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.)
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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6 Responses

  1. Allan’s having some technical problems and asked me to post the following:

    Allan (with an account of ” The Subprime Rogues Who Bought Congress”) and a LIST for some of you <<< CLICK HERE http://www.ourfuture.org/blog-entry/2009051906/subprime-rogues-who-bought-c ongress

    The Subprime Rogues Who Bought Congress By Isaiah J. Poole May 6th, 2009 – 11:04am ET A Center for Public Integrity report released today, “Who’s Behind the Financial Meltdown,” spells out how 25 of the country’s largest financial institutions fueled the subprime mortgage market that precipitated the global financial crash. In addition, as a complementary Financial Times report today shows, these institutions spent more than $370 million over the past decade in lobbying and campaign cash for the deregulated environment that allowed their behavior to go unchecked. It is a glaring example of what Robert Borosage writes today and what other writers have said repeatedly: Wall Street bought our political system out from under the rest of us so it could be used to their ends, and now we are the ones who are paying the price. The Center for Public Integrity , a nonprofit investigative journalism site, reports that:these top subprime lenders were not simply “unwitting victims of an unforeseen financial collapse, as they have sometimes portrayed themselves, but enablers that bankrolled the type of lending that has threatened the financial system.” Ke y findings of th e study: At least 21 of the top 25 subprime lenders were financed by banks that received bailout money — through direct ownership, credit agreements, or huge purchases of loans for securitization. Eleven of the lenders on the list have payments totaling billions of dollars to settle claims of widespread lending abuses. Four of those have received bank bailout funds, including American International Group Inc. and Citigroup Inc. The top lender on the list, Countrywide, last year paid more than $8.6 billion to settle a predatory lending suit brought by the District of Columbia and 49 states. A computer analysis of more than 350 million mortgage applications reported to the federal government between 1994 and 2007 found that the amount of money spent by homeowners on their mortgages as a percentage of their income spiked sharply during the peak of the subprime boom. Loan-to-income ratios rose from 1.65 in 1994 (meaning the average mortgage loan was 165 percent of a borrower’s income) to 2.46 in 2005. Bill Buzenberg, in a commentary accompanying the report, wrote that the investigation shows the extent to which the line being touted by financial institutions—that they were “victims” of rogues within their operations and that no one could foresee the damage that could be created by the toxic assets on their books—is bull. What’s missing from this story is the fact that this was a self-inflicted wound for which the rest of us are picking up a massive tab. The largest American a nd Europ ean banks and investment houses were not the unwitting “victims” of an unforeseen financial collapse, as they have so often been portrayed. The mega-banks not only invested in subprime lending institutions — they were the enablers, bankrollers, and instigators driving high-interest lending, and they did so because it was so lucrative and unregulated. Worse, in many instances these are the same financial institutions the government is now bailing out with tax revenues. … Did these major financial institutions not understand what kind of lending was taking place? The poor quality of these loans was no secret. Many of these subprime lenders, the Center found, were forced to pay billions of dollars to settle government charges of abusive or predatory lending practices. This was a period of some of the worst mortgage lending in American history, in which regulators were nowhere to be seen, and normal income documentation and loan standards were thrown out the window. In many cases, though, the big banks really didn’t care if the loans were bad. That’s because they’d bought “insurance” against them — those infamous “credit default swaps.” The swaps sounded good, except they were unregulated, and those selling them — like American International Group Inc. — didn’t have to maintain reserves to guard against unforeseen losses. It was all a house of cards, and some tried to sound the alarm. A look at the historical record shows that Washi ngto n was warned repeatedly over the last decade — by consumer advocates and a handful of regulators and lawmakers — that these high-cost loans represented a systemic risk to the economy. It is hard to believe the major banks were unaware of what was going on, or what the consequences might ultimately be. … Despite such warnings, Congress, the White House, and the Federal Reserve all dithered while the subprime disaster spread. Long forgotten congressional hearings and oversight reports, as well as interviews with former officials, reveal a troubling history of missed opportunities, thwarted regulations, and abject lack of oversight. Instead, the financial industry supported more deregulation, along with an extraordinary disregard for the damage being done. This was accompanied by millions of dollars in political contributions to leading lawmakers of both parties from the same financial industry that is in such trouble today. Those campaign contributions, as this chart shows, were more heavily showered on Democrats than they were on Republicans during the past 10 years. Of $23 million in campaign contributions, the major Democratic campaign committees received at least 51.3 percent, with the presidential campaign of Barack Obama receiving 9.3 percent of the total. In addition, just one of these firms, Countrywide, spent at least $2.9 million on direct lobbying from 2006 to 2008, based on data collected by OpenSecrets.org from reports filed with Congress. The continuing lobbying muscle of the big financial institutions was=2 0largely responsible for last week’s defeat of a mortgage reform bill that would have allowed bankruptcy court judges to write down the value of mortgages that were likely to have been fraudulently inflated to begin with. That same muscle is being used this week by the credit-card oligopoly to defeat legislation that would put restraints on their ability to bilk consumers. It will take a lot of citizen power, striking fear in the hearts of both Democrats and Republicans, to fight back against a lobby that still retains so much political power even as it has destroyed so many lives. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ Go to the same site for a companion article that claims “Corruption Is Harmful to Your Health” Update on my research in my case: For months I sought online info on SASCO Series 2005 RF-5 of which US Bank National Association claims (as Plaintiff) it is the Trustee. This deal was nowhere carried on the SEC website. Today, in a new Google search, I found a November , 2008 letter from Weil, Gotshal & Manges LLP representing Lehman Brothers Special Financing Inc (“LBSF”) in their Chap 11 bankrupcy. The letter was addressed to HSBC Bank USA, CTLA-Structured Finance at 10East 40 th St, Floor 14, NY, NY . http://www.legco.gov.hk/yr08-09/english/panels/fa/papers/fa1218cb1-422-1-e.pdf Check out Schedule A. Maybe THE FUND YOUR PLAINTIFF CLAIMS it is the trustee of is listed in its single line d 19 pages. Mine was. This adds more layers to the question, “who owns the note ?” QUESTION: How can US Bank National Association prosecute against me in March 2008 a Miami foreclosure action as Trustee for the Certificate-holders of SASCO Series 2005 RF-5 while Weil, Gotshal & Manges LLP in a November 2008 letter recognizes HSBC Bank as the Trustee of that very same fund? Is it possible that there are two or more Trustees as counterparties in a credit default swap? RSVP Allan Brattle Research Associates BeMoved@AOL.com

