It so happens that some of the most important swing states in the next election are also states with high concentrations of foreclosures, states hit the hardest by the foreclosure crisis. In particular, states like Florida and Nevada are seen as pivotal to the Presidential race, and the Obama campaign wants to compete in the sand state of Arizona. The survey, done by Public Policy Polling for the Campaign for a Fair Settlement, polls voters in those three states, along with Pennsylvania and North Carolina.

The poll asked three questions. On housing policy, it asked whether voters approved or disapproved of President Obama’s handling of the housing and mortgage crisis.

Arizona 30 approve-54 disapprove
Florida 36 approve-50 disapprove
Nevada 34 approve-54 disapprove
North Carolina 41 approve-46 disapprove
Pennsylvania 38 approve-48 disapprove

Where this really shows up is in the partisan breakdown. There’s a partisan split in the polling, with Democrats generally supportive of the President and Republicans opposed. But independents are strongly negative on this question, worse than the overall numbers, from a 26-48 split in Pennsylvania, to 34-56 in North Carolina, to 28-49 in Florida, to 29-52 in Arizona, to a whopping 21-70 in Nevada.

Most respondents agreed on the second question, whether the economic crisis is at least partially the result of “criminal actions by Wall Street executives.” That got anywhere from 69% support in Florida to 77% support in Nevada and Pennsylvania.

Finally, the survey asked, “Do you agree or disagree with the following statement: President Obama has not done enough to hold the banks accountable for their role in the housing collapse?”

Pennsylvania 63 agree-29 disagree
North Carolina 60 agree-32 disagree
Nevada 69 agree-25 disagree
Florida 59 agree-33 disagree
Arizona 65 agree-26 disagree

The support for the statement is much more intense on the agree side, with “strongly agree” getting three to five times as much support from poll respondents as “strongly disagree.” And the independent split virtually matches the topline numbers in all states.

The full poll with crosstabs is available CombinedResults[11][1][3][1] here. The survey was taken April 30 and May 1, before we learned about JPMorgan Chase’s Fail Whale trade, which has renewed attention on financial reform. In a statement, Nish Suvarnakar of Campaign for a Fair Settlement, who commissioned the poll, said, “The President should heed the message independent voters are sending and show stronger leadership on housing… Obama can help homeowners, his campaign and the overall economy by more aggressively pursuing banks’ criminal acts and supporting meaningful solutions for underwater homeowners.”

I’ll have more on this beyond the raw numbers later today. But it’s clear that voters, particularly independents, have ingrained negative views of the President’s performance on housing and Wall Street accountability, and that they will need actions and not words to change their views. And that’s particularly true in states he has to win in November, which happen to correlate with the hardest-hit states from the foreclosure crisis.

You guessed it, people stopped paying their electricity bills and now it looks like the power company – which had to be bailed out last month – has stopped even trying to collect the levy.

“Well-informed sources suggest that the new bills the company is issuing do not include the property levy despite the law providing for the first installment concerning 2012.”

The government had hoped to raise €1.7bn-€2bn from the levy in the fourth quarter of last year. But a massive unions-led civil disobedience movement against this “injustice” scuppered that and a ruling that it was illegal to disconnect people’s electricity supply for non-payment sent the collection rate even lower.

I don’t have a really good answer to this, other than the fact that we know that continued austerity inducing a depression causes mass social unrest pretty much everywhere it’s been tried. If you want people to follow the law, you need to provide them with a glimmer of hope that the law will help them succeed instead of pushing them down into poverty. Maybe it’s civil disobedience, or maybe it’s just an inability to pay.

Meanwhile, the idea that this is just a problem limited to Europe, without consequences for the United States, has been rendered inoperative by simple math. Jared Bernstein took a look at budget deficits in the US year over year and finds that we’re implementing a significant amount of austerity of our own, despite the fragile economic state:

…what matters in terms of foot-on-the-accelerator is the change in the budget deficit, and the fact is we’ve been letting up right as the economy appears to have a slowed a bit. Add state fiscal drag and the growing unemployment insurance cuts and you get the picture.

On the first point, the figure compares the budget deficit so far this fiscal year with the one from the same months of last FY. Last year’s was $150 billion more negative. Annualized, that’s enough to drive the unemployment rate a half-point higher than it would otherwise be.

