According to Republican gospel, taxes on investment must always be low, or else investors will simply sit on their money, refusing to do the very thing that could earn them more money. However, as David Abromowitz laid out in Bloobmerg View today, Mitt Romney’s tax returns undermine this argument.

After all, Romney made his fortune via investments made by Bain Capital, the private equity firm that he ran. And Bain’s investments between 1984 and 1999 “occurred when capital-gains rates were much higher than they are today. Yet Bain consistently attracted massive amounts of private capital, and thrived”:

Bain’s haul is further evidence that fair tax rates don’t hold back profit-seeking capitalists, at least until those rates reach a point that no one is proposing. From 1984 until 1999, the top rates on capital gains — the profit from investments as opposed to compensation for work — were often at 28 percent, and never lower than 20 percent. Indeed, in 1987, under President Ronald Reagan, the 20 percent rate rose to 28 percent — a 40 percent increase in potential taxation of Bain investment profit. (Yes, Reagan did raise taxes, even on capital.)

An analysis by the Wall Street Journal of 77 Bain deals in that time period showed that the firm “produced about $2.5 billion in gains for its investors,” on about $1.1 billion invested. Clearly, even with capital-gains rates almost double those today, fund managers such as Romney didn’t lack investors.

As billionaire investor Warren Buffett put it, “I have worked with investors for 60 years and I have yet to see anyone — not even when capital-gains rates were 39.9 percent in 1976-77 — shy away from a sensible investment because of the tax rate on the potential gain.” It’s worth remembering that it was conservative icon Ronald Reagan who completely equalized the tax treatment of investment and wage income, rejecting the argument that a lower capital gains rate was necessary to incentivize investment.

As Nobel Prize winning economist Paul Krugman has noted, the case for a lower capital gains tax is dubious at best. “Nothing in our history or experience says that unearned income has to be taxed this lightly,” he wrote.

Today, 49 states joined the federal government in finalizing a $26 billion settlement with five of the nation’s biggest banks over the banks’ foreclosure fraud abuses. The money will be used to aid homeowners, both through direct payments and by reducing mortgage principal for homeowners who find themselves owing more on their mortgage than their home is currently worth.

In terms of the size of the housing problem, as Reuters’ Agnes T. Crane and Daniel Indiviglio noted, $26 billion is a “mathematical drop in the bucket,” considering that homeowners are underwater by some $700 billion. As far as being a knock for the banks, Nasdaq.com columnist Daniel Pereira noted that the $26 billion is about half what the four publicly traded banks involved in the settlement made in profits last year:

The $26 billion represents a significant settlement, but it clearly won’t stagger the banks too much. Together, the four banks mentioned above took in a total profit of $47.6 billion in 2011. It’s not as if the banks will be paying the settlements out of pure profits, either; they’ve all set aside a fair amount of capital to pay for their mistakes. Still it’s telling that the banks will be paying just about half of their annual profits to walk away from the foreclosure mess.

Several state attorneys general were hesitant to join the settlement, fearing that the terms were too easy on the banks and that the extent of the banks’ fraudulent activities had not been uncovered. As we noted before, the settlement protects the banks from state and federal lawsuits pertaining to some abuses, such as “robo-signing” foreclosure documents, but doesn’t prevent individuals from moving forward with their own individual actions against the banks.

While it certainly won’t be a panacea for all that ails the housing market, it will certainly help those people who, until this point, had little hope of receiving a principal reduction any other way.

House Republicans have released a transportation bill that would eliminate the government’s dedicated funding stream for mass transit, instead counting on a plan that the Congressional Budget Office found would cover just 5 percent of transit costs. The New York Times called the bill “uniquely terrible,” while Transportation Secretary Ray LaHood, a Republican, called it “the worst transportation bill I’ve ever seen during 35 years of public service.”

Cuts to mass transit fall hard on low-income people who count on public transportation to get to work, go to school, and go about their lives. And they fall hardest on low-income minorities, who, as the research organization PolicyLink noted, as disproportionately likely to not own an automobile:

As housing and jobs have moved farther apart, the distance has created employment barriers for anyone without unlimited ability to drive. Nineteen percent of African Americans and 13.7 percent of Latinos lack access to automobiles, compared with 4.6 percent of whites. Poverty complicates the problem: 33 percent of poor African Americans and 25 percent of poor Latinos lack automobile access, compared with 12.1 percent of poor whites. Cars owned by low-income people tend to be older, less reliable, and less fuel-efficient. This makes commuting to work unpredictable and more expensive, at best.

“Communities of color, low-income Americans and people with disabilities will be disproportionately impacted since they are the most transit dependent communities and negotiate their daily lives on mass transportation to reach employment, health care, and educational centers,” said the Leadership Conference on Civil and Human Rights. “These funding provisions will impact the millions of Americans who rely on public transit systems to get to work, to school, or to the doctor,” agreed the American Transit Association.

