Are Banks Different From the Rest of Us?

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Krugman claims that the banks are different. When they break the law the prosecutors are put on trial. That is how top GOP lawmakers have responded in defense of banks being prosecuted by State Attorney Generals. They are accusing the Attorney Generals of extortion. They believe that when the banks take actions to increase shareholder value they are only doing what they should be doing. Moreover, we should not do anything that might affect their profits because we depend on them to turn the economy around. Krugman believes otherwise. He thinks that the economy would turn around faster if we could stop housing prices from falling further. That would require banks to take actions that would maximize the present value of mortgages that are at risk. That would benefit those who invested in the mortgages and households that cannot afford their mortgages. The banks are generating fees from servicing the mortgages at risk at the expense of investors and households.