Cramdown Vote: Banks Bought Senators On The Cheap

Sen. Dick Durbin (D-Ill.) introduced legislation in the Senate Thursday which would allow homeowners in bankruptcy to renegotiate -- or cramdown -- mortgages with banks. His corresponding amendment to the House-passed bankruptcy reform bill is scheduled to be voted on at 2:30. (Read the whole thing.)

[UPDATE: It fell 15 votes short of the 60 needed to end a filibuster. Here are the 'no' votes and the amount of money they've taken from the financial industry.]

The measure is widely expected to fail, as crucial Democratic senators, whose votes are needed to overcome a filibuster, have publicly declared their opposition.

Democratic Sens. Ben Nelson (Neb.), Mary Landrieu (La.) and Jon Tester have indicated they plan to vote against the amendment. Sen. Evan Bayh (D-Ind.), who supported the bill last time around, expressed reluctance to back it this time. The banking industry has lobbied relentlessly against the reform.

On Monday night, Durbin concluded that the banks "frankly own the place."

The place came (relatively) cheap.

The banking and real estate industry has funneled roughly $2,000,000 into Landrieu's campaign coffers over her 12-year career, according to data from the Center for Responsive Politics. Bayh has taken in about $3.5 million. The financial sector is Nelson's biggest backer; he's taken $1.4 million from banks and real estate interests and another $1.2 million from insurance firms. Tester has fielded roughly half a million in his two years in office.

That's about nine million dollars -- far, far less than one percent of the amount taxpayers have spent to bail out the financial industry.

The opponents of the bill all say that industry influence is not the reason they'll vote against the measure. Rather, they claim genuine policy disagreements: concerns it could raise interest rates or increase defaults, for instance.

But Durbin's amendment is very narrowly tailored and would only allow mortgages signed before Jan. 1 to be modified -- meaning that interest rates on future loans should be unaffected.

We'll be watching the roll call and will post the rest of the no votes along with their take from the financial industry.

Durbin's office has also calculated, relying on data from the Center for Responsible Lending and Moody's, how many homes his bill would save and how much home equity it would preserve by preventing foreclosures, which damage entire neighborhoods.

Landrieu's Louisiana could see 12,651 homes and $500 million of equity preserved. Tester's Montana: 2,815 and $40 million. Nelson's Nebraska: 3,763 and $140 million. Bayh's Indiana: 27,960 homes and $590 million.

Across the United States, the measure is estimated to prevent 1.69 million foreclosures and preserve $300 billion in home equity.

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

[Steve MacGregor]

05:14 PM on 05/02/2009

If Michelle Baughman really wants to know who in congress is un-american, she can read the roll call of all the Senators who voted against this bill. Then she'll know.

[dsws]

04:26 PM on 05/01/2009

"only allow mortgages signed before Jan. 1 to be modified -- meaning that interest rates on future loans should be unaffected."

What we do now, banks have reason to expect that we may do again. Rates will reflect those expectations.

If we want people to stay in their homes (or hang onto their rental properties), modify the terms of the loan: extend the term and lower the interest rate -- not lower the principal. If you you have $10k lower principal, you're $10k better off when you sell a house And if you don't sell the house, you're still $10k better off. There's no effect on the incentive whether to stay or sell. By contrast, if your interest rate is lowered so that your mortgage is $10k less valuable to the bank, you're $10k better off provided you own the house for the entire duration of the mortgage. But if you sell, you lose it: the reduced interest rate doesn't carry over to a new mortgage. So you have a reason to keep the house.

If we want to give bankrupt homeowners some money, just give them some money. Make a fund overseen by the Fed or FDIC. Designate some lending practices as deprecated. When a bankruptcy judge reduces the interest rate on a deprecated mortgage, have the fund cut a check.

Changing the rate and duration is enough. A thousand-year mortgage at zero interest is just as good as owning the house -- until you sell.

[VOTER]

02:23 PM on 05/01/2009

Also contact the DNC: Issues

http://www.democrats.org/contact.html

[VOTER]

02:09 PM on 05/01/2009

If in a town, population of 5,000, had 50% or more citizens line up at their
local banks to withdraw all of their money, would the banks care?

[PDRE]

09:34 AM on 05/01/2009

The Democratic Hall of Shame
of those people who choose to represent their banks rather than their people. All Republicans are included by absence since they all voted on behalf of their bank. However the following Democrats should be especially named and rightfully defeated in the next election by their people whom they have failed to represent.
Baucus (D-MT)
Bennet (D-CO)
Byrd (D-WV)
Carper (D-DE)
Dorgan (D-ND)
Johnson (D-SD)
Landrieu (D-LA)
Lincoln (D-AR)
Nelson (D-NE)
Pryor (D-AR)
Specter (D-PA)
Tester (D-MT)

Not Voting
Kennedy (D-MA)
Rockefeller (D-WV)

[VOTER]

02:10 PM on 05/01/2009

There is no excuse for the votes of these Dems. NONE!

[Spiderxx1]

10:24 AM on 05/06/2009

Yes, this is exactly what we should do. Keep a list and vote them out. Its alright to help some banks, but not ok to help some common citizens.

