The banking industry and its conservative allies in Congress have been complaining about a proposed settlement that would involve the nation’s biggest banks reducing loan principal for troubled homeowners, in exchange for avoiding litigation pertaining to the “robo-signing” scandal and other mortgage servicing misdeeds. Bank of America CEO Brian Moynihan whined about the proposed settlement’s fairness, while other bank executives have called it a “naked shakedown.”

Wells Fargo CEO John Stumpf is also criticizing the proposed settlement. His justification for doing so is that helping troubled homeowners avoid foreclosure might increase the federal deficit:

On Thursday, Wells Fargo & Co. Chief Executive John Stumpf said extensive loan principal reduction would increase the U.S. deficit if taxpayers are forced to pay for write-downs of loans held by government-controlled Fannie Mae and Freddie Mac. “It’s important to the country so that whatever happens does not slow down the recovery,” Mr. Stumpf said.

Former White House housing adviser and current CAP senior fellow Peter Swire said that the banks’ argument “boils down to the view that they should get away with all their mistakes because they’re too hard to fix now.” Indeed, Stumpf doesn’t want to agree to more foreclosure prevention, and is taking advantage of the political class’ obsession with the deficit to achieve that end.

But while some of the principal reductions would surely occur on loans held by Fannie and Freddie loans, many would be on loans held by private investors, not the government, so would have no effect on the deficit. Furthermore, keeping people in their homes, as opposed to foreclosing on them, has a positive effect both on the local economy and for those holding the loan (particularly with the current glut of housing on the market).

Plus, the main factor driving the short-term deficit is that there was a Great Recession, caused in large part by malfeasance on Wall Street. As a result of excess on the part of Wells Fargo and the nation’s other banking giants, a housing bubble grew and burst, throwing millions out of work, driving tax revenues to their lowest level in 60 years, increasing social safety net payments, and necessitating hundreds of billions in taxpayer dollars to be spent rescuing the financial system. Hence, the nation has very large short-term deficits.

Wells Fargo’s federal bailout of $25 billion was worth more than the entire proposed foreclosure fraud settlement. Reducing loan principal for troubled homeowners, meanwhile, will allow them to stabilize for the long-term, reduce their debt, begin spending again, and thus create demand and drive the economic recovery.

Several multinational corporations last week launched a lobbying campaign to press for what’s known as a tax repatriation holiday — a window in which they can bring overseas profits back to the U.S. at a dramatically lower tax rate. Profits brought back to the U.S. are usually subject to the statutory corporate income tax rate.

The corporations — including Cisco, Microsoft, Apple, Qualcomm, Pfizer, Kodak, and Duke Energy — have hired big-name lobbyists to advance their efforts. And they’ve evidently picked up the endorsement of 2012 Republican presidential contender Mitt Romney:

Likely presidential candidate Mitt Romney wants to use the promise of huge tax breaks to entice large corporations to move their overseas profits back to the United States, in hopes they would create a wealth of new jobs for US workers. The payoff would be significant and almost immediate, generating “hundreds of thousands — if not millions — of good, permanent, private sector jobs,’’ Romney told Republicans in Bartlett, N.H., last weekend.

While Romney and the corporations say that such a tax holiday would lead to massive domestic investment and job creation, the Bush administration tried such a policy already. It turned into a windfall for shareholders and corporate CEO’s, but didn’t deliver the promised domestic investment.

In 2004, Congress passed the Homeland Investment Act, allowing companies to bring back offshore profits in 2005 and pay a tax rate of just 5.25 percent, far below the 35 percent corporate tax rate. Congress passed the bill because corporations said the money would go towards domestic job creation. However, according to work done by the National Bureau of Economic Research, 92 percent of the nearly $300 billion that companies brought back went to share buybacks and increased dividend payments.

Kristen Forbes, who was on President Bush’s Council of Economic Advisers when the last repatriation holiday was approved, told the Boston Globe that the policy “didn’t accomplish the stated goals of bringing jobs and investment to the US.’’ The Congressional Research Service also studied the tax holiday, and “found no evidence that the tax break resulted in ‘a corresponding increase in domestic investment or employment.’’’

Romney has previously endorsed huge corporate tax cuts as a way to boost job creation (even though there’s no evidence that such job creation would actually occur). A repatriation holiday, according to the research, would have similarly lackluster results.