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With the media’s laser-like focus on the Obama-Republican tax deal, here’s a story that’s underreported: the Obama Administration’s coddling of the Big Banks and simultaneous neglect of homeowners facing foreclosure. Ad Policy

Consider this: the recent Fed audit revealed over $3.3 trillion in emergency assistance to the banks and other corporate behemoths during the financial crisis—no strings attached. Two trillion dollars to Morgan Stanley here, $600 billion to Goldman there, throw in a little chump change for McDonald’s, GE, others—no demands to increase lending to small businesses, or modify mortgages for unemployed homeowners, for example.

Then consider the 19 states which are recipients of the Hardest Hit Fund (HHF)—a portion of TARP money set aside to help homeowners in states struggling with the highest unemployment rates and steepest declines in the housing market.

Some of those states, including Ohio, let Treasury Secretary Tim Geithner know as far back as this past spring that they wanted to use some of those funds to assist legal aid groups that help individual homeowners. Seems like a reasonable request—unlike the absurdity of handing over trillions of dollars to robo-signing, foreclosure-mad banks, no questions asked.

Treasury solicited the opinion of an outside law firm, Squire, Sanders & Dempsey. Never mind that the firm’s clients include BB&T Corporation and payday lender CNG Financial Corp. The firm said, in essence—sorry, no can do on the legal aid. Not permitted under the TARP.

Huh? Hold on a sec—is this the same TARP that granted the Treasury Secretary all those "extraordinary powers" to protect people’s home values, preserve home ownership, promote economic growth, etc.?

Congresswoman Marcy Kaptur wasted no time in challenging Treasury’s interpretation. This comes as no surprise. The feisty, maverick Ohioan has consistently been ahead of the curve in the foreclosure fight—attempting to increase the number of FBI agents working on foreclosure fraud as far back as June 2009. She also told homeowners to demand that foreclosing banks "produce the note" back in 2008, more than two years before the robo-signing scandal revealed the extent to which banks are illegally foreclosing on people.

Kaptur let Treasury know that the interpretation was just plain wrong.

"We talked with Secretary Geithner about this back in June—we had mailed him letters," said Kaptur. "But of course with the big banks in charge, Treasury is sadly representing them more than the people being affected by this around the country and in places like Ohio. It didn’t have to be this way. And the carnage across the countryside in terms of empty neighborhoods, families destroyed, going into our shelters—it didn’t have to happen."

Senator Sherrod Brown also wrote Secretary Geithner on June 1 questioning Treasury’s refusal to allow states to use TARP money to help homeowners obtain legal aid services.

"The purposes of [TARP] are restoring liquidity and stability to the financial system and using TARP funds in a manner that, among other things, protects home values, preserves homeownership, and promotes jobs and economic growth. Both legal services and homeowner counseling would seem to fit squarely within these purposes." Senator Brown goes on to note, "Section 109(a) says that TARP funds can be used for programs to minimize foreclosures, and legal services are such a program."

Receiving no indication that Treasury would budge on the issue, Representative Kaptur introduced a bill in June to amend the Emergency Economic Stabilization Act of 2008 so that TARP money could be used "to provide assistance to nonprofit counseling intermediaries and nonprofit legal organizations to provide legal assistance to homeowners." It is limited to single family homeowners who occupy the house and it prohibits use of the funds for class action lawsuits. Senator Brown introduced a companion bill last month.

Let’s get this straight—this legislation doesn’t involve any new money—the money is already out the door. It doesn’t even require states to use that money to support legal aid, it just gives them the option if they so choose. States’ rights—now that’s something even the GOP should be able to support.

"Legal aid lawyers are on the front line of the housing crisis, and their hard work is often the only thing helping homeowners understand their rights in foreclosure," Senator Brown told me in an e-mail. "Unlike many of the foreclosure prevention programs already in place, providing legal services with adequate resources is a simple, straightforward way of helping families keep their homes without providing a windfall to the banks."

One of Brown’s constituents described trying to deal with the banks on his own this way: "In 1999, I was diagnosed with cancer. I endured two surgeries and a brutal year of chemotherapy. My experiences with [my servicer] have been worse than having cancer."

Kaptur also related how critical legal representation is for people currently going it alone.

"Even in a judicial foreclosure state like Ohio—where the foreclosure has to go through the courts—the property owner is distraught, really at the end of their rope, and generally doesn’t even think that they have a right to legal representation," said Kaptur. "I can tell you that happened to two of my neighbors—women, both working—both have jobs. They simply were so ashamed they walked away from their equity and their property."

Another state receiving TARP money through the Hardest Hit Fund is Georgia. The AFL-CIO has been very active there in helping members facing foreclosures, and Charlie Flemming, president of the Atlanta-North Georgia Labor Council, praised this legislation.

"Homeowners who are able to work with Atlanta Legal Aide, compared to people who have to go it alone against the big banks—it’s like night and day when it comes to getting mortgage modifications," said Flemming. "The squeaky wheel definitely gets the grease. But these legal aid groups are understaffed and way under-funded."

If you trust banks—that they haven’t made mistakes and every foreclosure that’s moved forward is a simple paperwork error—then this bill probably isn’t for you.

But if you live on this planet, then you know that the real story is more along the lines of what’s revealed in a recent GAO report cited by Senator Brown at a hearing last month: "Between 14,000 and 34,000 families in cities like Cleveland, Akron, and Columbus have been unnecessarily forced out of their homes."

Urge your representative to cosponsor the Kaptur bill (HR 5510) and encourage the Democratic leadership to move it before recess. Tell your senator to cosponsor the Brown bill (S. 3979). And while you’re at it, tell Treasury to get on board and allow states to use the Hardest Hit Funds as they see fit.

"The courts—the judicial system of this country—is what is left in terms of gaining fair treatment under the law for homeowners," said Kaptur.