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.
3. Boycott big banks and move public money. One
of the key profit centers for banks is their government business. And
it isn’t just LIBOR they cheated on. There are investigations and
growing scandals around
price fixing on municipal bonds as well. Furthermore, banks are holding cities hostage on
Letters of Credit (LOC’s) by
ratcheting up the cost knowing if cities refuse to pay they may be
forced to pay huge termination fees. If increasing numbers of cities,
pension funds and other holders of public capital chose to boycott
certain big banks and moved money out of those banks, it could be a huge
financial hit for them.
4. Enact resolutions at local governments and pension funds. There
is a simple way to get started that will send chills down Wall Street
banks’ spines. Let’s start moving resolutions in cities and counties big
and small around the country, demanding that local government and
pension funds explore suing banks over LIBOR and prepare to use eminent
domain to seize underwater mortgages from banks if they won’t
renegotiate debt.
This sample resolution
is a first step in raising the issue locally and starting to build a
campaign to force local governments to hold Wall Street accountable.
5. Litigate and legislate. But
it isn’t enough just to pass resolutions--that is only a first step. If
the banks refuse to renegotiate the debt than we need to litigate and
legislate in our local communities. Our pension funds need to sue to
recoup their losses. Local government needs to sue to get out of bad
deals and claw back money banks unfairly made off of local taxpayers.
And we need to follow the lead of Oakland, Los Angeles and other cities
that have passed laws saying they will divest from banks that engage in
unfair banking practices.
Since the financial crisis hit in 2008,
community groups like National People’s Action, ACCE, New York
Communities for Change, the New Bottom Line, the Alliance for a Just
Society and Right to the City, to name a few, have joined with unions,
Occupy Wall Street, Occupy Our Homes and hundreds of thousands of people
who have stood up to Wall Street greed. Wall Street and banking royalty
are no longer untouchable. We have the tools and we have the
leverage--let's start using them to start winning for our communities
and families. It is our responsibility to REBEL. All of our futures
depend on it!
*
These figures represent updated estimates from last year's report, The Win-Win Solution, from the New Bottom Line, which investigated the effects on the economy of writing down all underwater mortgages to current market value.
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