresh’s followers. For those who don’t take the Bible seriously, talking about Scripture when there is a battle going on seems like an evasion. For those who do, however, it makes perfect sense:

KORESH: No, this is life. This is life and death!

LYNCH: Okay.

KORESH: Theology—

LYNCH: That’s what I’m talking about.

KORESH: is life and death.

It is useful to compare the Branch Davidians with the Mormons of the mid-nineteenth century. The Mormons were vilified in those years in large part because Joseph Smith believed in polygamy. But the Cornell historian R. Laurence Moore, in his classic book “Religious Outsiders and the Making of Americans,” points out that the moral hysteria over the Mormons was misplaced. The Mormons were quintessential Americans. “Like the Puritans before them, the Mormons linked disciplined labor with religious duty,” Moore writes. “Mormon culture promoted all the virtues usually associated with the formation of middle-class consciousness—thrift, the denial of immediate gratification, and strict control over one’s passions.” Polygamy, the practice that so excited popular passions, was of little importance to the Church: “First, the vast majority of nineteenth century Mormons did not practice polygamy, and many of them found it distasteful, at least as a way of conducting their own lives. Second, those who did practice plural marriage scarcely exhibited the lascivious behavior made familiar in anti-Mormon literature. Plural wives were commonly the widowed or unmarried sisters of the original wife.”

So why were nineteenth-century Americans so upset with the Mormons? Moore’s answer is that Americans thought the Mormons were different from them because the Mormons themselves “said they were different and because their claims, frequently advanced in the most obnoxious way possible, prompted others to agree and to treat them as such.” In order to give his followers a sense of identity and resilience, Joseph Smith “required them to maintain certain fictions of cultural apartness.” Moore describes this as a very American pattern. Countless religious innovators over the years have played the game of establishing an identity for themselves by accentuating their otherness. Koresh faced the same problem, and he, too, made his claims, at least in the eyes of the outside world, “in the most obnoxious way possible.”

The risks of such a strategy are obvious. Mainstream American society finds it easiest to be tolerant when the outsider chooses to minimize the differences that separate him from the majority. The country club opens its doors to Jews. The university welcomes African-Americans. Heterosexuals extend the privilege of marriage to the gay community. Whenever these liberal feats are accomplished, we congratulate ourselves. But it is not exactly a major moral accomplishment for Waspy golfers to accept Jews who have decided that they, too, wish to play golf. It is a much harder form of tolerance to accept an outsider group that chooses to maximize its differences from the broader culture. And the lesson of Clive Doyle’s memoir—and the battle of Mount Carmel—is that Americans aren’t very good at respecting the freedom of others to be so obnoxiously different. Many Mormons, incidentally, would say the same thing. When the Mormons settled in Nauvoo, Illinois, local public opinion turned against them. Joseph Smith was charged with perjury and adultery, then arrested for inciting a riot. While he was in custody awaiting trial, in 1844, an armed mob stormed the prison and shot him dead.

Not long after the Waco siege began, James Tabor, the Biblical scholar, heard David Koresh on CNN talking about the Seven Seals. Tabor is an expert on Biblical apocalypticism and recognized the Branch Davidians for what they were—a community immersed in the world of the Old Testament prophets. He contacted a fellow religious scholar, Phillip Arnold, and together they went to the F.B.I. “It became clear to me that neither the officials in charge nor the media who were sensationally reporting the sexual escapades of David Koresh had a clue about the biblical world which this group inhabited,” Tabor writes, in an essay about his role in the Mount Carmel conflict. “I realized that in order to deal with David Koresh, and to have any chance for a peaceful resolution of the Waco situation, one would have to understand and make use of these biblical texts.”

Arnold and Tabor began long discussions with Livingstone Fagan, a Branch Davidian who had been sent out of Mount Carmel early in the siege to act as a spokesman. Fagan was a Jamaican-born Brit, and one of the community’s scholars—a man known for greeting others with the very English “Hello, Livingstone Fagan here. Shall we study?” Fagan helped Tabor and Arnold understand that Mount Carmel’s adherents thought they were living through the “fifth seal”—a late stage in the end of time, during which believers are asked to suffer through a round of bloodshed, to “wait a little season,” and then to suffer a second round.