In addition to shortchanging transit and those who depend on it, the bill would also open up nearly all of America’s coastal waters to oil drilling. “It is really just one more attempt to promote the Republicans’ drill-now-drill-everywhere agenda and the interests of their industry patrons,” the Times editorialized.

In the end, neither the House GOP’s nor the Senate’s transportation bills do enough to help the country’s crumbling infrastructure. But for the House in particular, the bill is simply an excuse to drill-baby-drill and make it that much harder for people without cars to go about their lives.

Fresh off the news that government backed mortgage giant Fannie Mae knew about foreclosure fraud abuses being committed by the nation’s biggest banks as far back as 2003, but did nothing, Bloomberg News reported today that Fannie Mae also “pulled the plug” on a plan to help underwater homeowners in 2010. In a letter, Senate Democrats quote a former Fannie Mae employee who claims that the plan was ready to go, but was killed at the last moment because Fannie Mae executives were “philosophically opposed to writing down principal balances”:

A former Fannie Mae employee told the committee that the mortgage finance company had developed a pilot program for reducing mortgage debt for borrowers who owe more on their house than the property is worth.

The purpose of the plan was to develop “a responsible way to reduce principal balances for underwater mortgage borrowers without creating undue incremental moral hazard,” the employee told the committee.

The pilot had preliminary approvals from officials at Fannie Mae, FHFA, and the Office of the Comptroller of the Currency, a bank regulator, according to the former employee.

In mid-2010, two weeks before its launch, senior Fannie Mae executives cancelled the program because they were “philosophically opposed to writing down principal balances,” according to the former worker, who was quoted in the letter without being identified.

Edward DeMarco — the acting head of the Federal Housing Finance Agency, the regulator for both Fannie Mae and Freddie Mac — has also been, as one former administration official said, a “boulder” in the way of allowing the mortgage giants to reduce principal for troubled homeowners, on the grounds that it would be bad for Fannie and Freddie’s bottom line. Meanwhile, “some economists counter that while principal reductions might lead to a short-term hit for Fannie and Freddie, it would ultimately result in fewer underwater mortgages, fewer foreclosures and a healthier housing market — all good for Fannie and Freddie’s bottom line.”

The opposition to principal reductions within Fannie Mae, according to Bloomberg, seems to be much more pernicious, in that they think mortgage writedowns are an unfair bailout for homeowners. But this ignores the fact that many homeowners are underwater — owing more on their mortgage than their home is currently worth — not due to anything they did but because of the 2008 bursting of the housing bubble and the foreclosure epidemic that followed, which dragged home values down to a point from which they have yet to recover.

Federal and state officials today will finally announce that they’ve reached a settlement with the nation’s biggest banks over the banks’ various foreclosure fraud abuses, such as “robo-signing” foreclosure documents and submitting falsely notarized documents to courts. The settlement has been in the works for several months, as a few key states — most notably California and New York — were holding out for tougher terms against the banks.

Here are some of the key numbers in the settlement, which is being officially announced at 10 a.m.:

49: States that have reportedly signed onto the settlement. The lone holdout is Oklahoma, as Attorney General Scott Pruitt (R) feels that the terms are too hard on the banks. Attorneys General Eric Schneidermann (D-NY), Kamala Harris (D-CA), and Beau Biden (D-DE) have thrown their support to the agreement, after opposing earlier versions for being too easy on the banks.

5: Banks covered by the settlement: Bank of America, Wells Fargo, JPMorgan Chase, Citigroup and Ally Financial.

$26 billion: The amount of the settlement. About $5 billion will be direct cash penalties, $1.5 billion of which will go directly to homeowners foreclosed upon between September 2008 and December 2011.

$17 billion: The amount of settlement money going toward reducing loan principal (the amount homeowners have outstanding on their mortgages) and mortgage modifications. Banks will not get dollar-for-dollar credit for every principal reduction, so HUD Secretary Shaun Donovan believes the deal will ultimately result in $30-$40 billion in real principal reduction.

$1,800 to $2,000: The amount going to homeowners who qualify for direct cash payments.

1 to 2 million: Homeowners expected to be aided by the settlement money, with one million receiving reduced loan balances or loan modifications and 750,000 receiving direct payments.

4 million: Americans who have been foreclosed upon since 2007.

The deal protects banks from state and federal lawsuits pertaining to some foreclosure fraud abuses, including robo-signing. However, Schneidermann’s lawsuit against three big banks for allegedly fraudulent use of a mortgage database will go forward. In addition, “individual homeowners retain private rights of action to sue over foreclosure fraud and other abuses.”