However, it seems that Gov. John Kasich (R-OH) and the Republican legislature feel that the state has money to burn on tax cuts for the financial industry:

An Ohio Legislative Service Commission analysis said the bill “may decrease GRF (general revenue fund) revenue by an uncertain amount, though the revenue loss may be up to $30 million per year, when compared to the introduced version of the bill.”

The potential of a $23 million to $30 million tax cut for financial institutions drew fire from Democrats at a time when schools and local governments are suffering from significant budget cuts.

Kasich’s original plan was meant to be revenue neutral, but the legislature cut it up until it turned into a gift to the banks worth millions of dollars. As Policy Matters Ohio noted, the justification for cutting banks’ taxes — that they will use the money to increase lending — is fundamentally flawed:

The idea that cutting bank tax rates will fuel more lending and a stronger economy is misplaced. Since many Ohio banks already are “flush with cash,” as a representative of the industry puts it, cutting their taxes is unlikely to lead to new lending. Ohio banks are doing well, as a Feb. 28 press release from the Ohio Bankers League entitled “Bumper Quarter for Ohio Banks” attests, and are in no need of a tax cut.

“We’re basically giving the banks … a $25 million gift every year,” said state Rep. Mike Foley (D). “But we’re also doing that in the context of an economy and state budget in Ohio that has been wracked and harmed and hurt and mangled by the financial industry that we’re giving benefits to today.”

Rep. Joe Walsh (R-IL) erupts at a constituent who asked about the bank lobby

Rather than campaigning on a typical pro-business platform, the Tea Party freshmen tapped into public resentment of big banks and bailouts. For example, then-candidate Sandy Adams (R-FL) said on her campaign website that she “opposes government bailouts” and “would have voted against TARP and the auto bailout.” Jeff Landry (R-LA) said bailouts of private businesses had “corrupted our free market system by rewarding the irresponsible and penalizing the responsible,” blasting “bank bailouts, which led to taxpayer money directly or indirectly going into multi-million dollar bonuses.”

But in Congress, the Tea Party has toed the line for big banks. Eleven of the 15 have become co-sponsors of H.R. 3461, a top priority for the ABA. According to Americans for Financial Reform, the legislation would “tilt the playing field further in the direction of excessive deference to industry interests and tie the hands of regulators attempting to protect the public interest.” The bill would make it harder for bank examiners to do their job, giving regulatory responsibilities to an industry that’s already shown it can’t police itself.

Here is what happened:

The lone Tea Party freshman member of the Financial Services Committee, Rep. Stephen Fincher (R-TN), has consistently voted with the industry and the Republican majority for weaker regulation of the sector.

And of the 15, all but McKinley and Rep. Tim Huelskamp (R-KS) voted for the GOP’s 2013 budget proposal, which included the repeal of a key component of the financial sector regulation.

Their rhetoric has also become extremely friendly to the financial industry. Rep. Joe Walsh (R-IL) famously yelled at a constituent: “Don’t blame banks, and don’t blame the marketplace for the mess we’re in right now! I am tired of hearing that crap! This pisses me off!” Rep. Diane Black (R-TN) bashed financial regulations as “part of a pattern of government interference in the private sector.” Rep. Blake Fahrenthold (R-TX) warned “excessive regulations will hurt our financial institutions.” Rep. David McKinley (R-WV) said that by regulating banking and financial institutions, “what they’re doing is getting into our lives. And many of us are trying to find a way to get them to pull back.” And several of the freshmen criticized Dodd-Frank’s regulations for limiting credit availability for small businesses.

Overall, of course, Romney has shown little interest in diagnosing or addressing the causes of the 2008 financial crisis, and the role of the nation’s biggest banks in nearly sinking the global economy. And the banks surely appreciate it, considering that employees of the biggest financial firms are his top donors, as the Boston Globe noted today:

When the head of JPMorgan Chase met with shareholders to answer for a trading loss of more than $2 billion Tuesday, it was against an evolving political backdrop: Donors from big banks are betting on Mitt Romney to defeat President Obama and repeal new restraints on risky, large-scale investments. [...]

