President Obama delivered a strong populist, pro-middle class speech last night. And being a strong populist pro-middle class kind of guy, I naturally liked it a lot. I wasn’t the only one: voters loved it. Check out this dramatic overnight report from Stan Greenberg . The numbers jump off the page at you, with improvement scores on all kinds of key measures going dramatically higher. So it was a very good night for the President, and a good night for Democrats like me who really hate the idea of either Newt Gingrich or Mitt Romney being the guy giving the State of the Union speech next year. Obama set up the frame for all of 2012 extremely well, and Democrats go into the election year with a fighting chance in spite of a bad economy.

But underneath the surface, below the headlines, something else incredibly important happened last night, and in the days leading up to the speech- something that I believe will have a lot more to do with the President’s re-election than the SOTU speech. If he wants to run against Wall Street in this campaign, he needs credibility to do it, and he took a big step toward getting it last night.

The key word of the day is accountability. The progressive movement in this country came together to firmly and aggressively hold this President accountable, and he responded by announcing something that has the potential to finally- finally, finally- hold the big banks on Wall Street accountable. Now, we have to keep holding the President accountable to make sure the right things happen. But a huge, huge step was taken yesterday, and it may yet result in the biggest win progressives and middle class homeowners have had against Wall Street in many decades.

The backdrop is the ongoing fight over what to do about the deep and pervasive corruption of the big banks in terms of mortgage securitization. If that sounds like an obscure wonky issue, know this: it is at the dead center heart of the 2008 financial collapse, and over whether the housing sector and the economy in general comes back strong any time in the next decade. Over 25% of homeowners are underwater on their mortgages, and until you deal directly and aggressively with that problem, the housing market will remain dead, and the economy will stay flat. The reason that all this economic damage happened is financial fraud on a mass level: what NY AG Eric Schneiderman calls the old pump and dump. Bankers committed mortgage origination fraud, duping both home purchasers and investors who bought their crap, on a massive scale. Then bankers (some of the same and some new ones) intentionally inflated a bubble they knew could not sustain itself, and they did it on a massive scale as well. Then they bought off Moody’s and the other ratings agencies to give Triple A ratings to this toxic mess. And then they commissioned perjury on a massive scale- possibly a million separate counts- through the robo-signing scam to try to foreclose on homes as fast as they could.

They made more money faster than any small set of people in world history, and it was based to a great extent on fraud. And the rest of us have been handed the bill: 8 million lost jobs, the $750 billion TARP bailout, the trillions in Federal Reserve bailout, 25 percent of homeowners underwater, millions of foreclosures. And by and large, the bankers who created this mess have yet to be held accountable in any way: they aren’t in jail, they still have their jobs, very few of them have even had to pay fines.

For reasons I will never understand, certain Attorneys General and some members of the Obama administration started over a year ago going down the path of taking a small subset of these issues, the robo-signing, and trying to do a settlement deal with the bankers that would have been a disaster: a relatively small amount of money in exchange for a wide ranging release for legal responsibility in many different areas. This has been called by some a slap on the wrist, but it was far worse than that, because the bankers who caused this mess would have gotten off the hook for most or all of these sins with no investigations being done and no accountability being had. Fortunately, progressives who follow these issues have been able to build a big movement around stopping this get-out-of-jail-free-card deal, and have been demanding a real, full-scale, wide-ranging investigation that included all the financial fraud issues, with a goal of forcing the banks to be held more fully responsible for the damage they have done to homeowners. Led in this fight by the remarkable Attorney General of New York Eric Schneiderman, who fought and scrapped for the right thing every step of the way, we appear to have won a big initial victory in this fight: Eric will be co-chairing a new inter-agency task force to investigate all forms of financial fraud. I am told by a senior White House official who has been involved in all these negotiations that as far as they are concerned, Eric is considered by them as first among equals, with the power to drive this task force forward. Knowing Eric, if he’s not able to get done what he wants through this investigation, he will walk away anyway.

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Here it comes again. This holiday weekend we'll see a lot of media coverage of Martin Luther King, Jr. But we'll hear very little about what he really was -- a brave and visionary leader whose vision is as relevant today as ever.

One year ago I listed ten quotes by Dr. King, and mourned the lack of a movement that would advance his kind of vision. Then came the uprising in Madison and the Occupy movement, which began a long-overdue national debate about economic, as well as racial inequality.

Once again, Dr. King's insights offer insight and vision for today's movement activists -- and tomorrow's.

1. "True compassion is more than flinging a coin to a beggar; it is not haphazard and superficial. It comes to see that an edifice which produces beggars needs restructuring." Where Do We Go From Here? August 1967 speech.

