By Mark Hertsgaard, cross-posted from his blog.
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.