Two Key Dems Throw Cold Water On Bankruptcy Bill

Sen. Dick Durbin announced Monday night that after weeks of negotiations between Senate Democrats and the financial industry, a compromise had been reached on bankruptcy legislation -- but it remained to be seen whether that compromise would win 60 votes.

On Tuesday, a key Democrat came out against the compromise bill, which would allow judges in certain circumstances to modify mortgage terms -- a process known as cramdown. Meanwhile, a second crucial Democratic vote said that he doubted the bill had enough support for his vote to decide it one way or the other.

Sen. Mary Landrieu (D-La.) spoke poorly of Durbin's compromise proposal, which is now being circulated. "I don't think it's much of a compromise," Landrieu told the Huffington Post. "My community bankers are really opposed to it and I think it's important for people to realize there is a big difference right now in the country between the health of these large international financial institutions and our local community banks...I think we gotta be careful about adopting processes and procedures that would really hurt our community banks."

Asked if she was a definite no, Landrieu responded that she was "pretty close to a definite No."

Sen. Evan Bayh (D-Ind.) wouldn't say whether or not he supported the compromise, but he nevertheless expressed deep skepticism.

"My concern about this is that in our appropriate zeal to help the four or five percent of Americans who might be faced with bankruptcy, we don't unduly raise the costs of homeownership on the 95 percent who never will," Bayh, who supported the legislation last year, told the Huffington Post.

Backers of the bill say that they are close to getting the 60 votes needed; Bayh and Landrieu are key votes needed for passage. Bayh, however, painted a much more pessimistic picture, saying that he was unlikely to be the deciding vote.

"I'd be surprised if that were the case," he said. "There's been a tendency on the part of some who are advocates for the legislation to overestimate the number of votes in favor...When I was actively involved at the moment it broke down it was my impression there were no Republicans who were willing to support it and at least a few Democrats have stated openly on the record that they were in opposition. How you get to 60 with those numbers is a mathematical problem."

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Sen. Jon Tester (D-Mont.) previously told the Huffington Post he opposed cramdown, dealing a blow to the bill, but he has yet to comment on the new compromise package.

Bayh, who has not been a principal negotiator over the last several weeks, said that he has not yet been briefed on the compromise and didn't rule out voting for it. "I'm not opposing anything -- I was one of 36 -- I voted for it. I was for getting something done in this area," he said, referencing his previous vote in support.

"But if we're not intelligent about it we're going to raise the cost on the vast majority of Hoosiers who will never go into bankruptcy and that would not be fair to them. I am for getting something done. I voted for it last year and I'd like to vote for it again this year. It depends on what the specifics are."

Ryan Grim is the author of the forthcoming book This Is Your Country On Drugs: The Secret History of Getting High in America

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Comments

[slowtono]

Take over!! That's what this is about. Local secure banks have thumbed their noses at international thieving banks. Say NO say it loud! Say O B A M A show us the money. Heres the solution, the money flows thru the hands of the real investor first, that's the American citizen. Then to the bank for debts owed, then to the national, international and federal investors. The citizens are out of debt, the local and state banks are out of debt and the fat thieves get their money with nothing left to do with it but pay taxes or re-insert it as investment into society.

[karen1p]

For the people, BUY the people.

[k6007]

Rally their constituents. Tell the bluedogs they can have the banks' money, OR the peoples' vote. NOT BOTH!

[spadefba]

Bottom line is current law allows persons with multiple properties to have all mortgages after the first home to be modified in bankruptcy court. But the average joe who has just one home gets screwed. Another case of the rich getting better treatment than the poor. How can Conservatives justify this.

[bobwalters]

They justify it by the political contributions they receive. Bought and paid for --- finest Congress money can buy, and cheap, too.

[dollbaby]

Exactly....if I have the money than I can bargain with you. So I guess that's how The Donald files over and over again and stays rich?

[timberdoodle]

Let them fillibuster and then call them out on a roll call vote.

[Softnsweet]

I agree

[nivek]

You hear the term 'moral hazard' thrown around a lot these days when it comes to bankruptcy. Moral and ethical behavior has always been the issue. Some would like you to believe filing bankruptcy is a way to get over on your creditors and abandon your responsibility to pay. There may be some truth to that, but to allow a judge to change terms of a legal contract that you happily signed because of changing economic conditions seems like a moral hazard in it's own right. I don't have great love for the banking industry, but how do you tell them their contracts are going to be re-negotiated by a third party? That will put an end to the sanctity of the binding contract as we know it.