[KYlawyer]

02:26 AM on 05/01/2009

There is one and only one solution to the problem of lobbyists $ perverting the halls of congress...Public financing of campaigns set a limit for the House and Senate Campaigns, outlaw any additional funding from being slipped to the candidates.

This would also make for a real citizen congress in that now only the rich and powerful can run because of the money and needed connections. Public financing would allow for a wider range of folks to seek office in congress.

Until we take some measure such as public financing, we are only going to have government by the of the corporate interests, by the corporate interests and for the corporate interests.

[blah7]

04:25 PM on 05/01/2009

@ KYlawyer - I used to agree with you on public financing of campaigns/elections, but admittedly, it would be very difficult to enact and defend (1st Amendment grounds). But recently, a friend mentioned something Alan Keyes (of all people!) said "No dollar vote without a ballot vote. If you can’t walk into the voting booth and cast a vote, you should not be able to make a contribution. No corporate contributions. No union contributions. No contributions whatsoever from any entities that are not actual breathing voters who can go cast a vote." And have total tranparency and publication of all donations. Not a perfect solution, but gets you partway there. Just a thought...

[Jim Welke]

08:25 PM on 05/01/2009

Eliminating corporate money from campaigns would surely fix a lot of problems. These folks who take corporate money and claim there's no quid pro quo are "full of baloney", as my Mom would say.

Personally, I think TV and radio ads are utterly devoid of useful information, cost a ton, and should be discouraged altogether. Can TV's (and radios) be programmed to block them -- voter controls? Maybe then politicians wouldn't need so much money for their campaigns.

One of my recent favorites is Chris Dodd, Chairman of the Senate Banking Committee. He takes piles, suitcases full, of money from banks he's supposed to regulate. Financial crisis, anyone?

Want to see campaign contributions "who and how much"? Visit: http://www.opensecrets.org/

There's a new group, led by Lawrence Lessig, devoted to this: http://change-congress.org/

http://www.cyclopsvue.blogspot.com

[huffingt]

12:48 AM on 05/01/2009

some born nayers, others chronic nayers, a few opportunistic nayers.
It is up to the constituents to straiten them up

[huffingt]

12:46 AM on 05/01/2009

some born nayers, others chronic nayers, others opportunistic nayers.
It is up to the constituents to SHAPE that up

[Gwenlee]

11:34 PM on 04/30/2009

Sen. Byrd I am sooooooooooooooooooooooo disappointed.

I am tired of people saying greed as my problem was a ripple effect. I bought what we could affored. I will be in filing a lawsuit for sure now. I was going to let it go. Breech of contract for me. I feel so bad for the others. I think lots of them were swindled. Now everyone please attend a mortgage class before you buy.

[Steve Bruesewitz]

10:51 PM on 04/30/2009

We tend to think about campaign contributions in the opposite way they affect things. The congress isn't bought by the banks when they donate money to politicians. Banks pay money to candidates who agree with them to get those candidates elected. Further contributions are just reminders. We have to change who payrolls politicians from special interests to the public. Happily enough Sen. Durbin is also the sponsor of public financing of campaigns in the Senate. Public financing of elections is not just a good idea it is a pre-requisite for any significant change.

[pjean]

10:18 PM on 04/30/2009

We need to protest the bankers. Although I do not own a home, in these tough economic times they should try and work with homeowners. This goes to show how greedy these bankers are and how we so desperately need a revolution and show these politicians that we put them in office for the people not the BANKS. This is a sad day when a bunch of thieves get bailed out and the hard working people get stuck in the rear yet again.

[Lorianne]

11:16 PM on 04/30/2009

The greed is on both sides ... its mutual.

[DLBSR]

11:20 PM on 04/30/2009

Second that.

[ncal]

09:58 PM on 04/30/2009

Go back and review Keaton's film 'Mad Money' now that you know how the banking system worked. If the money doesn't exist (e.g., your 401K untaxed money; doesn't exist; you can't take a loss nohow), then does it matter if it's stolen? You're cast as the guy who testifies to the end that what happened could not possibly have happened.

[Tidyus]

09:42 PM on 04/30/2009

Let the bankers celebrate winning this battle now...ho ho ho.. but if Durbin brings up the bill again, chances are he/we will win. The banker's argument is false because the bill was limited to only houses mortgaged by a certain date and does not condition the future. People like Tester from Montana may have been mislead. Besides, the more the bankers party, the less fight they will have next time. They may have just won the battle and lost the war.

[sueinmn]

09:32 PM on 04/30/2009

Is this a sample run of bank reform, insurance reform and what ever else reform we are in need of?

Who do these Senators work for??? The banks or us?????????????

[mike42nola]

02:16 AM on 05/01/2009

Sue, they work for themselves and only represent their own interests. They think the American people are shallow and that we will continue to look the other way while they waste trillions of taxpayer mdollars on do nothing programs.

[CAP6]

09:08 PM on 04/30/2009

A few Words Of Wisdom I deem appropriate for this forum

Suppose you were an idiot. And suppose you were a member of Congress. But then I repeat myself. -- Mark Twain

In my many years, I have come to a conclusion that one useless man is a shame, two is a law firm, and three or more is a congress. -- John Adams

What this country needs are more unemployed politicians. -- Edward Langley, Artist (1928-1995)

Finally, and my personal favorite;

There is no distinctly native American criminal class...save Congress. -- Mark Twain