Then there are all the state job losses, which are also keeping the unemployment rate elevated, as I show here.

Finally, as my CBPP colleague and UI expert Hannah Shaw points out, over 400,000 long-term unemployed persons in 25 high-unemployment states have lost UI benefits so far this year as the extended benefits program is ending in states across the land.

This is a global phenomenon of austerity coming out of the Great Recession, which in some cases is pushing countries back into recession, and which in all cases is dragging on economic growth despite elevated unemployment.

“Sen. Levin and I were very specific on risk management, that it had to apply to a specific identified risk,” Merkley said in an interview. “You can have hedges, but on a position-by-position basis. The risk was not identified for any of the multitudinous moves in the London Whale’s strategy. Even Jamie Dimon agrees with that. But he said it’s part of some vast portfolio hedge. The concept of a specific risk and a specific hedge does not fit with a portfolio hedge.”

Merkley chalked it up to two years of lobbying by Wall Street, including from Dimon and JPMorgan Chase, chipping away at the rule he authored, whittling it down to practical irrelevance. “If portfolio hedging stays in the rules, it guts the Volcker rule,” he said.

He then listed all the reasons you would want to put up a firewall between bank deposits and what amount to hedge fund trades. “If you allow hedge funds to operate inside of banks, you subsidize them with taxpayer money through the discount window and other lending facilities. You subvert the funds that should be used for lending to small businesses into this trading activity. And if the risky trades go bad, they melt down the system of credit in this country. The business community should be 100% behind the Volcker rule firewall because it sustains a reliable supply of credit.”

Indeed, one of the reasons that JPMorgan Chase had the ability to make these massive trades was because of a windfall of taxpayer-insured excess deposits. They took the money and, instead of using it to stimulate more lending or economic activity, decided to gamble with it, secure in the knowledge that, even if they lost, they would make it up or get the government to give them a fresh set of chips. This is no different from the kinds of risky practices we have seen in the financial sector since before the financial crisis.

The critique falls in line with the calls by many financial reform advocates and pundits to “make banking boring,” so that everyone stays in their lane, with the banks providing credit and the allocation of capital, and hedge funds doing the high-risk trading outside of the commercial bank framework. “I have no objection to Jamie Dimon being the head of a hedge fund,” Merkley said. “I object to having him run a hedge fund inside a large bank.”

This has led to some calls for rules stronger than what we see in even a restored Dodd-Frank. Merkley doesn’t see much hope for passage there. “I seriously doubt that any bill will get to the President’s desk that fundamentally moves in that direction,” he said. As for what it would take to get the debate going that way? “It will take another crisis to move the debate. We’ll hopefully avert much of the crisis with the rules we have in place now.” Merkley reasoned that the Volcker rule’s firewall would limit systemic risk by farming it out to hedge funds and less systemically important institutions. “You can start a fire on your patio, so nothing in the house is injured,” Merkley said by way of analogy. “If you set your living room on fire, you burn down your house.”

But this all assumes that the Volcker rule, and the other parts of the as-yet not fully implemented financial reform (including derivatives rules, which Brooksley Born called attention to today), get implemented properly. That’s not what we’re seeing right now. So Merkley and others will have to use this event as a pressuring mechanism to get the federal regulatory apparatus back on track with the language and the spirit of the law. Even then, nobody would suggest that the post-Dodd-Frank landscape is perfectly safe compared to the landscape before the legislation.

“There is still systemic risk,” Merkley said.

The Democratic governor said he would consider any “vital programs” that may be affected, but he suggested much of the money from the settlement with large banks would otherwise have been used for lawyers.

“Any program that will help homeowners I will take a good look at,” Brown told reporters one day after releasing his May budget revision. “We have time to work on the budget, but we’re looking for money where we can find it.” [...]

Brown said before speaking to a crime victims group in Sacramento that budgeting is “all a balance.”

“Whether it’s courts or children or teachers or vulnerable people, it’s not pretty,” he said.

Brown is seeking a mix of spending cuts, borrowing and tax increases to close a $15.7 billion budget deficit.