[PhilipTaylor]

Obama and his Team are still NOT addressing the ROOT of the Problem, "NO CREDIT FLOWS" to Main Street!

$12,800,000,000,000 has been pumped into Wall Street (per Bloomberg) but almost nothing to Main Street other than a few half-baked low funded complicated programs that take forever to work!

As stated in the NY Times Wall Street OWNS the TEAM and it shows!

Obama could Fund a Government Bank that loans directly to Main Street over the Internet at low rates and fees to solve this problem. Even putting a couple $Trillion into local Community Banks and Local Credit Unions would be far more productive.

Instead we see another small program for second mortgages that will take forever to happen!

Is Main Street d00med to SUFFER while Wall Street claims Profits from the Team's funding?

[bobwalters]

In answer to your question: Yes, of course. Main Street doesn't make big political contributions nor does it hire armies of lobbyists. And Summers/Geithner are where they are to guarantee that Obama doesn't do much of anything the money oligopoly doesn't approve of; i. e., anything that doesn't line their pockets further or diminishes their clout.

[Softnsweet]

Exactly. Obama could take the money and open up a government bank. I bet the bankers out there would be crying if that happen.

[1Eco]

Vote everyone out who can't support the people.

[dcrinaz]

Again, we must make our voices heard!

Write Landry at: http://landrieu.senate.gov/contact/index.cfm

And Bayh at: http://bayh.senate.gov/contact/email/

And tell them what you think. Be polite and respectful, but firm.

And write Sen. Durbin to tell him "no compromise on H.R. 1106. Pass as is." He's available at:
http://durbin.senate.gov/contact.cfm

And tell them to look at what people are saying about them on Huffington Post.

Pass REAL CONSUMER FRIENDLY BANKRUPTCY REFORM!

[Carolab]

DONE!

[alabaman]

Senators contacted. The banking lobby is extrremely powerful, though. Why can't there be a lobby that represents ordinary consumers, e.g., a National Consumers Lobby?

[PhilipTaylor]

Need a WEB PAGE, a Non-Profit Corporation, and to register as a lobby!

Start one!

[PhilipTaylor]

Right NOW Wall Street OWNS our Congress Paying:

1. Average of $7.5 Million to each Senator every 4 years!
2. Average of $1.86 Million to each House Member every 4 years!

PROTECT OUR Congress Members Votes:

Funnel all Political Contributions through a Government Contribution Cleansing and Funds Distribution Agency that uses strict formulas for allocating funds blindly to Politicians so their votes are NOT purchased! Fairness for New potential Members (No incumbent advantages for voting record)!

[Carolab]

We have non-profits who lobby in behalf of our interests. But that is called "advocacy" because they aren't bribing Congresscritters.

[PhilipTaylor]

Also Done!

[k1k2lee]

DONE TOO!!

[dcrinaz]

Thanks to everyone! cutting and pasting makes the emailing simple! It also makes our voices heard. Senators are used to working in a vacuum, sealed off from contact from the everyday world. For democracy's sake and the sake of our country, let's change that! What we are asking for is fair and just and it will stop the foreclosures.

[dcrinaz]

ACORN and another website had had a campaign to get e-mails and letters to house members when H.R. 1106 was facing similar hurdles in the House. I don't know what they are doing, but they should do something.

[Carolab]

For those of you who seem to OPPOSE "cramdown", I'd like to remind you: Obama favors it.

[AbbieXHoffman]

So?

[Carolab]

So, there are so many strong Obama supporters on this board I thought I'd remind them of that.

[ericcorrigan]

It is good to see senators taking into consideration the impact on the vast majority of people who will not benefit from cramdown. Definetly refreshing
www.ericcorrigan.com

[PhilipTaylor]

Where is your concern for the $12.8 Trillion given to Wall Street by the FED and Treasury?

BS! Pure BS!

[PhilipTaylor]

Pure Welfare!

[aspertame]

This bill is where I break with a lot of fellow progressives. I'm all for restoring the old standards of Bankruptcy protection that were torn down by the BK "Reform" Act a few years back that Credit Card cos rammed through, but it is a dangerous game of rigging if you give troubled homeowners a lower principle or what have you, to afford what logic dictates they should never have qualified for. You are punishing those who stepped back and said "I can't afford that".

What the distressed homedebtor should be able to do is walk away, without recourse for the bank save for cases of provable fraud, and not the kind encouraged by wink-wink nudge-nudge brokers/lenders. Do that, and lenders would feel the pressure to renegotiate loans all by themselves without govt. help, unless they thought they could sell the foreclosed house off for more. This would restore moral hazard (the kind of self interest that used to make lenders afraid to make crazy loans), and would create a marketplace in which the distressed borrower could either work out something realistic or walk away without a huge debt burden, but not benefit materially from being naive or greedy.