The top five donor groups in Romney’s campaign are individuals and political action committees associated with large financial institutions, led by Wall Street giants Goldman Sachs and JPMorgan Chase, according to information compiled by the Center for Responsive Politics, a nonpartisan research group that tracks campaign donations.

The Globe actually got it a bit wrong: the top six donors to Romney come from the biggest banks — Goldman Sachs, JP Morgan Chase, Bank of America, Morgan Stanley, Credit Suisse, and Citigroup. And the finance/insurance/real estate industry is far and away the largest donor to Romney’s campaign, giving him $18 million. Of course, banks also throw money at the Democrats, but in this cycle, they’ve clearly favored the GOP.

Romney is surely not the only Republican lawmaker getting JP Morgan’s back, as House Financial Services Committee Spencer Bachus (R-Al) also defended the bank. Bachus, though, is also bankrolled by the financial industry.

The laws were supported and pushed by activists from the 99 Percent Movement and religious groups who have led campaigns to move money from the nation’s largest banks. The ordinances give preference for city contracts to banks that make the most substantial investments in the local community through small business loans, home loans, foreclosure prevention, and other programs, according to the PICO National Network, a coalition of religious organizations that pushed for the Los Angeles ordinance:

The New York City ordinance would require banks to provide information on reinvestment activities, including foreclosure and loan modification information, that would be used to evaluate the banks that want to hold city deposits. The Los Angeles ordinance will gather data on banks’ participation in foreclosure prevention and home loan principal reduction programs, as well as other community reinvestment information.

New York Mayor Michael Bloomberg is likely to veto his city’s ordinance, another poke at 99 Percent Movement activists who have butted heads with him over the last eight months. Los Angeles Mayor Antonio Villaraigosa is expected to sign his city’s version into law.

Cleveland became the first major city to adopt a responsible banking ordinance in 1991, and they have spread quickly since the 99 Percent Movement ignited last fall. Pittsburgh and San Diego recently passed similar ordinances, and city councils in Seattle, Boston, and San Francisco are all considering laws now.

Q: You think had it [the Volcker rule] been in place, we wouldn’t be talking about this?

WARREN: Well, I’m going to put it this way. The Volcker Rule would help. We don’t know exactly the nature of these trades. But if the question is is the Volcker rule enough, or do we need more, look, I’m somebody who believes we really should have boring banking. That banking should be — the part that’s about savings accounts and checking accounts and our money system — should be separated from the kind of risk-taking that Wall Street traders want to take. That was originally what the Glass-Steagall Act was about, it was repealed in 1999. There was an effort to get it into Dodd-Frank in the 2010 bill. That effort failed. I think we really do need that kind of separation. We need to go back to boring banking. The people who want to take risks need to take risks with their own money and do it somewhere else.

Watch it:

This echoes the call made by economist Paul Krugman, who noted that the era of boring banking “was also an era of spectacular economic progress for most Americans.”

Just last month, JP Morgan economist Blythe Masters insisted that the bank was not engaged in trading for its own benefit. Dimon meanwhile, was deriding the proponents of regulations to rein in risky trading as “infantile,” as the New York Times’ Gretchen Morgenson reported:

The loss, and the embarrassment it held for Jamie Dimon, the bank’s imperious chief executive, came just one month after a private dinner party in Dallas at which he assailed two respected public figures who have pushed for policies that would make banks like JPMorgan smaller and less risky.

One was Paul Volcker, the former Federal Reserve chairman, whose remedy for risky trading by too-big-to-fail banks is known as the Volcker Rule. The other was Richard W. Fisher, president of the Federal Reserve Bank of Dallas, who has also argued that large institutions should be slimmed down or limited in their risky trading practices. [...]

During the party, Mr. Dimon took questions from the crowd, according to an attendee who spoke on condition of anonymity for fear of alienating the bank. One guest asked about the problem of too-big-to-fail banks and the arguments made by Mr. Volcker and Mr. Fisher.

Mr. Dimon responded that he had just two words to describe them: “infantile” and “nonfactual.”

