Weekend Economists Rise Again August 10-12, 2012

[Demeter]

5. Time to Rebel! Five Ways We Can Break the Big Banks' Death Grip on the Economy

http://truth-out.org/opinion/item/10807-time-to-rebel-five-ways-we-can-break-the-big-banks-death-grip-on-the-economy

Wall Street’s incredible greed and arrogance may have finally handed us the tools and leverage we need.

Let’s be honest. Many people are feeling a little hopeless and cynical about whether anything can change how Wall Street banks run roughshod over the economy and our democracy. We’ve marched, rallied, sat-in and thousands have been arrested--and yet bankers have remained unrepentant, unpunished, unindicted and seemingly untouchable. But the wheels of history are turning and Wall Street’s incredible greed and arrogance may have finally handed us the tools and leverage we need to challenge and break the death grip Wall Street has on struggling people and communities around the country.

Two critical tools--the LIBOR fraud scandal and the potential to start exercising eminent domain to seize bank-owned properties--can supercharge the ongoing campaigns focused on Wall Street. For the first time we can align moral and legal arguments with real leverage to demand that banks renegotiate the debt that is bankrupting communities and drowning homeowners around the country. The single most important step we can take to address local budget deficits is to force banks to renegotiate toxic deals held by local government and to rewrite mortgages for underwater homeowners. Combined, this would pump hundreds of billions into local economies...

...Whatever the ultimate number is (there are estimates of hundreds of billions in damages DUE TO LIBOR FIXING), this scandal has permanently torpedoed the notion that there is “moral hazard” in debt relief for regular folks. We can now prove what we’ve always suspected--that the big banks have rigged the game in their favor and that our deals with them are inherently unfair and should be renegotiated. Oakland, California has taken a first step by demanding Goldman Sachs renegotiate a toxic swap the city is trapped in, saying it will boycott Goldman Sachs in the future if the bank won’t renegotiate.

Eminent Domain. Government has long seized property to create room to build shopping malls and stadiums. Those same laws can be used to seize underwater mortgages from banks and then rewrite them at their real value so homeowners can stay in their homes at greatly reduced mortgage costs. If banks are unwilling to reset mortgages at fair market value, then local governments can lawfully seize their property for the common economic good. They would merely have to pay the banks fair market value for the mortgages, which would force the banks to take significant writedowns. San Bernardino County and Berkeley, California have already started down this road...

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