A couple things. First, the idea that the funds would be used on “lawyers” (and a nice demonization of lawyers from a Democratic governor, there) is a gross simplification. It would be use to supply legal help and counseling for victims of foreclosure. There are reams of studies showing that, when these victims get the legal help they need to navigate either foreclosure proceedings or loan modification programs, they do much better. So the idea that Brown saved the state from filling the pockets of greedy lawyers – the money would go to groups like the Legal Aid Foundation, hardly wealthy ambulance chasers – is pretty abominable.

Second, Brown says that he wouldn’t want to harm any “vital programs.” When housing is such a major anchor dragging down the economy in the state and in the nation, any program that would lead to debt reduction and keep people in their homes can be considered vital. That includes counseling and services involving those dreaded “lawyers.”

Finally, Brown talks about “a balance” in budgeting. There’s no balance at all in what he’s doing with the settlement funds. In fact, his plan is to take them all. If you look at the relevant section of the May revised budget (p.89), described here by Alejandro Lazo, you see that the Governor plans to use $292.2 million of the funds for issues somewhat related to housing, or at least the state Department of Justice:

National Mortgage Settlement Proceeds — The National Mortgage Settlement stipulates that California will receive $410.6 million in discretionary funds for administrative costs and to support programs that benefit California homeowners affected by the mortgage and foreclosure crisis and other consumers.

The May Revision proposes trailer bill language to support the following programs:
$41.1 million paid as a civil penalty into the Unfair Competition Law Fund to offset the costs of various DOJ programs.
$44.9 million to support the DOJ’s Public Rights and Law Enforcement programs relating to public protection and consumer fraud enforcement and litigation.
$8.2 million for the Department of Fair Employment and Housing’s ongoing efforts to prevent and eliminate unlawful discrimination in housing and the prosecution of violations under the Fair Employment and Housing Act.
$198 million to offset General Fund costs for housing bond debt service for those programs funded with Proposition 46 and Proposition 1C housing bonds that assist homeowners.

But the Governor counts savings of all $292.2 million to the General Fund from this action, meaning that funding for all of this would be reduced by similar amounts. Counselors and legal aid societies would be left with nothing. And here’s the key line:

The remaining $118.4 million will be reserved for similar uses in 2013‑14.

So Brown would do this all over again with the balance next year. In other words, ALL $410.6 million, almost 15% of the total cash penalty paid to the states in the settlement, would be raided by California to pay for the budget gap, under Brown’s plan. Every last penny. This is supposed to represent “balance.”

I’m glad Kamala Harris is putting up a fight. But this was baked into the cake when no strings were put on the settlement cash. There were only “encouragements” in the language to put the money to its proper use. The banks had an interest in seeing that money not used for proper legal representation for their customers so they could continue to steal from them. So the language remained loose. And given state budget woes, nature just took its course.

Meanwhile, in a case of bad timing, JPMorgan Chase held its shareholder meeting in Tampa today. The protests were decidedly muted considering the circumstance, with just a handful of Occupy Tampa protesters outside. Inside the meeting, activists failed to make any significant changes to JPM’s management:

At its annual shareholder meeting in Tampa, Florida, 91% of those who voted backed Jamie Dimon’s $23m pay packet for the last year.

And a vote to strip Mr Dimon of his dual titles of chief executive and chairman won only 40%.

But most ballots were cast before the trading loss was announced.

Mr Dimon has called the shock loss a “terrible, egregious mistake” and told reporters after annual meeting: “The buck always stops with me.”

Except in this case, it didn’t. And the buck got $23 million for his services. In fact, Dimon said at the meeting that it would pursue disciplinary action, not against the buck, but against the subordinates who executed the trades. He even brought up the idea of clawbacks in compensation for those individuals. Not for the buck, of course. New York City Comptroller John Liu has endorsed the concept of clawbacks for the responsible parties, as well as former FDIC Chairman Sheila Bair:

“We don’t know the facts and culpability, but it appears she (Ina Drew, who resigned this week) did have a responsibility here along with a number of others,” Sheila Bair, former chairman of the Federal Deposit Insurance Corp, said in an interview with Reuters Insider. “Clearly, the whole purpose of clawbacks is if you make a bad bet that results in losses, compensation should be clawed back.”

JPMorgan Chase’s stock has lost $14.3 billion in market capitalization, or seven times as much as the loss in the Fail Whale trade, since the announcement last Thursday. However, it rebounded today, up 2.82% to $36.80 thus far in afternoon trading.