Not only has JP Morgan belittled those trying to ensure that the nation’s biggest banks can’t threaten the economy with their risky trading, but it has actively lobbied to water down new rules governing these trades. And Dimon is still claiming that the Volcker Rule, meant to prevent banks from trading for their own account with taxpayer-backed dollars, is unnecessary. But as Businessweek’s economic editor, Peter Coy, wrote:

The need for a risk-reducing rule something like the Volcker Rule is obvious. Banks have a special obligation to avoid risk because their failure can drag down the entire economy. JPMorgan is able to borrow cheaply because lenders understand that the federal government will not let it default. In fact, it has been officially declared “too big to fail.” In return for the trampoline of taxpayer dollars—once implicit, now explicit—JPMorgan and other too-big-to-fail banks have no choice but to accept some constraints on their freedom of action.

But it sure doesn’t seem like Dimon will be swayed by that argument anytime soon.

Dimon appeared today on NBC’s Meet the Press, where he was asked by host David Gregory if JP Morgan’s massive loss shows that the banking system — just a few years after a financial crisis that nearly brought the global economy to its knees — is still too risky. Dimon replied, “I don’t think so”:

GREGORY: Have you given regulators new ammunition against the banks?

DIMON: Absolutely, this is a very unfortunate and inopportune time to have had this.

GREGORY: But if the best of the best can’t manage a risk like this, does it not tell you that the banking system is still several years after the financial collapse, too risky?

DIMON: I don’t think so. It’s a question of size. This is not a risk that is life threatening to JP Morgan.

Watch it:

Of course, the point isn’t whether JP Morgan, the biggest bank in the U.S., can survive a trade like this. It’s whether the financial system can sustain this sort of trading by all of the big banks, many of which are not in the same financial shape as JP Morgan.

As the New York Times detailed yesterday, JP Morgan and the rest of the nation’s biggest banks have been fighting to widen exemptions to the Volcker Rule that would allow banks to continue making risky trades of this sort. ”I hope that the final [Volcker] rule will prevent this,” said Rep. Barney Frank (D-MA), whose name graces the Dodd-Frank financial reform bill, on ABC today. “The Volcker Rule is still being formulated.”

Under the proposals, a single bank could not hold more than 10 percent of the nation’s banking deposits, nor take on more than 10 percent of the banking system’s liabilities. Banks could take on no more than $1.3 trillion, or 2 percent of the nation’s gross domestic product, in non-deposit liabilities. Non-banks could not take on more than three percent of GDP in liabilities, and could not grow larger than $436 billion.

Four existing banks — JPMorgan Chase, Bank of America, Citigroup and Wells Fargo — are currently above the size cap, and would need to be shrunk down if the bill became law, according to Miller’s office.

“The gigantic size of megabanks, and the perception in the marketplace that they are too big for the government ever to permit to fail, gives them an unfair competitive advantage over smaller financial institutions that distorts the market and discourages competition.” said Miller. “As our nation’s economy begins to recover, we must ensure that megabanks cannot take the same kind of risks that hurt so many of our nation’s families and small businesses,” Brown added. “That’s why we need to place sensible size limits on our nation’s large financial institutions and ensure that if banks gamble, they have the resources to cover their losses.”

At the moment, the nation’s four biggest banks hold about 40 percent of total deposits. They also issue one out of every two mortgages and nearly two out of every three credit cards in America.

Richard Parsons, speaking two days after ending his 16-year tenure on the board of Citigroup Inc. (C) and a predecessor, said the financial crisis was partly caused by a regulatory change that permitted the company’s creation. [...]

“To some extent what we saw in the 2007, 2008 crash was the result of the throwing off of Glass-Steagall,” Parsons, 64, said during a question-and-answer session. “Have we gotten our arms around it yet? I don’t think so because the financial- services sector moves so fast.”

It was Citigroup that was the first big beneficiary of the repeal of Glass-Steagall, which allowed Citibank to merge with Traveler’s Group to form Citigroup. Former Citigroup Chairman Sandy Weill used to have a portrait on his office wall that proclaimed him, “The Shatterer of Glass-Steagall.” Of course, Citigroup needed to bailed out during the financial crisis of 2008.

Parsons is not the only former Citi executive to see the light of day when it comes to deregulation. Former CEO John Reed has said that investment banking and commercial banking should once again be separated, taking banking back to where it was before the deregulatory zeal of the 1990s took hold.

