Banking Lobby Defeats Plan Intended to Help Homeowners

by Damozel | Despite the support of Obama and one bank (Citigroup), the Senate voted 45-51 against the bill that would have let bankruptcy judges rewrite -- "cram down" in the vernacular -- mortgage payments for homeowners.  (abc news; think progress) 

This bill was part and parcel of "a central element" in the Dems' plan to stabilize the economy. (Wash. Independent) Tragically, "[s]everal Democrats, including the newest Democrat, Sen. Arlen Specter of PA, opposed [the bill]."(abc news)  "Nays included all Republicans and Baucus, Bennet, Byrd, Carper, Dorgan (?), Johnson, Landrieu, Lincoln, Nelson (NE), Pryor, Specter (awesome!), Tester," dday says. Ryan Grimm at HuffPost discusses the millions in contributions raked in to their campaign coffers by some of those Dems. 

And -- wow -- Sen. Dick Durbin is seriously annoyed.  Siding with those who don't have "paid lobbyists" and against bankers who "own the place," he slammed the argument being mounted by the banks:

Durbin said on the Senate floor that in negotiations, the banking industry argued that restructuring primary home loans -- secondary home loans and luxury loans for items like yachts can already be restructured by a bankruptcy judge -- would create a moral hazard in this country.

"Senator, you don't understand the moral hazard here," Durbin paraphrased the banking argument. "People have to be held responsible for their wrongdoing. If you make a mistake, darn it, you've got to pay the price. that's what America is all about."

"Really, Mr. Banker on wall street? that's what America is all about?" he railed.

"What price did wall street pay for their miserable decisions, creating rotten portfolios, destroying the credit of America and its businesses?" Durbin said of the $700 billion Wall Street bailout Congress passed, and Durbin supported in the waning days of the Bush administration. "Oh, (the bankers) paid a pretty heavy price. Hundreds of billions of dollars in taxpayers' money sent to them to bail them out and put them back in business, even to fund executive bonuses for those guilty of mismanagement. Moral hazard, huh? How can they argue that with a straight face? They do." (abc news)

Major concessions didn't help.  (Wash. Independent)

[T]he bankruptcy bill, sponsored by Sen. Richard Durbin (D-Ill.), permits bankruptcy judges to reduce, or “cramdown,” homeowners’ mortgage payments to help borrowers stay in their homes — an option currently available to save vacation homes, yachts and almost any other valuable asset, but not primary homes. The House passed a similar bill in March, but it’s been stalled in the upper chamber while Durbin and other Senate leaders tried for weeks to negotiate the support of the giants of the finance industry, including Bank of America, Wells Fargo, JP Morgan Chase and the Credit Union National Association.

To no avail. Only Citigroup, which endorsed the Senate bill earlier in the year, has signed on in support. And it wasn’t for a lack of concessions from Democrats. Indeed, behind Durbin, Senate leaders diluted the bill so that eligibility applies only to: (1) loans taken out before Jan. 1, 2009; (2) loans that are at least 60 days delinquent; (3) loans with outstanding balances of less than $729,750; and (4) loans for which homeowners were not offered a modification from their servicer — one compatible with either the Obama administration’s new anti-foreclosure plan or the Hope for Homeowners program. Also, the Durbin compromise sunsets the bankruptcy option in 2012.

“It’s a compromise six ways to Sunday to answer everyone’s concerns, and yet you’ve still got what looks like all the Republicans, and a handful of Democrats, who don’t want the bill,” said David Abromowitz, a housing expert at the progressive Center for American Progress. “[The banks] still have enormous political power on Capitol Hill.”  (Wash. Independent)

The timing could hardly be worse for homeowners, with foreclosures up 24% from 2008.(Wash. Independent)

Given the tidal wave of foreclosures that have so destabilized our economy, this seems like a no-brainer piece of legislation. There were over 800,000 foreclosures in the first three months of 2009 -- more than 341,000 in March alone.

But the banking lobbyists went after it with guns a-blazing....And their aim was true -- and deadly.  (Arianna Huffington)

Obama ain't happy. 

During Wednesday night's press conference, President Obama said that he's been "sobered by the fact that change in Washington comes slow" and "humbled by the fact that the presidency is extraordinarily powerful, but we are just part of a much broader tapestry of American life and there are a lot of different power centers."  (HuffPost)

One of which is the potent banking lobby.  So anyway, the rich guys won and are breaking out the champagne.  No, really.  Think Progress reports:

The American News Project noted that the Mortgage Bankers Association was "in a celebratory mood" at its annual meeting this week because "a massive lobbying campaign" against cram-down appeared to be working.

How do they get away with it? Arianna Huffington asks why banks "are still being treated as beltway royalty?"  Dday says:  "[T]hey fund the campaigns, they throw the best parties, they share the interests and perspective of those disproportionately wealthy politicians."  In this oligarchy masquerading as a democracy, the banks therefore have disproproportionate power.

Dick Durbin is opening the window and showing the sick, decayed underbelly inside. Actions like the shareholder revolt ousting Ken Lewis from the chairmanship of Bank of America need to happen more and again. At some point, we can affect these people personally, and really damage them where they live. It's the only way, through a broad-based movement, to overturn this horrible dynamic of financial industry control of government.

Ryan Grimm thinks that the defeat of this measure will ultimately be detrimental to banks and not just to homeowners.

The death of the bankruptcy reform measure -- which would have allowed a small number of homeowners who met strict conditions to renegotiate mortgages under bankruptcy protection -- is a major tactical win for the banking industry. But allowing the foreclosure crisis to continue unabated may end up being a failed strategy for the financial sector.

More at Memeorandum....

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Comments

[arizona bankruptcy lawyer]

The U S Government has already done way too much over the past 4 months. Unfortunately the train has left the station and these folks will continue spending until there is no one left to tax.

[Credit Card Debt Forgiveness]

Not sure if it makes a lot of sense to me but it looks like you're having fun.

[Unfiled Tax Returns]

Great job...sure his to see you having fun.