Shareholders had more to say about the mortgage servicing practices of the bank than the Fail Whale trade, according to some reports. That should not be lost here. Shareholder activism has pressed the leading banks on their foreclosure practices.

U.S. District Judge James Boasberg said the NLRB did not technically have a quorum when it adopted the rules last year. The NLRB had three members at the time; two approved the rules and the third, Republican Brian Hayes, took no action.

Had Hayes voted or indicated his choice to abstain, that could have signified a quorum, according to the judge.

“We think the judge’s ruling is flat-out wrong,” says AFL-CIO General Counsel Lynn Rhinehart. “Brian Hayes was a sitting, working, paid member of the NLRB when the rule was adopted, and remains so today….The judge’s ruling, while in our view incorrect, is solely based on technical issues that speak to the procedure of the board and not the rule itself.”

This was certainly a technicality, not a ruling on the merits. And there is now a full complement of members on the NLRB, including three appointed by Democrats, thanks to recess appointments. The NLRB could re-approve the rules after the fact, if this ruling isn’t overturned on appeal.

However, that would run into another problem, the controversy over the recess appointments themselves. Some corporate-backed group would almost certainly sue – indeed, the lawsuits have already been put into motion – over any ruling made by an NLRB member installed at the end of last year in a recess appointment. The theory goes that the recess appointments were unconstitutional because the Senate was engaged in pro forma sessions at the time. This is a bit of uncharted territory for the legal community, so we don’t quite know how it will turn out, though the Administration has a passel of lawyers lined up to say that the recess appointments were perfectly legal.

But there are plenty of conservative judges scattered through the federal judiciary willing to say otherwise. And this drags out and delays the modestly improved election rules for unions. The obviously better solution to the problems of union intimidation and needless foot-dragging on the part of management was the Employee Free Choice Act. But not only did it not pass when Democrats had large majorities, it didn’t even come close to getting a vote. And these are the consequences.

So Reid’s more widely recognized comments last week, that the proponents of Senate rules reform were right, represented a repetition, in a sense, not a spontaneous moment of anger. Nevertheless, Merkley was pleased that the Majority Leader was coming around to his way of thinking on the subject. “It felt good that the Majority Leader publicly declared that there’s a problem that has to be addressed,” Merkley said. “It’s been a continuous affliction of the minority blocking debate on legislation.”

It’s one thing for Reid to admit the problem, and another for him to act on it. Reid has publicly committed to taking a new look at the issue next January, when there is a small window of time for the Senate to reset their rules. Some have argued that this issue could be pressed right away, with an ultimatum to move on Presidential appointments or risk the “nuclear option,” where a majority of the Senate can change the rules mid-session. There’s even an effort afoot to have the filibuster declared unconstitutional by the courts, with a high-powered attorney attached. And the question of whether anything will be done must collide with the reality that control of the Senate is up for grabs in this year’s elections.

By this time two years ago, Merkley and his partner Tom Udall had already been putting in place their set of reforms, building a coalition for change. That effort failed in January 2011. What are Merkley and his colleagues doing this time around? “My hope had been to find a group of Republicans to join us on specific reforms,” the Senator from Oregon told me. “Right now the outcome of the Senate is in doubt, which could be a helpful moment to get us out of the mode of which party these reforms help. I’ve been holding some conversations in that regard” with selected Republicans, Merkley said.

He added, “A point Tom and I made, the things we were proposing, we could support whether in the majority or the minority. It included a reform that the minority sought, a protocol for amendments,” so that the Majority Leader would not just block attempts by the minority to legislate through “filling the amendment tree” or other measures to stop a vote.

Of course, a micro-miniature version of the Merkley-Udall filibuster reform plan was instituted as a “gentlemen’s agreement” in 2011. It included one of the five-point plan that Merkley and Udall sought, the banning of secret holds (Merkley says that, as far as he can tell, when a Senator objects to unanimous consent these days, you can usually find out who’s doing it). In addition, the minority agreed to force cloture votes on the motion to proceed to legislation, as long as the majority allowed for more room for amendments. This has failed miserably. Filibusters are up in this session, amendments have gotten less germane to the legislation at hand and are frequently used to send messages or embarrass vulnerable lawmakers, and legislating has basically ground to a halt. “No observer could look at the Senate today and say its conduct is any different. If anything, it’s worse,” Merkley said.

