I was on vacation this week, but the thing that stood out most to me in recent news reports had nothing to do with the date the President speaks to Congress, or the ups and downs of the stock market. The thing I was most fascinated by, because I think how it comes out will have far more to do with jobs and the health of our economy than what the President says in his speech (not that it isn’t important — politically, it’s crucial), was about the deal various administration figures, as well as some state AGs are trying to cut with the big Wall Street banks. First a little background is in order, to place the bank negotiations in context with the other big negotiations over the budget and jobs that are going on in D.C. right now.

"Centrist" politicians (so-called because they are seeking the center between us rabid progressive types and the repeal-the-20th-Century policies of the Republican Party, as opposed to the actual voting center of the country which is about as rabid as us progressive types on economic policy) can't understand why the vast majority of progressives have set ourselves in opposition to grand budget bargains and deals that Wall Street bankers are willing to sign off on. They can't understand why we are so shrill in our defense of Social Security and Medicare and Medicaid, why we are so adamant in demanding big and bold jobs measures rather than modest policies that Republicans might consider, and why we would reject a deal with the big banks that would let them off the hook on future liability for all the crimes they have committed on mortgage fraud and servicing.

I can give them the simple reason: the middle class in this country (let alone the poor) is being crushed, and it feels way too much like most politicians aren't trying to do anything to change that. Earlier in the decade, with flat earnings and rising costs for essentials like groceries and gasoline, the middle class was being squeezed, or hard-pressed if you prefer. Now with real unemployment (including those too discouraged to work, and those stuck with low-wage, part-time or temporary work when they desperately need a full-time job) well above 15 percent; with housing prices collapsed and still going lower; and 30 percent of homeowners stuck with underwater mortgages; with gasoline prices still far higher than drivers were paying just a few years ago, and inflation in groceries, health care, and college tuition for their kids still moving inexorably higher; and with government officials at every level making cut after deep cut in programs that help the middle class the most: with all that, the middle class is not just squeezed or hard pressed, but is being crushed. And that's not just me using that word: more and more, in the focus groups I am watching that is the way working and middle class Americans are describing what they are going through: we are being crushed.

So when politicians complain that the Left is being unreasonable, and is stopping them from "getting things done", I'm personally proud to 'fess up. Like 80 percent of the American people, we don't want Social Security benefits to be cut in exchange for some grand bargain that will trim a little more from our deficit 10 or 20 years down the road. We don't want seniors to have to pay a higher percentage of their incomes to pay for their health care costs. We don't want state and federal governments to slash Medicaid coverage for seniors in nursing homes or people with disabilities or poor children. We don't want more teachers or firefighters or cops to be laid off.

One more thing we don't want: for bankers to be freed of their obligations to obey the law.

Tom Miller (full disclosure: he is actually an old friend of mine, and someone I like a lot personally) and some of the people in the administration pushing this settlement are arguing that the only way to deliver tangible benefits in terms of mortgage write-downs any time soon is to settle with the banks now. Otherwise, they say, the legal fight will take years, and hard-pressed homeowners need help now. To get $20 billion now, to not have to force the banks kicking and screaming to help homeowners immediately, is a tempting argument, and I don't doubt their good intentions. But $20 billion is nowhere near enough, and if the bankers are never held accountable they will keep doing the same kind of thing over and over again.

Let's take the amount first. Twenty billion dollars sounds like a lot of money, but it falls way short in two different ways. First, it is nowhere near the amount these big banks made off of the massive amount of market manipulation and shady practices in the mortgage industry in the first place, and it is in general a small amount to pay given the size of these massive companies. According to an SEIU report, last year the six biggest banks paid their executives $143 billion in bonuses, benefits and compensation, or “more than enough to fill the $130 billion total budget gap for all 50 states in FY 2011.” If you are going to discourage bad behavior in behemoth corporations like this, you have to actually do things that will really have an impact on them: jail time, forcing them to step down from their jobs, or do such massive fines to their companies that it hurts the companies' stock price, profit margin, and bonuses. Secondly, $20 billion is less than a third of the money it would take to write down all the mortgages currently underwater, which recent studies estimate to be in the $70 billion dollar range. We shouldn't even be considering letting these banks off the hook for their fraud until we've actually solved the problem of homeowners victimized by the housing price collapse these big banks caused with their market manipulations.

Which leads me to my final point: these massive banks are way too powerful for the good of our economy and our democracy. They desperately need to be held accountable in ways that will discourage them from doing the kind of economy-crashing things that led to the 2008 financial and housing collapse. One official deeply involved in the settlement talks said to me that there were two things at play in those talks, one of which was getting money into hard-pressed homeowners' pockets quickly, and the other being to hold the big banks accountable. But, he said, if he had to sacrifice one to get the other, he would sacrifice more accountability to get money for homeowners now. Of course, as I've described, the $20 billion they are looking to get isn't nearly enough. But on a more fundamental level, if we never hold these big banks accountable for breaking the law and wrecking the economy, they will never learn their lesson, and greed will trump whatever shreds of morality they still have every time. Our democracy and our economy end up in tatters if some companies are not only too big to fail but too big to jail, if they operate under a different set of laws than everyone else. Tim Geithner made the same choices in 2008-9, that "Old Testament justice," as he called it, was less important than saving the banks. So they were not prosecuted for their crimes; they were not allowed to go out of business; they were not denied their bonuses, or fired from their jobs; they were not broken up into smaller banks. They just kept on doing what they were doing, with the hope that a few more good regulations passed in the financial reform bill will keep future disasters from happening.

The problem, of course, is that if you can violate the law, and use your immense political power to weaken regulations, and no one ever holds you accountable, nothing changes. Many economists are now predicting that we will have more Too Big To Fail-style financial crises in the years to come, because the fundamental structure in the way these banks do business has not changed.

The bottom line is that when you are to blame for others' misery, you should be held accountable. It's true with the big bankers, and it's true with public policy in general: middle-class and low-income folks did not cause the deficit or our economic crisis, so they shouldn't pay for fixing it. What we need right now are jobs, not cuts, and to hold those responsible (which is overwhelmingly the big banks) for our economic collapse accountable.