"Bain Capitalism" - a.k.a "vulture capitalism" -- didn't happen out of nowhere. It was made by politicians. It should be un-made by politicians. The system is the problem and it needs to change.

A long list of corporations and banks enriched itself by triggering the events that led to the Great Recession, and many of them took Federal bailout money when it happened. Each of them has a Corporate Social Responsibility policy, designed to show they're good citizens who give back to the community. And each of them has a fleet of lobbyists working to protect their privileged status and tax benefits.

Meanwhile the poverty rate, which had been declining, started to rise again in 2000. That year it stood at 11.3 percent, but by 2009 the Census Bureau reported that it had climbed back to 14.3 percent. At last count, 46 million Americans lived in poverty, more than 15 percent of the population. More than 16 million of them are children, which means that nearly one in four American kids (22 percent) is living in poverty.

Is that OK with you?

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Newman: "So I sped home to save my friend's life and I was stopped for speeding. Yes, I admit I was speeding, but it was to save a man's life. A close friend. An innocent person who wanted nothing more out of life than to love, to be loved, and to be a banker."

Kiko's House: It's the banksters, stupid! (Who caused the Great Recession and, with the GOP, are preventing recovery.)

Just an Earth-Bound Misfit: No matter what, banksters will find some way to separate you from your money. Hold on tight.

Human Voices: When up means down. Prophecies of economic doom, circa 2012.

All Things Democrat: Preventing election fraud on November 8. A primer.

Round-up by Michael J.W. Stickings of The Reaction. I'll be here all week.

Send tips, along with wine and roses, to mbru@crooksandliars.com.

In the New York Times magazine this last Sunday with the unintentionally hilarious headline "What the Left Doesn’t Understand About Obama," editor of The New Republic, Jonathan Chait has a whopper in the very first paragraph (emphasis is mine):

This has been the summer that liberal discontent with Obama has finally crystallized. The frustration has been simmering for a while — through centrist appointments, bank bailouts and the defeat of the public option, to name a few examples. But it has taken the debt-ceiling standoff and the threat of a double-dip recession to create a leftist critique of the president that stuck.

Obama passed the stimulus. The stimulus that worked. Bush bailed out the banks and the auto industry. Now the American auto industry is slightly booming at the moment. Hiring and everything. And the banksters are rich and under-taxed. As much as I hate to admit it - something horrible Bush did actually worked.

Get that? Bush bailed out the banks and the auto industry in '08. Guess who wasn't President until January '09? Someone who couldn't have bailed out anything yet. Obama got stuck with its implementation but he didn't start it. Bush is the Bailout President. Remember: "I've abandoned free-market principles to save the free-market system."

This is revisionist at best. Otherwise false.

This deserves a correction. That's what we do in journalism - whether is at a blog or at the Grey Lady.

The New York Times needs to correct this error.

The banks surprisingly lost for once.

NY Times:

The Senate refused Wednesday to delay new rules that would sharply cut the fees that banks can charge retailers to process debit card transactions. he debit card rules were a major part of the Dodd-Frank financial regulation law passed last year. The Senate vote was one of the strongest challenges so far to the new law.

Although 54 senators voted in favor of the delay, the measure failed to garner the 60 votes that were required for it to pass under Senate rules. Forty-five senators voted against the measure, which was sponsored by Senator Jon Tester, a Montana Democrat who is facing a tough re-election battle next year, and Senator Bob Corker, a Tennessee Republican.

Even with the defeat, the vote showed the results of a remarkable come-from-behind lobbying campaign by banks to recover from the anti-Wall Street drubbing they took during last year’s debate over financial regulation. The debit card measure, sponsored by Senator Richard J. Durbin, an Illinois Democrat, passed last year by a two-to-one ratio after little debate and no hearings.

The Wednesday vote, which followed a vigorous floor debate, was a victory for retailers, who have complained that banks and the companies that control the largest debit card networks, Visa and MasterCard, have consistently raised the fees on debit card transactions even as the market has grown rapidly and technology costs have declined.

Those fees topped $20 billion last year, according to industry reports.

Tea Party pols and activists are actually against the Consumer Financial Protection Bureau, which if had their support would have become much tougher on the financial world and in the end helped the very people that are being gutted by Big Business. I'd say it was strange and self destructive, but John Birch and Ayn Rand rules the right these days.