Apportion the blame as you like, but unless the housing market is left alone to find its own floor, home value manipulation will continue to fuel bubbles and put the next generation of homeowners at severe risk, proving that we learned nothing.

[Carolab]

The more foreclosures we have, the more the "investors" make out on their "derivatives" and their PPIP purchases (which only work if the assets are OVER-VALUED, with the risks on OUR backs--and the more we lose in equity in OUR homes. It's not rocket science.

[flowereater]

Please don't be brainwashed into believing that everyone who got one of these crappy mortgages is a liar and a thief. That is just not true.

And these thieving bankers will never negotiate anything by themselves without force.

[k1k2lee]

You are making the incorrect assumption that the "floor" is created by the foreclosures. That is actually as much of an artificial floor as the other was an artificial bubble. The downgrade in everyone's property values is greater where there are more and more foreclosures. If the foreclosures are prevented, then property values, while having dropped to a more realistic value, are not completely devastated. Actually, by allowing the banks to foreclose rather than allowing a judge, following a complete review of all the evidence and argument submitted by skilled attorneys for the banks as well as the debtors, to create a modified loan that will permit the home to remain out of foreclosure, you would actually be inflicting greater punishment on those who "stepped back" and chose something more affordable, because then their home prices will plummet even further due to no fault of their own. You are completely buying into a bank argument that fails logically because it fails to account for the case-by-case evidentiary review that will be conducted and the able assistance those banks are given through their counsel in court.

[aspertame]

I was actually not referencing those who "'stepped back' and chose something more affordable", but those who simply did not buy. You cannot talk about a supposed "artificial floor" and then base your case against letting that floor be hit on the idea that it will damage the innocent. The bubble damaged the innocent, as will fixing it. I'm talking about taking unavoidable losses already cooked into this mess and redistributing them (to borrow GOP teabagging parlance) to all taxpayers, including those who made better choices. It's called Moral Hazard, and it's about discouraging people or entities from doing dumb, self-destructive things - even if naively done - by not shielding them substantively from consequences. I do not mean driving people who were not greedy into penury, but walking away from a bad buy (free of the bank having recourse to seek judgement) as an allowable consequence is a lot less damaging to the population as a whole than saying here, we won't allow you to lose much of anything in this deal AND you can keep the house, and your fellow tax paying Americans will cover that through bank bailouts and special programs. Talk about buying into the bank's agenda? If the housing market is futher destabilized by loan mods and other market manipulations, then it's not the home debtor who comes away the better for it, just the banks!

[PhilipTaylor]

We Main Street Americans must begin to REFORM this System of Government that allows:

1. Wall Street Corruption and Greed to Sink our Economy!
2. Wall Street to pay $5 Billion to our Congress to Buy Votes!
3. Corporate welfare to sink or Budgets and OUR FUTURES!
4. Obama with Geithner and Summers to continue to ignore Main Street as it drops off the EDGE! After the Election the Average American on Main Street ceases to exist! The only things that matter is the Lobbyists and Corporate Interest Groups!
5. Not "1" CEO (other than merger) has lost their Position!

PROTECT OUR Congress Members Votes:

Funnel all Political Contributions through a Government Contribution Cleansing and Funds Distribution Agency that uses strict formulas for allocating funds blindly to Politicians so their votes are NOT purchased! Fairness for New potential Members (No incumbent advantages for voting record)!

[iridium53]

Why have elections at all?

Why not just let the banksters do everything. They seem to be doing that already.

Obama now looks to be nothing more than a front man for the banksters. They seem to just delegate their requests to him so that he, Geithner, Summers and Bernanke can execute for them.

[PhilipTaylor]

That is what happens so why NOT just let the Banks RUN THE WHOLE SHOW!

Saves all the frustration of pretending Main Street Matters!

[kells1001]

Smaller community banks are in better positions to make loans because they did not partake in as much unscrupulous lending. Congress and President Bush changed the bankruptcy laws effective early 2006 because they could not or did not want to face the realities of a necessary slowdown. They along with the fed encouraged further interest rate reduction, over valuation of homes. Had they continued under the old bankruptcy law more people would have stayed in their homes and credit markets would have been forced to correct sooner.

Better regulation and responsible action instead of greed, quick profits and trying to pass the buck to the weakest links is exactly why the correct actions now are to place all things in perspective with the help of local government and appraisers.