Senate Republicans Defeat Mortgage Cramdown Bill

The Empire Strikes Back: Senate Republicans Defeat Mortgage Cramdown Bill
by pragprogress

Fri May 01, 2009 at 12:34:43 PM PDT Daily Kos

The Republican Party, defeated at the polls and bereft of ideas, managed to eke out a small but significant victory this week with the help of their friends in the banking industry by defeating a Senate bill that would've restored the ability of bankruptcy judges to write down the principal amount on home mortgages to reflect declining property values.

The Senate Republicans prevailed by convincing eleven "moderate" Democrats to join them in sealing the fate of millions of homeowners who are unable to refinance their existing mortgages because they are "underwater" due to the dramatic reductions in the value of their homes.

The defeat of this legislation is a good example of how dysfunctional a democracy can become when powerful self-interests are allowed to trump the broader public interest through the influence of lobbyists backed by massive amounts of campaign contributions.

Somehow lost in the fog of the $12 trillion in public funds that have been dedicated to solving our banking crisis is the fact that the crisis began with skyrocketing foreclosure rates and is not likely to end until those rates come back down to normal. The "toxic assets" that are at the heart of the sickness in the financial system are toxic because the loans on which they are based are headed into foreclosure at rates far beyond what was originally anticipated.

Yet, foreclosure rates are at record levels and still climbing. With an even bigger wave of foreclosures looming on the horizon in the form of the huge number of adjustable rate mortgages written at the top of the housing bubble coming due in the next year or two, this problem will not go away on its own.

(Full article)