So far, his sought bipartisan coalition for rules reform has not come together. But Merkley plans to keep going. “I say it at every opportunity,” he said. “I fully intend to press this case vigorously.”

“We shouldn’t dread the debt limit. We should welcome it. It’s an action-forcing event in a town that has become infamous for inaction,” Boehner will say according to excerpts of prepared remarks provided by his office. “That night in New York City, I put forth the principle that we should not raise the debt ceiling without real spending cuts and reforms that exceed the amount of the debt limit increase…. When the time comes, I will again insist on my simple principle of cuts and reforms greater than the debt limit increase. This is the only avenue I see right now to force the elected leadership of this country to solve our structural fiscal imbalance. If that means we have to do a series of stop-gap measures, so be it – but that’s not the ideal. Let’s start solving the problem. We can make the bold cuts and reforms necessary to meet this principle, and we must.”

“Reforms” have been added to the menu along with cuts, but basically Boehner affirms the same principle: for every dollar of increase in the debt limit, a dollar in reductions to the deficit must be included. I think by reforms Boehner might mean tax reform, but the Speaker also wants the House to vote this summer on a short-term extension of the Bush tax cuts, paired with a long term tax system overhaul that would presumably be either revenue-neutral or revenue-negative. This means that, at the same time that Boehner is demanding to “solve our structural fiscal imbalance,” he favors a policy that increases that fiscal imbalance by $4 trillion over the next ten years.

The other way to solve that structural imbalance is to let the Bush tax cuts expire. That will eliminate almost the entire medium-term primary fiscal gap. This is of course known as “Taxmageddon,” and must be avoided at all costs. But look at the alternative that Boehner has set up. He wants a dollar of spending cuts for every dollar of debt limit increase. A choice between those two poles is pretty obvious.

The problem is that it’s not really a choice, though it probably can be fashioned that way. Affirmative legislation must pass to extend the expiring tax cuts. Affirmative legislation must pass to increase the debt limit, barring the unlikely (though wholly Constitutional) outcome that the President allows for the minting of a trillion-dollar coin at the Treasury Department. You could see some pairing of these two issues, along with something on the trigger, the automatic cuts to discretionary and defense spending scheduled at the end of the year along with these other issues (it’s not totally clear when the debt limit will be reached, but the most educated guess is sometime around the end of 2012 or the beginning of 2013).

But this is all up in the air. The House has already passed a budget that violates the targets for spending set by the debt limit deal. And now there’s this vow of another hostage crisis. It adds up to a looming disaster in a lame duck session of Congress, possibly with a lame duck President in the Oval Office. Leaving politics aside for a moment, this is a looming disaster for the economy.

Newly installed French President Francois Hollande declared Tuesday that he would propose a “new pact” to his European partners emphasizing economic stimulus in addition to the fiscal discipline imposed by Germany [...]

“On this day, a lot of people, and first of all in Europe, await us and look toward us,” Hollande said. “To overcome the crisis that has struck it, Europe needs plans. It needs solidarity. It needs growth.

“I will propose a new pact to our partners that will join the necessary reduction of public debts with an indispensable stimulation of the economy.”

This already retreats a bit from the tougher line focused more on growth that Hollande carried through the campaign. In the end it’s just words; the action commences today. Immediately after his swearing-in, Hollande flew to Berlin for a meeting with German chancellor Angela Merkel. The meeting will presumably focus on this “new pact,” and whether that means a side deal, focused on growth, to the fiscal pact already agreed to by Eurozone member states, or a renegotiation of the deal entirely. My suspicion is that it’s the former. Hollande has emphasized growth more, and Merkel austerity, but there’s a way to meet in the middle here that doesn’t upset the status quo too much. Maybe you add some small investment fund, known as project bonds, to stimulate demand across Europe. And maybe the “growth” emphasis goes to the euphemistically named “labor market reforms,” which would get at growth through an internal devaluation, breaking the leverage that workers have for wages and benefits.

That’s bad news for the citizens of Europe. The status quo is already strangling them. The emphasis on austerity needs to be wholly rejected at this point, with the whole focus on getting the Eurozone out of its economic crisis. Austerity has become self-defeating. One obstacle to that is today’s better than expected economic news from Germany. This will allow the Germans to deny reality for a while longer, even as Greece cracks up. They may even convince themselves that a Greek exit from the Eurozone will have no ripple effects throughout Europe.