It's over. Now 7 pm in the East. Day started at 7am at the IAFF - AFL/CIO Headquarters of the Firefighters down here in Palm Beach. Phone banks set up in their exec offices allowed a rag tag rainbow coalition of campaign workers to ring up lists of registered democrats.The names were in descending order of age. I swear. It started off with a dozen or more people listed at 105 and went down to 104, 103, 102, 101, etc. I called one 93 year old who was being wheeled in his wheel chair to vote for Kerry as we spoke. Another 94 year old "didn't remember if she voted, but if she did, she voted for Kerry. Our "War Room" was staffed with a half dozen people - mostly from the holistic healing world. One guy was an acupuncturist, another was a "upper body therapist", there was even a new age nurse.

More later.....

The entire house of cards constructed by the banks and the mortgage industry is falling down, and it's not going to be pretty. By the time it's all over, this could make 2008's previous banking failures look mild in comparison. This latest lawsuit is a civil suit, not criminal. But that doesn't mean the feds won't get in on the case if it heats up -- and I'm guessing it will:

Citigroup Inc. and Ally Financial Inc. units were sued by homeowners in Kentucky for allegedly conspiring with Mortgage Electronic Registration Systems Inc. to falsely foreclose on loans.

The lawsuit, filed as a civil-racketeering class action on behalf of all Kentucky homeowners facing foreclosure, also names as a defendant Reston, Virginia-based MERS, the company that handles mortgage transfers among member banks. The suit claims that through MERS the banks are foreclosing on homes even when they don’t hold titles to the properties.

“Defendants have filed foreclosures throughout the state of Kentucky and the United States of America knowing that they were not the ‘owners’ or beneficiaries of the loan they filed foreclosure upon,” the homeowners wrote in their complaint filed Sept. 28 in federal court in Louisville, Kentucky.

The homeowners claim the defendants filed or caused to be filed mortgages with forged signatures, filed foreclosure actions months before they acquired any legal interest in the properties and falsely claimed to own notes executed with mortgages.

[...] “RICO comes in because the fraud didn’t just happen piecemeal,” Heather Boone McKeever, a Lexington, Kentucky-based lawyer for the homeowners, said in a phone interview today. “This is organized crime by people in suits, but it is still organized crime. They created a very thorough plan.”

As I've noted previously, some of the biggest title insurance companies are refusing to insure mortgages in foreclosure -- because they can't be sure who actually has title. Because lenders won't underwrite a mortgage without it, this will have the likely effect of driving down home prices even more.

This is as serious as it gets.

The only people happy about this are the lawyers, who will be billing for untangling this whole mess. See, this is why you want a tightly-regulated derivatives market. Now the banks don't even know who owns the mortgages used as collateral. In fact, this can even affect homeowners who are attempting to pay off their mortgages. Who will assign them a clear title?

Watch for the banks for fight any attempt to impose a foreclosure moratorium. This mess is so bad, the administration may have to do what they could have done in the first place: Nationalize the banks. Stay tuned.

Oh dear God, I hate admitting it when anyone over at the Corner is right about something but... AAAAAAAARRRRRRRRGGGGGHHHH... Nicole Gelinas is right:

The financial system's failures made themselves obvious starting in 2007 in part because legislators and regulators thought that they could conjure up on command not only wisdom and competence but omniscience.

In the years leading up to the financial crisis, regulators allowed financial firms such as AIG to create derivatives that evaded the old-fashioned limits on borrowing and trading. The people in charge figured that the financial guys had figured out every angle and made these things perfectly safe.

Regulators, too, allowed banks to borrow far more than old-fashioned rules would have allowed on mortgage-related securities and other instruments rated AAA — because competent people had determined that such securities could never fail.

Finally, regulators allowed people to buy houses with no money down — even though we learned in the 1920s that it's not a good idea to let people borrow limitlessly to speculate that the price of something will continue to rise.

The lesson to be learned here is that we need borrowing and trading rules that apply to everyone and everything for those times when bankers, regulators, and tens of millions of ordinary Americans aren't right.

The bill offers no evidence that anyone in Congress has learned this lesson.

The essential problem with the financial reform package the Democrats have put together is that it relies far too much on the discrepancy of regulators and not enough on hard law. So instead of breaking up banks whose assets exceed a certain level of GDP, we have merely given regulators the ability to break up banks if and when they pose grave risks to the economy. As anyone who has followed the wacky hijinks of our government during the Bush years knows, regulators often suck, especially when they're sleeping with the people they're supposed to be regulating.

So here's how it's going to play out: At some point in the future, we will have a Republican president who will appoint Levi Johnston to head up the SEC or Treasury or the Fed. Levi will have all kinds of powers at his disposal, whether it's breaking up big banks, raising interest rates to curtail asset bubbles or enforcing strict leverage requirements. But instead of utilizing any of the vast powers at his disposal, Levi smokes dope and pleasures himself while watching porn all day long. Five days after taking office, the economy crashes again and Levi is trotted out in front of the cameras to tell us that "nobody could have predicted" this sort of thing would ever happen.