Parsons doesn’t advocate such a step, and of course, his admission is more than a decade too late. “Why didn’t he do something about it when he had a chance to?” asked financial analyst Mike Mayo. Just yesterday, federal regulators gave banks two years to fully comply with new rules meant to prevent them from engaging in risky trading with taxpayer-backed dollars.

House Republicans on that committee — which has become the second most lucrative committee for fundraising — today released their plan to come up with the cuts mandated by the budget authored by Budget Committee Chairman Paul Ryan (R-WI). Their proposed cuts include:

– ELIMINATING RESOLUTION AUTHORITY: This is a power included in the Dodd-Frank financial reform law of 2008 that allows the government to dissolve a failed financial firm without resorting to the ad hoc bailouts of 2008. Ryan explicitly called for its repeal in the budget, even though it would leave the government powerless to act should another big bank bring the economy to the brink of disaster, other than handing it a bailout.

– ELIMINATING FORECLOSURE PREVENTION PROGRAM: The Home Affordable Modification Program (HAMP) has undoubtedly fallen woefully short of its goals, reaching far fewer homeowners than it was supposed to. But House Republicans want to eliminate it entirely, even with 3.6 homeowners estimated to go into foreclosure in the next two years.

– CUTTING THE CONSUMER PROTECTION BUREAU’S BUDGET BY TWO-THIRDS: The Consumer Financial Protection Bureau has a budget of just shy of $600 million for fiscal year 2013. House Republicans propose , even as the agency begins reining in abuses in the student loan and home mortgage industries.

House Republicans have been trying to water down Dodd-Frank ever since it passed. This budget proposal from the Financial Services Committee is just the latest round in the effort to ensure that the committee follows its chairman’s order to “serve the banks.”

Adding to the list of horrors, ProPublica found that Litton Loan Servicing, which was owned by Goldman Sachs at the time, denied many troubled homeowners mortgage modifications after sending their paperwork to India and losing it:

When homeowners faxed their documents, they didn’t go to Litton, [former employee Chris Wyatt] says. They went to India, where a low-cost company scanned and filed the documents — but often misfiled or lost them. Wyatt says Litton routinely denied modifications because homeowners had not sent their documents when, in fact, they had.

In a process internally referred to as a “denial sweep,” Litton’s computers would automatically generate denial letters for every homeowner who, according to Litton’s records, hadn’t sent their documents. But untold numbers of those documents had been lost on another continent. Wyatt complained about the practice in multiple meetings with senior management, he says, but managers were chiefly worried about reducing the overwhelming backlog.

Behavior of this sort is part of the reason that the Obama administration’s mortgage modification programs came up so woefully short of their goals. The programs depended far too much on providing incentives to the banks to modify mortgages, despite the shoddy state of those banks’ modification processes, and therefore only a fraction of the people at whom the programs were aimed actually received any help.

Wells Fargo has taken advantage of borrowers who rely on it to accurately apply payments and calculate the amounts owed. But perhaps more disturbing is Wells Fargo’s refusal to voluntarily correct its errors. It prefers to rely on the ignorance of borrowers or their inability to fund a challenge to its demands, rather than voluntarily relinquish gains obtained through improper accounting methods. Wells Fargo’s conduct was a breach of its contractual obligations to its borrowers. More importantly, when exposed, it revealed its true corporate character by denying any obligation to correct its past transgressions and mounting a legal assault ensure it never had to. Society requires that those in business conduct themselves with honestly and fair dealing. [...]

Wells Fargo’s actions were not only highly reprehensible, but its subsequent reaction on their exposure has been less than satisfactory. There is a strong societal interest in preventing such future conduct through a punitive award.

As Naked Capitalism’s Yves Smith noted, Wells Fargo “has an annoying habit of piously claiming it is better than other servicers when it engages in the same indefensible conduct as its peers.” Indeed, Wells Fargo has used robo-signers to fraudulently foreclosure on borrowers and has illegally foreclosed on military veterans. The bank even promoted woefully unqualified employees — including one who came to the bank from a pizza restaurant — to “vice president,” so that they could speed more foreclosures through the pipeline.

Wells Fargo’s repugnant foreclosure practices have led some to move their money out of the bank, including a group of clergy in San Francisco that pulled $10 million out of the bank and called on it “to put an immediate freeze on its foreclosures and repent for [its] misconduct.”