Bold leadership is still needed for Europe to avoid catastrophe, but the early signs look to be for more muddling through.

In the years leading up to JPMorgan Chase’s $2 billion trading loss, risk managers and some senior investment bankers raised concerns that the bank was making increasingly large investments involving complex trades that were hard to understand. But even as the size of the bets climbed steadily, these former employees say, their concerns about the dangers were ignored or dismissed.

An increased appetite for such trades had the approval of the upper echelons of the bank, including Jamie Dimon, the chief executive, current and former employees said.

Initially, this led to sharply higher investing profits, but they said it also contributed to the bank’s lowering its guard.

Apparently, regulators plan to scrutinize risk management at JPM and other banks. However, the investigation will be led by the Office of Comptroller of the Currency, which if past experience is any guide makes it approximately worthless. There’s a new leader at OCC, Thomas Curry, and in one of the first acts under his leadership, they let go Allonhill, the company that both created and was hired to audit foreclosure operations at Aurora Loan Services as part of the ongoing OCC foreclosure reviews. So that was a step in the right direction for OCC.

Still, I put little faith in the hands of the regulators at this point. The renewed focus on financial reform, and in particular principle-based rules that go beyond the Swiss cheese that has become prudential regulation, offers the best hope that the risks at JPM and other banks will not get borne by the everyday taxpayer. That’s the concern here. JPMorgan Chase has enough profits and reserves to cover this bet. But what if another bank engaged in the same practices didn’t? What if they didn’t have the reserves? What if they lowered their capital and increased their leverage? Then the gambling with taxpayer-insured money, as Dick Durbin puts it, would have a real cost.

Even Republican Bob Corker of the Senate Banking Committee believes that the Fail Whale trades could be a signifying event in creating stronger rules for Wall Street. The Banking Committee will hold hearings in the coming weeks on the issue.

But the more important work is being done outside the political system, to create the best menu of policies to ensure that bank investors rather than taxpayers and ordinary Americans pay the price for recklessness at Wall Street banks. I think Mike Konczal had the best explanation of the importance of this effort:

There is something to a conservative like Kevin Williamson’s remark that “The odd thing about this is that it is now considered somehow scandalous when a business loses money. It’s a scandal when banks make profits, and it’s a scandal when they make losses.” On a long enough timeline, the survival rate for everyone drops to zero. Though it was clear quickly at 5 p.m. Thursday that JP Morgan wasn’t in danger of collapsing, if things had been different it could have failed.

This illustrates the need for a mechanism to allow firms to fail in a way that fairly allocates losses to the right parties. The way corporations fail in this country is a series of legal choices we’ve made, and we found in the fall of 2008 that the mechanism we have for a shadow-bank financial firm failing — Chapter 11 bankruptcy — dragged down the entire system with it. Hence the move to bring in the FDIC to make sure a financial firm fails in a way compatible with fairness [...]

Shareholders are wiped out, the bank is recapitalized through previous debt holders, and the old board is fired. Stability and accountability are both emphasized. This is not simple, and this is where Dodd-Frank hangs together or it falls apart. It is a system of deterrence and detection alongside FDIC resolution. The Volcker Rule is meant to prevent having hedge fund-like gigantic losses out of nowhere, which would allow the FDIC to have some lead time to try to steer a firm back to solvency through prompt corrective action before resolution. Well-capitalized and transparent derivative markets will help with issues of contagion and panic that come with a major financial firm approaching collapse.

In a subsequent post, Konczal looks at how breaking up megabanks can aid the resolution authority process, by giving it the opportunity to work more smoothly and more credibly. Similarly (and this is the key point in my view), reducing size would reduce market power at these firms, which includes political power and influence. It’s one of the only ways to get back to an equilibrium where the “free market” actually means something, instead of the current situation of socialism for the rich, where the risk is socialized and the profit privatized. Capitalization plays a role in this to ensure we put off the point where a financial firm fails to the extent possible. I discussed this yesterday.

I’m glad the Fail Whale trade has opened up space to talk about these issues, even as I don’t believe it will lead to immediate adoption of anyone’s reform wish list. The first step is to get these ideas into the conversation.