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Bank Settlement: $25 Billion Down, $675 Billion to Go

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This week a $25 billion settlement was announced in which big banks pay up for a portion of their bad deeds in the home foreclosure crisis. Everyone is trying to determine whether this is a good deal or a bad deal.

Here is how I score it. This deal represents small progress on a small problem. Now it's time to make big progress on the big problem.

Don't count on finding many good points in the deal itself, because there aren't a lot. In fact, the main win can be found in what's NOT in the deal.

A truly horrible deal would have let the banks write a small check and then seal the door on all further investigations and pursuits of accountability. This deal does NOT do that. Because this settlement limits legal immunity for banks, this deal does not automatically let the banks off the hook for all of their wrong-doing. Except for a few issues like robo-signing, state attorneys general can still fight for more compensation and relief for the banks' victims. Government officials can proceed with investigating and prosecuting banks for their role in crashing the economy and the housing market. In other words, the door is still open to solve the much bigger problems we face. Our fight for justice can, and will, continue.

That is small comfort, perhaps, but it was hard won. So we should honor the hard work of New York State Attorney General Eric Schneiderman, California Attorney General Kamala Harris and others, including many grassroots progressive organizations like New Bottom Line. They fought courageously to prevent a total sweetheart deal for the banks. This outcome is the result of determined activism, and without this heroic effort, the deal would have been drastically worse.

That said, there is a reason why many progressives and housing advocates are furious, and why many struggling homeowners are left wondering, "How does this help me?"

Millions of homeowners and families are still suffering under the tremendous weight of a debt blanket that is smothering the economy.

This $25 billion settlement helps only a fraction of those homeowners and addresses only a very limited set of fraudulent behaviors. A number of homeowners will get some cash payments, but the amounts are negligible compared to the pain and injustice they have experienced. The actual total cash paid out by the banks is only $5 billion dollars, to be split among the nation's largest banks -- hardly a stiff penalty considering that the six largest banks in the U.S. paid $144 billion in bonuses last year. And enforcement mechanisms remain murky.

We must not forget the more than 14 million homeowners (one in five) whose homes are underwater, beneath a crushing total $700 billion in negative equity. We must not forget the more than 4 million families who have lost their homes. We must not forget the millions of families who are in some form of foreclosure proceedings on this very day.

These are the Americans who have suffered and continue to suffer. They are worried today, like yesterday, whether they will still have a home to live in tomorrow. They are the ones who must choose every month whether to pay bills or to feed their children.

Here are three things that must happen next:

1) The U.S. Department of Justice and state attorneys general must investigate and prosecute banks more aggressively than ever, at a much larger scale than anything that has happened to date.

2) We must force banks to make massive principal reduction of hundreds of billions of dollars, to immediately relieve the 14 million homeowners in the country who have underwater mortgages.

3) We must change laws and regulations to prevent this kind of crisis and fraud from ever happening again.

Two weeks ago, I called for hundreds of billions in principal reduction for homeowners. This would free up Americans to start new businesses, spend money on worthwhile products and services, and invest in their children's futures. We still need to address the $700 billion in negative equity, which in turn is only part of the nearly seven trillion dollars in total lost equity created by the banks' irresponsible, and in some cases, illegal practices.

We need a solution at the scale of the problem, so that families can get back on their feet, the economy can get working, and people can reach for their American dreams again instead of watching them drown.

That is why I say: $25 billion down, $675 billion to go.