In addition to Tom Miller winning his Attorney General race in Iowa (really Richard Cordray was the biggest loss among the AGs really working on the foreclosure fraud investigation, along with a partisan flip in Arizona and potentially California), Martha Coakley was re-elected to a second term in Massachusetts. Outside of the national media glare, it turns out that Coakley was a pretty effective Attorney General, particularly on issues involving the big banks. She spearheaded the Countrywide lawsuit and a number of other judgments against the banks. Now she has an opportunity to become a leader in the AG investigation.

Celinda Lake was Coakley’s pollster, and talks broadly about vindication and spotting the troubling signs of a Democratic wipeout during that campaign. Some of that is spin, but this is the salient point:

“Voters had a desire for change and for the same sentiments that brought them to us in 2008 brought them to these Tea Party candidates and often very flawed candidates in 2010,” Lake explained. “The blue-collar America really feels that the economic policies in the past few years has helped people sitting around conference tables more than it’s helped people sitting around kitchen tables. And that is really a losing formula for Democrats — we are supposed to be for working people [...]

“Really, they should have been communicating that and taking action every day. The first opportunity for that is to address the mortgage and housing crisis. It makes no sense to ordinary people to say you don’t want to mess around with the house market because it can hurt you. That makes no sense to real people because real people cannot understand how anybody losing their house can leave anybody else better off and how, if you are in a neighborhood trying to maintain your own home and there is an abandoned or foreclosed home next door, how does that improve your housing value?… [Obama] was totally out of step.”

I’ve been saying in various ways that Democrats lost because they never provided tangible benefit to people’s lives. They never made a decent case for government to do that, either. But crucially, the one program where struggling people did interact with their government, HAMP, has resulted in making many of them worse off than before. This is a crushing blow to liberalism and the theory of government as effective.

And it won’t get any better until Democrats, from the President on down, address this crisis. Not only because it’s central to rebuilding the economy – with foreclosures running at over 1 million per year, the economy has no chance at revival. But because it draws the battle lines of whose side government is on and whose side it isn’t. For Democrats, side with the banks, and feel the sting at the polls. Their core constituency just doesn’t want to see that. They’ll think, “if I have no chance of an advocate in my government, at least I’ll vote for lower taxes for myself.”

This crisis is bound up in our economic future, but also in the question of whether government works at all. There are things the President and the Treasury Department can do to fix HAMP. There are plenty of things the Justice Department can do to fix the banks. The AG investigation, with Martha Coakley in tow, can be supported. Democrats can speak with one voice, about the rule of law, due process, and the ability for everyone to be equal under that law, including the banks. If you keep having stories about someone owning a car but the bank repossessed it, in other words stories of banks being thieves, unchecked by government, that’s the end of this Presidency, without question.