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Time to REBEL! 5 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.
 
 
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Photo Credit: Lily Rothrock via Flickr

 

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.

First some definitions:

The LIBOR fraud scandal may seem confusing, but it is really pretty simple. Over $800 trillion in loans, derivatives and other financial deals are based on LIBOR (the London Interbank Offered Rate). The banks fixed the rate to increase their profits at our expense and now everyone all over the world is trying to figure out how much it has cost the rest of us.

Whatever the ultimate number is (there are estimates of hundreds of billions in damages), 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

.

It is time to REBEL, against Wall Street and the big banks and to start fixing the economy and reclaim our democracy. There are five steps to this:

1. Renegotiate public and housing debt. We need to lift up the demand loud and clear that we want to renegotiate public debt and that it is unfair and illegal to hold local governments and public services hostage to Wall Street’s toxic loans. It is estimated that banks have already sucked more than $50 billion out of local communities through toxic loans, fees and tricky deals that cities are locked into.

2. Exercise eminent domain. There are 16 million underwater homes, worth $2.8 trillion, that are $1.2 trillion underwater. Resetting those mortgages to fair market value would save the average underwater homeowner $543 per month, pumping $104 billion into the national economy every year. This would create 1.5 million jobs nationally.* If just five of the most severely underwater cities used eminent domain they could seize $140 billion worth of underwater homes from banks, forcing banks to take a $30 billion haircut on underwater loans.

 
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