Bank Lobby On Course To Gut Bankruptcy Bill

The bankruptcy reform bill that passed the House weeks ago amid much fanfare is on course to be gutted by the Senate Thursday. Senate Majority Leader Harry Reid (D-Nev.) told the Huffington Post Wednesday that he wasn't sure the bill had enough votes to overcome a GOP filibuster and that its key provision -- cramdown -- may have to come out.

"We're going to find out. I don't know," he said when asked if the bill had enough votes to pass.

Democrats Ben Nelson (Neb.), Mary Landrieu (La.) and Jon Tester (Mont.) have indicated to the Huffington Post that they oppose the bill's central measure -- giving bankruptcy judges the power to reduce, or cramdown, a homeowner's mortgage payment under bankruptcy proceedings.

That provision is on the chopping block.

"The bill that the House sent us is a very, very good bill, a very good bill," said Reid. "It would be a terrific bill if we had cramdown in it and it'll still be a good bill if that's not in it."

Cramdown, however, is the guts of the bill, House Speaker Nancy Pelosi (D-Calif.) told the Huffington Post.

"Well, it wouldn't be a bankruptcy reform bill without cramdown in it," she said.

The two versions of the bill would need to be reconciled in a conference committee. "I strongly support [cramdown], but we'll see what happens on the Senate floor," said Pelosi.

On Tuesday night, Sen. Dick Durbin (D-Ill.), the lead proponent of the cramdown measure, laid out the latest compromise version, which includes strict conditions governing which mortgages would be eligible. Only mortgages entered into before Jan. 1, 2009 would be open to judges to reduce. A mortgage would need to be delinquent for 60 days. A borrower would need to notify the bank of economic difficulty 45 days before filing for bankruptcy. Only mortgages under $729,000 would be eligible.

Cramdown faces fierce opposition from Wall Street. "The very same banks that are saying these people have to pay a price for bad decisions, many of these banks were in line to receive millions if not billions of federal dollars because of the same mistakes they made, when they made a business mistake," said Durbin.

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

[dadw5boys]

12:45 AM on 05/01/2009

Wealthy People place their homes in TRUST so they can go bankrupt every 6 years is they want and the home is never threatened.

If you have a home valued over $150 K you need to place it in a trust.

It must be in a trust for 3 to 5 years before filing bankruptize. Check the required years in your state.

Also remember any unsecured debt that us 6 years old can be written off.

Never tansfer any debt ! That starts the count from day one.

These are laws that prevent people from becomming Endentured Servants.

[Tulka2]

01:44 AM on 04/30/2009

Nationalize the banks. (It will come to that and the sooner, the better will be Mainstreet's position.)

Tax the rich. (Thank you Obama, but may we please have some more, Sir?)

General Strike, June 1, 2009. (Do what you like, but on that day, i am not working nor am i spending one dime. The big boys tend to notice that kind of action fast... in whatever country it happens.)

[steelwheels]

09:37 AM on 04/30/2009

Now this is change I can believe in. This is what will really get their attention. Screww stupid parties with funny hats and signs. JUST STAY HOME. Where's the reference to this. this is the first I've heard of it

[Tulka2]

02:23 PM on 04/30/2009

(....and if you took it into your head to walk by your local bank or Fedral Building that day, well, you might find some other folks there too, but that's not even necessary.)

[dcrinaz]

09:46 PM on 04/29/2009

If you guys are upset about this, then wait till you see this Huffington Post article:

http://www.huffingtonpost.com/2009/04/29/dodd-white-house-ambivale_n_193214.html#postComment

It seems now that the Obama administration is now "ambivalent" about bankruptcy reform. What? After this issue was supported by the Obama campaign openly and clearly during the election?

Are the banks getting to Obama's advisors? Might they be getting to...him?

Take a look at the article. And if you are thoroughly concerned, please write President Obama at:
http://www.whitehouse.gov/CONTACT/

And remind that he needs to support real, strong, consumer friendly bankruptcy reform, with "cramdown" and all. Thanks!

[dcrinaz]

09:58 PM on 04/29/2009

As Senator Barack Obama, our president was a co-sponsor of S.2136 the Helping Families Save Their Homes in Bankruptcy Act of 2008. Now we have learned that President Obama, he is ambivalent about H.R. 1106, The Helping Families Save Their Homes Act of 2009, which is essentially the same bill as the 2008 version.

Why the flip-flop, President Obama?

If you'd like to ask him yourself, please write him at:
http://www.whitehouse.gov/CONTACT/

I think we'd all like an answer.

I'm a loyal Democrat, but I'm not a mindless one. And we have a right to know how many more homes does the White House and the Senate want to have the banks own through foreclosure? How many more Americans do they want to be made homeless before they pass this reform?

[SouthPrairie]

09:09 PM on 04/29/2009

I think we SHOULD cram it down their throats. They crammed it down ours. It was and is an immoral bill that intened to fleece. In fact that word wraps up the entire intent of the Bush Admin.

FLEECE

[ThomasMc]

08:30 PM on 04/29/2009

The Dems need to dump that useless wuss Reid and get a real leader.

[SouthPrairie]

09:10 PM on 04/29/2009

Yes we do.

[crypticpro]

08:26 PM on 04/29/2009

It is time now to figure out who is for the people and who is for the banks. Make them actually filibuster and explain how allowing bankruptcy judges to provide a comprehensive and individualized plan for struggling citizens is somehow a wrong approach. Get real Harry Reid and you other Democrats. IT IS TIME TO FIGHT. Really, it's way past time. Who do you think voted you in office? Why do you suppose they did that? Was it to attain the goals of lobbyist and banks? Do you really think so? Take your lumps. Earn the scorn by taking action. Forget about getting elected. Forget about your own interests. You are supposed to represent the people and they are hurting and getting fighting mad at the lack of real change. As an insightful post observed, there is pressure building and it will be vented sooner or later. It is a universal law of human nature.