M&T Bank CEO Robert Wilmers

For instance, JP Morgan Chase CEO Jamie Dimon, who runs the biggest bank in the U.S., has taken issue with the rule (while admitting he hasn’t read it all). But not all big banks are opposed to the regulation. Business Insider’s Joe Weisenthal flagged a missive from M&T Bank CEO Robert Wilmers, in which he criticized big banks for “a pattern of investing in areas where they possessed little knowledge.” He went on to criticize large bank bonuses and to chastise Wall Street for lobbying against the Volcker rule:

Public cynicism about the major banks has been further reinforced by the salaries of their top executives, in large part fueled not by lending but by trading. At a time when the American economy is stuck in the doldrums and so many are unemployed or under-employed, the average compensation for the chief executives of four of the six largest banks in 2010 was $17.3 million – more than 262 times that of the average American worker. One bank with 33,000 employees earned a 3.7% return on common equity in 2011, yet its employees received an average compensation of $367,000 – more than five times that of the average U.S. worker. Thus, it is hardly surprising that the public would judge the banking industry harshly – and view Wall Street’s executives and their intentions with skepticism.

Nor can one say with any confidence that we have seen a fundamental change in the big bank business approach which helped lead us into crisis and scandal. The Wall Street banks continue to fight against regulation that would limit their capacity to trade for their own accounts – while enjoying the backing of deposit insurance – and thus seek to keep in place a system which puts taxpayers at high risk. In 2011, the six largest banks spent $31.5 million on lobbying activities. All told, the six firms employed 234 registered lobbyists.

Willmers, who oversees the 29th largest bank in the U.S. with $77 billion in assets, is surely no huge fan of Dodd-Frank, and he heaps disproportionate blame for the financial crisis onto government backed mortgage giants Fannie Mae and Freddie Mac. But his critique of Wall Street banks is spot-on, as is his assessment of the financial industry’s tarnished image. According to a Stanford University study, the number of Americans with hardly any confidence in the banking sector is at an all-time high.

They found that properties in predominately black and Latino neighborhoods were far more likely than those in predominately white areas to be left in disrepair, with maintenance problems such as broken or boarded-up windows, unkempt yards, water damage and unsecured entrances. In addition, foreclosed properties in minority neighborhoods were routinely less likely to have for-sale signs than those in white communities.

“The inferior way in which banks maintain and market their REO properties in communities of color actually changes the character of and serves to degrade the quality of life in these neighborhoods,” said the report by NFHA, a consortium of groups from across the country dedicated to eliminating housing discrimination.

The report is the latest sign of discrimination on the part of big banks when it comes to America’s housing market. Earlier reports found that blacks and Latinos were twice as likely to have been affected by the housing crisis, largely because an industry that has become infamous for its predatory lending practices was even more predatory when dealing with black and Latino borrowers. Banks and lenders often pushed minority borrowers into subprime loans even when they qualified for prime loans, adding as much as $100,000 in interest payments over the life of the loan.

The NFHA did not name the banks that owned the properties it investigated, but it does plan to file administrative complaints with the Department of Housing and Urban Development soon.

In 2008, the authors conducted an undercover study in which trained actors made more than 300 visits to financial advisers available to the general public through banks, brokerages, and investment advisory firms. The results: “Financial advisers not only fail to curb investors’ worst habits, they actually tend to reinforce them — especially when those habits generate fees for the advisers,” as SmartMoney reports:

So, when the actors came into these offices, what happened? Basically, the advisers advised the dummy clients to do a whole lot of things that were in the advisers’ interests, while making some adjustments based on just how much they thought the clients could be persuaded to do.

Most strikingly, the advisers nudged people in low-cost index funds toward high-fee actively managed funds — blatantly making their clients worse off.

The researchers used an array of portfolios with differing strategies and degrees of risk in the study, but found that financial advisers recommended a change in strategy — often toward “active management” that increased their fees or commissions — 85 percent of the time. And when advisers did mention fees, they “downplayed them without lying,” the authors of the study found.

Even worse, those without knowledge of financial advising and their own portfolios aren’t aware of how bad the service can be. Despite the study’s findings, the actors were willing to return to 70 percent of the advisers.

