What Bank Problems Mean for 2012 Landscape

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Last week’s revelation of a multibillion-dollar loss at J.P. Morgan Chase & Co. has brought back some painful memories of the great financial earthquake of 2008. The bank’s flawed hedging strategy served as a reminder that new regulations on the financial-services industry aren’t in place – and even if they were, there are questions about how they would have impacted J.P. Morgan’s expensive mistake.

That may have real political meaning in 2012.

Presidential elections are generally about many things: large-scale domestic issues, foreign policy, cultural wedge issues and, of course, the economy. But as more is learned about J.P. Morgan’s big error, and a federal investigation was launched this week, the odds increase that banking and bank regulations may emerge as a key issue in this campaign as another front in the fight over government regulation.

The spate of bank failures has worked its way through the country in the past four years, and the impact has been concentrated in key population centers and battle ground states.

Nearly 450 banks and thrifts have formally failed in the U.S. since 2008. That’s a big number, far more than all the failures in the 16 years before 2008 combined. But when you look at the reach of those failures in terms of people’s everyday lives, the impacts are far greater.

More than 6,300 bank branches were swept up in those failures, according to data from SNL Financial, with about 1,500 of those branches actually closing and the rest reopening under new management. And look at some of the states hit hardest and you will see the big population centers in politically crucial states like Florida, Colorado, Wisconsin, Arizona and Nevada.

Why are bank branches important? Because while headlines and news stories featuring astronomical numbers may have explained the facts of the banking crisis, the shuffling at those local branches is how people on the ground in real communities experienced the financial unsteadiness of the past few years.  For the rest of this week's Politics Counts column, please visit the Wall Street Journal's Web site.