Mike Konczal at Rortybomb runs with some of Stephen Lerner’s ideas about homeowner organizing.

Collective bargaining is the cure to this kind of power differential – give consumers access to the same expertise that businesses would draw on in these circumstances. Explicit in unions are that a small fee up front gets you full representation later – an insurance fund against fraud and exploitation, something that Marine could have used when paying lawyer expenses by the hour out of pocket. It also creates organizations for putting political pressures on what are clearly political problems.

Because this is, at its core, a distributional issue. If we had let the banks fail then these mortgages could have been sold off for a fraction of what they were worth, and the principal writedowns could have happened efficiently. Instead we backstopped their losses, didn’t force writedowns, tried to push programs like PPIP which would have used FDIC money to inflate the value of these mortgage bonds, and in general have hoped the banks could become whole by recapitalizing through earnings. The only way to do that is to keep extensive pressure on homeowners and consumers.

To put it a different way, these losses have happened. They are here. It’s just a matter of how they get shared. We’ve done everything we can to protect the banks on this. Meanwhile, unnecessary foreclosures are running rampant across the country, putting balance-sheet pressures on neighborhoods, hurting municipality budgets and hitting investors and making residential and business investment difficult. And on the other side, one of the most durable pieces of the safety net created in the United States, the bankruptcy code, something that manages the distribution of losses when debts go horribly wrong, is broken when it comes to first mortgages. Bankruptcy court can temper moral hazard by making both sides take an upfront hit and share any appreciation later on, but Obama and the Treasury team have had no interest in making these adjustments.