While the authors of the Dodd-­‐Frank Act went to great lengths to denounce bailouts, this law only sustains them. The Federal Deposit Insurance Corporation (FDIC) now has the authority to draw on taxpayer dollars to bail out the creditors of large, “systemically significant” financial institutions. CBO’s expected cost for this new authority is $33 billion, although the office recognizes that “the cost of the program will depend on future economic and financial events that are inherently unpredictable.” In other words, another large-­‐scale financial crisis in which creditors are guaranteed to get government bailouts would cost taxpayers much, much more…This budget would end the bailout regime enshrined into law by the Dodd-­‐Frank Act.

House Budget Committee Chairman Paul Ryan (R-WI) has done this before, dressing up his opposition to the power known as “resolution authority” in the Dodd-Frank law as a principled stand against bailouts. But make no mistake: repealing the power would return the nation’s regulatory framework to where it was in 2008, leaving the government with little choice when large interconnected financial firms fail other than bailing them out or risking the implosion of the financial system.

Resolution authority is meant for firms that can’t go through traditional bankruptcy, due to their size and importance to the financial system. Under that authority, the Federal Deposit Insurance Corp. unwinds such a firm when it fails, and then recoups any losses to the taxpayer by selling off assets from the dissolved firm. Importantly, Dodd-Frank bars the use of taxpayer money to preserve a financial firm: the money can only be used to ease a firm through its dissolution, with all of the funds paid back. As Rep. Barney Frank (D-MA), whose name graces the law, said, resolution authority is a “death panel” for banks.

Former Treasury Secretary Henry Paulson, who oversaw the 2008 bank bailout, said he “would have loved to have” resolution authority to take apart failing firms. House Republicans, instead, would prefer to just holler about bailouts, while taking away the government’s ability to prevent them, thus dooming the country to a repeat of 2008, should the financial system ever face such a systemic shock again.

House Financial Services Committee Chairman Spencer Bachus (R-AL)

But Bachus has received a little last minute help, courtesy of the financial firms he thinks its his duty to assist:

Bachus’s coffers have been filled by a long list of financial firms whose interests are affected by the congressman’s committee. Over the past several days alone, he’s received donations from the likes of Citigroup, Barclays and RBS.

Bachus has relied on the financial industry for nearly half of his fundraising during this election cycle, receiving hundreds of thousands of dollars from commercial banks and securities firms. Over his career, the financial industry has been far and away Bachus’ biggest donor.

And it’s really no mystery why the financial industry is so keen on keeping Bachus around. As chairman, he has sought to water down and weaken the Dodd-Frank financial reform law, gut the budgets of financial markets regulators, and undermine foreclosure prevention programs.

This week, SEC Chairman Mary Schapiro implored Congress to give her agency the funding it needs. In the House Financial Services Committee yesterday, Rep. Barney Frank (D-MA) offered an amendment to do just that, but House Republicans voted it down on party lines.

But the worst part about the GOP’s intransigence when it comes to funding the SEC is that the agency isn’t even paid for by taxpayers. Instead, its budget comes from fees assessed on Wall Street. So refusing to fund it undermines regulatory enforcement, and just leaves more money to the banks:

Cutting the S.E.C.’s budget will have no effect on the budget deficit, won’t save taxpayers a dime and could cost the Treasury millions in lost fees and penalties. That’s because the S.E.C. isn’t financed by tax revenue, but rather by fees levied on those it regulates, which include all the big securities firms.

A little-noticed provision in Dodd-Frank mandates that those fees can’t exceed the S.E.C.’s budget. So cutting its requested budget by $222.5 million saves Wall Street the same amount.

The SEC regulates more than 35,000 institutions, and to give a sense of the funding gap it faces, JP Morgan Chase spends four times the SEC’s entire budget on information technology alone.

As the New York Times’ James Stewart put it, “given the magnitude of the S.E.C.’s task, Congress could make Wall Street firms pay more and not less to police the mess they helped create.” However, House Republicans have refused to do that, instead following House Financial Services Committee Chairman’s Spencer Bachus’ (R-AL) philosophy that Washington’s role is to “serve the banks.”