This was why the Davidians wouldn’t leave. They had been through the first round of violence, with the initial A.T.F. raid. Now they were doing as they believed the Bible compelled them to do—waiting. “We were fascinated by the way in which the literal words of this text dominated the entire situation,” Tabor writes. But they also saw the peril ahead—the promised second round of bloodshed. “Might they not provoke a violent end to things simply because they felt it was the predetermined will of God, moving things along to the sixth seal, which was the great Judgment Day of God?” Tabor asks.

Koresh needed another way to make sense of the prophecies in the Book of Revelation, so that a violent end was not preordained. Tabor and Arnold made a tape—a long, technical discussion of an alternative reading of Revelation—aired it on the radio, and sent it to Koresh. Koresh listened and was persuaded. He had been called a liar, a child molester, a con man, and a phony messiah. He had been invited to treat his children like bargaining chips and his followers like hostages. But now someone was taking his beliefs seriously. “I am presently being permitted to document in structured form the decoded messages of the seven seals,” he wrote back. “Upon the completion of this task, I will be freed of my waiting period. . . . As soon as I can see that people like Jim Tabor and Phil Arnold have a copy, I will come out and then you can do your thing with this beast.”

Inside Mount Carmel, Doyle writes, there was rejoicing. Soon they would all come out together, and the ordeal would be over. The F.B.I., however, remained skeptical. “Then what’s next?” one of the agents in charge allegedly said. “He’s going to write his memoirs?” The negotiators quizzed Koresh, again and again:

F.B.I.: Now listen. Let’s get back to the point in hand. This ah—you know—the writing of the seals. Ok. You’ve got to do that in there, and its gonna take you x amount of time. But—just tell me this, David—are you saying that when you finish that manuscript—

KORESH: Then I’m not bound any longer.

F.B.I.: No. But see, that doesn’t answer the question.

KORESH: Then I’ll be out—yes—definitely.

F.B.I.: I know you’ll be out. But that could mean a lot of things, David.

KORESH: I’ll be in custody in the jailhouse.

The negotiator doesn’t believe him. The conversation goes on—and on:

F.B.I.: I know—I know that some point in time that’s true. But I’m getting from you—I’m asking you, “When that is finished, are you telling me that you are coming out the next day, or two hours after you send that out or what?”

That conversation took place on Friday, April 16th. Doyle says that he thinks Koresh would have finished the manuscript within two weeks. The F.B.I. waited three days. By the morning of April 19th, the Feds had had enough. The F.B.I.’s tanks rumbled up to the Mount Carmel buildings, and punched holes in the walls with their mechanical arms. Some four hundred cannisters of CS gas—which can be flammable under certain conditions—were shot into enclosed spaces lit by candles and Coleman lanterns. Walls were rammed, sending huge chunks of concrete crashing down on those huddled inside. Doyle says that he crouched on the chapel floor, between the pews, trying to escape the tear gas. Someone yelled that a fire had started. He and a group of nine or ten people had been clustered in a passage at the back of the chapel when, suddenly, he says, everything turned black. He was hit by a wave of unbearable heat, and fell to the floor. He prayed to God for a miracle. He saw a hole in the wall, and crawled toward it.

Outside, the F.B.I. agents manning the loudspeaker system were chanting: “David, you have had your fifteen minutes of fame. [Koresh] is finished. He is no longer the Messiah.” Doyle continues, “I looked at myself. My jacket was melting all over me and smoking. The skin was rolling off my hands. It was not blistering, it was just rolling off. I turned around and looked at the hole, and it was a big mass of flames. The thought that went through my head was: No one is coming out of there now.”

In the fire, Koresh and seventy-three others perished, including twenty-five children. Doyle writes:

I came out the little driveway on the side of the building and got onto the main driveway that ran along the front of the building. As I turned the corner . . . one of the agents outside a tank started screaming at me to come over to him. My left ankle was all blistered, the skin was rolling off my hands, and my face was burned down the right side of my neck where the mask had been. I guess I took the mask off after I got out. It was kind of melting onto my face. . . . He was cussing me out, telling me if I made a false move he was going to blow my so-and-so head off. But he said: you’re gonna remember this day for the rest of your life. I thought: at least that is a true statement.