This is the sort of thing that happens when you put your faith in the competence of regulators rather than creating hard law. A real financial reform package would have held the banks to strict leverage requirements, would have forced them to stop prop trading if they wanted to retain access to the Fed's discount window and would have broken up the largest financial institutions. Instead we have a large complex nightmare that is riddled with loopholes that will allow the banks to behave just as irresponsibly as they've done in the past.

So take comfort, America. The only thing now saving us from another financial crisis is the wisdom and competence of Federal Reserve Chairman Levi Johnston. Huzzah!

Well, better late than never:

rates on 10-year Treasury bonds are only about 3 percent, many consumers still carry tens of thousands of dollars of credit card debt at 20 percent or more. This burden has been a continuing drag on spending. The federal government could reduce it by borrowing at 3 percent and lending to consumers at 8 percent under a one-time debt-restructuring plan.

With their debt service payments cut by more than half, consumers could increase spending immediately. And the five-percentage-point spread on money lent under the program would help cover its administrative costs, and maybe even relieve short-run government budget pressure.

This is, of course, correct, though I'd only push it up 4%, myself. I originally suggested this February 9, 2009. It was the right thing to do then, it's still the right thing to do.

As David Anderson notes, this would be a huge help to ordinary people:

Going from 18% to 8% interest, the individual with $10,000 in credit card debt would see their initial monthly payment go from $250 a month to $167 per month. Using a declining minimum payment formula of (monthly interest expense +1% of current balance), the debt burden at the end of the year is still $9,000 but the interest expense declines from $1,570 to $700. That gap of $870 is greater than the ARRA Making Work Pay tax credit and it most likely would be targeted at individuals with a high marginal propensity to spend (as evidenced by credit card debt.) If balances or interest rates are higher, the freed up cash flow would be even greater.

Also the government can make real, significant money by doing this. All it is is arbitrage. If you can borrow money cheap and lend it at higher rates that's free money. Not only would that help consumers, and the economy, it would also reduce the deficit. Win/Win/Win. If Blue Dogs are really sincere about their belief in deficit reduction they should jump all over this suggestion.

Note that rates being so high is a classic case of market failure. The banks are charging more than they need to in order to make a profit. In an actual free market other banks are supposed to step in and undercut them, but that isn't happening. We could argue about why (they're a collusive oligopoly or they're broke being the most probable causes), but in the immediate term, it doesn't matter, what matters is fixing it.

But I doubt it will happen. Why? Because the banks are making a TON of money by gouging customers, and they own DC. I suspect the best we can hope is that this is a warning shot across their bows, a message to reduce the looting or pillaging to "acceptable" levels.

Which will be a heck of a lot higher than you might like, but hey, they run the place.

The other day, Krugman wrote that we're in the beginning of a new Long Depression.

Forgive me, but he's wrong: this isn't the beginning, it's been going on for about two years now.

During a Depression there are periods where GDP grows. There are periods where jobs grow. It's just that the periods of job growth don't last.

There were opportunities to end the Depression before it really dug in its heels. The last one was at the beginning of Obama's term. Kicking out of the Depression required two things.

The first was an adequate stimulus. This didn't just mean a large enough stimulus, though the one offered was not large enough, it meant one properly constructed. Tax cuts for ordinary Americans are not stimulative, because folks like banks who have pricing power (you must have a credit card, loans, etc...) will simply take that money away by raising rates and fees. And it doesn't mean short term shovel-projects, it means making commitments which will last for years so that businesses, when making plans know that hiring is worth it because those employees will be needed for more than a year or so.

Likewise the US has some serious problems with the structure of the American economy. The cornerstone of the stimulus had to be reducing US dependence on oil because as long as the US economy is so dependent on oil, full fledged growth is simply not possible. The days of $20/barrel oil aren't coming back, and every time the price of oil gets too high, it puts great pressure on the US economy (and every other modern nation.)

The second thing which had to be done is to force the banks to actually eat their losses. Wipe out the shareholders and let the bondholders take their losses. All the money plunged into the banks (and it was much more than the TARP money, which was the smallest part of it) was wasted. Banks are not lending, and restoring lending is what the bailouts were sold as doing. Moreover they have raised borrowing rates and fees on those who need credit most, soaking up money which otherwise would be helping the economy rather than simply being sopped up to plug holes in bank balance sheets.

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