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The Big Banks' Battle Against Consumers and Homeowners

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There is a battle going on -- a big one -- and big battles have a lot of fronts. The big banks are doing whatever they can to fight back against consumers and homeowners who are desperately trying to curb the bankers' abuses. The number of different fronts that have been opened up keeps growing. Here are just a few of the most important ones:

1. In D.C., the biggest battle is over the new Consumer Financial Protection Bureau. Trying to build a new agency whose actual mission is to act on behalf of consumers in times like these is a treacherous undertaking, and Elizabeth Warren is battling on two major fronts of her own. The first is that the Republicans are trying to either strangle the agency at birth, or else rip its arms and legs off so that it lives but without much power to it. They are whining to high heaven that the budget for the agency is $379 million, which seems like it's about the price of a Wall Street banker's bonus check, but even worse for the poor Republicans is that they can't touch that budget because of the way Warren brilliantly negotiated the language on it -- it would be a set percentage of the Fed's budget rather than being subject to the whims of Congress and the Wall Street lobby.

The other CFPB battle is over who the agency director will be. Word from the Senate is that Banking, Housing and Urban Affairs Committee Ranking Member Richard Shelby is pulling out all the stops to keep the White House from making Warren the permanent head, threatening all kinds of things if she is nominated or given a recess appointment.

Now I am not stuck on Warren doing this, even though (full disclosure) she is my good friend. No one is indispensable. But here's the deal: The White House needs to look at the politics of this. There is not a shred of doubt that she would be the director Obama should pick, because the whole thing is her brainchild, and because she navigated the politics of getting it passed so masterfully against huge odds. Shelby is not going to okay with anyone who is actually acceptable to those of us who are advocates of Warren and the idea of a strong agency that she represents. And with Warren and the agency itself having become such a huge symbol of standing up to Wall Street, if Obama screws her over and then appoints someone weak enough to make Shelby happy, Obama is going to look awful -- not just to the base but to the middle and working class swing voters desperate for someone to take on Wall Street and look out for their interests. The fact is that this fight with Republicans over Warren is a fight that would politically help the White House. Yes, Shelby can block the nomination in the Senate, but then Obama simply gives her the recess appointment in June, after a politically valuable Wall Street vs. consumers floor fight in the Senate.

Here's the other interesting thing: I have been hearing from friends in the politically powerful community banking world that they actually like dealing with Warren a whole lot more than they originally thought they would. They have come to figure out that even though she is a regulator, the regulations she is pushing actually will help them in their battle for survival and market share with the big Wall Street bankers, and that she is far easier to work with than they thought she would be. If the community bankers don't side with Wall Street in opposing Warren, the Big Six banks really will be politically isolated, as will the Republicans walking the plank for them.

2. The mega-death battle being waged in courtrooms all over the country, in the state AGs' negotiations with bankers, in demonstrations and corporate campaigns and city council resolutions against JPMorgan Chase, and inside the Obama administration is the battle over mortgage modifications. A quarter of American homeowners have mortgages that are under water, with less equity in the house than the house is worth because of collapsed housing prices. The experts I'm talking to on this think this is the key moment: Do we get stuck in a minimum of one million-plus foreclosures a year dragging over the next decade, leaving our entire housing market in a hole we can't climb out of, which in turn would be a severe decade-long drag on our broader economy (can you say Japan's Lost Decade)? Or do we force the bankers to do a very big number of mortgage write-downs that will actually jolt the system enough to change the dynamic? The AGs, if they bargain aggressively enough and don't buy this bankers' idea that we should only look forward rather than dealing with the massive fraud and market problems they have already created, could force the banks to write down large numbers of mortgages. So could the Obama administration, if it admits the Home Affordable Modification Program isn't working and finally turns the regulatory screws on the Big Six banks plus Fannie and Freddie, which collectively dominate the market. This battle is the sleeper issue of the next couple of years, and if we blow it, we are most likely stuck with a Lost Decade scenario -- or maybe worse.

3. The banks are doing everything in their power to squeeze every penny they can from consumers and small businesses without the market power to fight back. One of the most egregious areas they have done this is in "swipe fees" on credit and debit cards. Sen. Durbin succeeded at getting a bipartisan amendment passed to finally regulate this practice, which banks have been abusing without shame for years, but now the bankers are whining (or maybe wining and dining; a banker recently bragged about closely "collaborating with regulators on this issue) to Federal Reserve regulators about rolling back regulations to make swipe fees "fairer." Winning this battle for consumers and small businesses would mean a $15 billion-a-year jolt to the Main Street economy.

4. All over the country, as part of national organizing efforts or just on their own, activists and local elected officials are taking on the six biggest Wall Street banks (who own assets equaling 64 percent of the USA's GDP). The JPMorgan Chase corporate campaign is a great example; activists are taking on that company with abandon, and have sketched out long-term plans to keep after them. The Hawaii state House just passed a foreclosure moratorium, and local governments all over the country are taking their money out the Big Six banks. I am even hearing more and more talk of a movement around strategic default by underwater homeowners. I think a lot of people have decided that these big banks -- who took down our economy with their recklessness, got bailed out with no strings attached, and then immediately started rewarding their executives record bonuses while unemployment is still above 9 percent (and a lot higher if you include discouraged, temporary, and part-time, not-by-choice workers) -- need to be brought down and replaced with a banking system that actually helps the real economy become healthier.

People are feeling deep in their gut that these big banks are out of control. They have too much power over the market and way too much over the politicians. And when bankers push back against even modest reforms and regulations that have been put into place, even after all the damage done to this economy by deregulation of the financial sector, it just drives the point home. The time is now to take on these big banks.