  2. Gee Hmm I Wonder where they got the Money to Lobby these Changes…… Hey Did Anybody ever find out what happend to all that Missing Bailout Money or why The Banks aren’t Lending even after being Bailed Out? Maybe they’re all CONNECTED!!!!!!!

  3. Log on to the National Association of Consumer Bankruptcy Lawyer to read more and with one click send a letter to your Senators and the President. NACBA has been a major lobbyist in favor of this amendment for over two years. When you write Obama, you might want to add a little bit about how he needs to use his muscle and insist on the Senators passing measures he is in favor of. It doesn’t seem that he has done much arm twisting, and it will be necessary if he wants to get anything done. http://www.nacba.com/. Also, here is the mailing address and fax number for the President:

    President Barack Obama
    The White House
    1600 Pennsylvania Avenue NW
    Washington, DC 20500
    via fax 202-456-2461

  4. legal ramifications???… the mortgage industry has been anything “legal” for years.
    if allowed WE WILL BE ” legally eradicated ” to become only a sad statistic
    kicked out of our homes while the “planned failure ” makes the banks richer!?
    is no one paying attention? i know i am not alone in this.
    a journey of a thousand mile starts with a single step!..LETS BEGIN!

  5. This is an interesting idea, should we get the ball rolling???
    I posted an article regarding this very issue last week here in livinglies, in the comments area.

    I believe you are 100% right. But we are to docile and do not know if many people will understand why it would be devastating for these lenders to go through something like this.

    Also I have no idea what would be the legal ramifications of pushing for what could be considered a bank run. As you may have realized the Federal Government, the lenders and investors have been successful in keeping all of us totally in the dark.

    Can the people who have been kicked out of their homes act this way?

    Many questions, but we do need answers.

  6. enough of these pathetic leaches [the banks] already !!!!
    its time we boycott the banks….
    its time to organize!!!!!!!!!!!!!!!!!
    homeowners left hung out to dry.. if we cash out of the banks by removing every penny from the banks LEAVING ONLY the essential $$ of ours in the bank that
    WE need to function in the day to day life necessities .
    YES as a collective WE CAN HURT THEM>>>

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