[Pendragon2008]

10:45 PM on 04/30/2009

Remember, it was JFK who said:

"Those who make peaceful revolution impossible, make violent revolution inevitable."

This bill was the definition of peaceful revolution; the reform of legislation designed to help the American people, who are scared, angry and looking for the Congress to protect their rights.

It's well past time that we look at Congress, and stop thinking of them as Republicans or Democrats.

They are Americans, who are meant to be representing America, and the interests of the American people - not banks or corporations.

[CaptainVideo]

08:26 PM on 04/29/2009

It is not Reid's fault that because of the filibuster it takes 60 votes to get anything passed in the Senate and that he does not have 60 votes.

If the Constitution were adhered to it would only take 51 votes to get bills passed in the Senate, and Reid would have the 51 votes.

It is high time to use the nuclear option, end the filibuster, and restore majority rule to the Senate.

[UNCLEJOE]

08:13 PM on 04/29/2009

The Greenspan banks in 2004-2006 seduced unsophisticated home buyers into mortgage plans which trapped the sub prime home buyers into certain future foreclosures. Now let those banks pay the price of the Federal Reser\ve Bank's duplicity.

Why is it that all these discussions about bailout never adress the problem of millions of home owners going or have gone into foreclosure? How can these millions of foreclosures be re-negotiated at the new lower hom\me values with the lower Fed Home Loan Rates as suggested by NYU Economics Professor Nouriel Rubini?

Why start the Recovery from the Banks down ala failed Reaganomics 'Trickle Down' theory and start from the bottom up which was first publicly advocated by Rubini, and start with the foundation of economics which unquestionable is the housing industry on which all other industries rise or fall? even the Banks, large and small.?

Today's lower home prices with lower Fed interest rates and a little restructuring of mortgage payments and a little subsidy from the government could expedite our economic Recovery much faster and billions cheaper without throwing billions down the deep pockets to the major banks like BOA and AIG and JP Morgan which actually reduced lending 30 to 50% after the first $780 billion hand-out called bailout.

[CaptainVideo]

08:11 PM on 04/29/2009

The people who broke the economy are now able to impose their will on the Senate with respect to the treatment of bankruptcy. Where is the outrage?

[jetphixer]

07:56 PM on 04/29/2009

I could never figure out why Harry caved on everything.Now i Know He also has "Majic Underwear" , These folks all are "Little Eichmann or as Paul K put it Apechecks[ (Russian) i know the spelling is messed up.] But that is how these folks operate. This is another reason Harry said Jay Bebee was so wonderful wen we know he is a war criminal;. GO SPAIN Hats off to ya all BILL

[CaptainVideo]

08:07 PM on 04/29/2009

The problem is not Harry. It is the fact that the public tolerates the misuse of a proceedural rule with respect to debate to defeat the original intent of the Constitution that to pass a law in the Senate all that is required is a 50% majority plus one, where the plus one can be the Vice President. It is the fact that the Republicans have been allowed to impose an unconstitutional requirement that a 60% supermajority is needed to get anything passed in the Senate that is the source of the problem.

It is time that the public demand that the nuclear option be used to end the filibuster and restore majority rule in the Senate.

[DannyRose]

07:42 PM on 04/29/2009

So now the Dems need 70 in the Senate to overcome the Repugs, the Blue Dogs and DINO Spector. Why even bother?

[paixa3]

07:31 PM on 04/29/2009

Both Pelosi and Reid are ""cavers"". However, there is no doubt that Harry was born with knee pads.

[TallyLass]

07:25 PM on 04/29/2009

Everyday, I come here and see the the continuing selling out of the masses who vote these people into to office. Then I see the nfew gain and they just smile as if when they screw us, we're supposed to take it and like it. I don't know what the catalyst is but one day the people are gonna explode.

[justthefacts17]

08:10 PM on 04/29/2009

The two worst congressional "leaders" ever in history.

[CaptainVideo]

08:13 PM on 04/29/2009

Due to the misuse of the Senate rules by the Republicans, it takes 60 votes to get anything passed. When Harry does not have the 60 votes, just what do you want him to do?

[Pinchy]

07:25 PM on 04/29/2009

The only way writedowns should be tolerated is if there are negative consequences with going that route. For example, what happens if the mortgage is written down to save the house and then the house value goes up to double what the owner paid in future years? If any property that benefited from a write down is sold for a profit in the future, the owner should be required to pay back the government "loan" with interest. This money should be earmarked to go directly against paying down the National debt and not to be diverted for other programs. That's the only way to avoid this becoming an incentive to default on your loan.

[CaptainVideo]

08:01 PM on 04/29/2009

If you own 6 houses like the McCains and you go into bankruptcy, the principal on the loans on houses 2-6 can be written down, even though the value of these houses may go up again in the future. If you own a large, expensive yacht, the principle on the loan can be written down even though its value may go up in the future. Nobody is required to repay anything if that happens.
So why should the first house, which is one's domicile be treated any differently?

[CaptainVideo]

08:03 PM on 04/29/2009

" the owner should be required to pay back the government "loan" with interest"

If the principal is reduced during a bankruptcy proceeding, it is the creditor who suffers the loss. There is no government loan involved. Get a clue before you post comments.

[TJCole]

06:56 PM on 04/29/2009

These mass foreclosures are this President's Hurricane Katrina on steroids...

Why won't this President serve the people of this country, over these corrupt predatory usurious Banksters...?

[paixa3]

07:33 PM on 04/29/2009

I agree, pass a usury law at 10%. ALL charges and fees count as interest in calculations.