Marcy’s got some great points in her critique of John Cole’s response to my post, with an additional detail I hadn’t considered: that one reason to deal with this at a national level, potentially with a moratorium, is that the banksters are going to inevitably come by when their institutions collapse due to lawsuits and demand another bailout:

This may well be catastrophic whether or not there’s a moratorium on foreclosures until such time as people start admitting what’s going on.

If that’s true (and as I said, I don’t really know, but that seems to be the obvious implication of all the fraud that was going on), then the question is, which catastrophe is going to be least bad for the American people? And which catastrophe best preserves the rule of law and property–the bedrocks of our country? Do we enter this catastrophe on the banksters’ terms, or on more equalized terms?

She also neatly addresses Cole’s plaintive cry for authority in dealing with this problem by mentioning Alan Grayson’s idea, which I had read about but forgotten, actually:

And then there’s the issue of the President’s authority to do something about this. As DDay suggested, there’s the possibility that the regulators (Office of Thrift Supervision or Office of the Comptroller of the Currency, for example) would impose a moratorium. Or, as Alan Grayson has requested, the government could (and probably should) declare this a systemic risk, which gives them the authority under Dodd-Frank to do what they need to do to protect our system. That doesn’t make it legally or (especially) politically easy to declare a moratorium (as the deepwater drilling Obama imposed makes clear). But once you regard this as an issue that may affect securitized mortgages more generally (and not just some foreclosures), then the claim that this may be systemic seems fair.

Yes, I’d say that Bank of America going belly-up constitutes systemic risk, not to mention a more-than-likely outcome of this debacle, at least, if we decide to look at their obligations honestly, unlike during TARP/the stress tests/etc. Witness how they have to provide, in essence, their own title insurance now. Insuring.. against themselves… to try and keep themselves in business.

Honestly, who’s going to fall for that?

The debate is thus less about whether a collapse is going to happen and more about how to steer it to crush the fewest people. Call me crazy, but I put our odds of getting through this as slightly better if a single national authority does the talking rather than 50 disparate state governments.

Democrats claimed that Fin-Reg would protect the system from another collapse; here’s their chance to cough up some proof.