Friday, December 9, 2011

Make Banks Re-Lend Subsidy Billions To The 99%

By Mark Hertsgaard, cross-posted from his blog

[Tuesday], the Occupy movement began occupying foreclosed homes to save fellow members of the 99 percent from economic ruin, not to mention homelessness–good for them. But it’s important to add that many of the millions of pending foreclosures in the United States could have been prevented–and still could be–if the federal government so orders. In fact, such a move would be one of the strongest steps the Obama administration could take to reduce human suffering and revive the economy.

When Washington pumped billions of dollars into the nation’s banks in 2008 and 2009, there was good reason to do so: It kept the US and arguably the global financial system from outright crashing, which would have brought even greater human and economic suffering than was experienced otherwise. But federal officials made an inexcusable error: they didn’t impose any conditions on the huge public subsidies that were provided to private banks.

Specifically, Washington could have made banks use the bailout money to modify the mortgages of people who were having trouble paying. This would have been fair–the banks had tricked many people into signing misleading mortgages in the first place–and it also would have been economically stimulative: it would have buoyed the housing market and boosted overall demand and therefore hiring.

President Obama has never publicly explained why he chose not to attach such conditions to the massive amounts of public money used to bail out the banks (but I’d bet that advice from Tim Geitner and Larry Summers played a big role). Now that Obama’s out running for re-election, he should be asked about this repeatedly on the campaign trail, by citizens as well as reporters, and urged to do better.

Because it’s not too late to do the right thing. As former New York governor and attorney general Elliot Spitzer explained recently in Slate, requiring banks to re-loan the billions in subsidy money they received to homeowners struggling with mortgage payments is a key step toward righting our economy and restoring justice for the 99 percent.
Why not combine the Occupy movement’s feet-on-the-street activism with Spitzer’s policy advice? Strikes me as a recipe for real change.


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