Friday, May 01, 2009
Senate Folly of the Day: "No" to mortgage reduction in bankruptcy
The Senate handed a victory to the banking industry on Thursday, defeating a Democratic proposal that would have given homeowners in financial trouble greater flexibility to renegotiate the terms of their mortgages. —Stephen Labaton reporting in "Senate Refuses to Let Judges Fix Mortgages in Bankruptcy"
The Senate Republicans and 12 Democrats continue to do all possible for their banker friends and as little as possible for those who were duped by them into signing ill-considered mortgages. This is short-sighted even by the lights of bankers. Sen. Schumer put it well: "They’re being almost lemming-like, for their immediate, short-term interests." (It should be evident to one and all that the "industry" has no reason to claim they can even discern where their self-interest lies.)
Dick Durbin, the Senator responsible for trying to keep his Democratic colleagues in line, said before the vote, which was expected to fail—
I don’t know what the next step will be. It’ll surely be the conference committee and hopefully the House can keep some aspect of bankruptcy reform in this. If we fail ... we’ll wait another year and face a worse crisis and hope that the banks won’t have as much clout.
That is a vain hope unless there’s a popular outcry, since a portion of the very money that the government has poured into the banks will be returned to the campaign-finance coffers of the Senators.1 But Durbin is absolutely correct that by next year the crisis will be worse.
All Republican Senators rejected the legislation, and the usual Democratic suspects also voted No:
- Blanche Lincoln (Ark.)
- Mark Pryor (Ark.)
- Sens. Max Baucus (Mont.)
- Jon Tester (Mont.)
- Michael Bennet (Colo.)
- Robert Byrd (W.Va.)
- Byron Dorgan (N.D.)
- Tim Johnson (S.D.)
- Mary Landrieu (La.)
- Ben Nelson (Neb.)
- Tom Carper (Del.)
- and of course, Arlen Specter (Penn.)
If you happen to live in one of these states, give your Senators a buzz and let them know that their support for the bankers instead of homeowners has not gone unnoticed.
Top banks and automakers receiving hundreds of billions of dollars in federal bailout money cut back heavily on lobbying expenses at the beginning of the year.
Still, banks in particular continued to spend millions to influence Washington as President Obama and a new Congress took office.
Eight of the nation’s largest banks — which combined have received more than $170 billion in money from the Troubled Asset Relief Program (TARP) — spent roughly $5.5 million on lobbying in the first three months of 2009, according to congressional records. General Motors Corp., its financing arm, Chrysler LLC and Cerberus Capital Management, Chrysler’s main financial investor, spent another $4.3 million.
For the automotive companies, the numbers represent a plunge of more than 30 percent in spending from the end of 2008, as well as from the same period last year. But for the banks, the lobbying expenses are a strong sign of continuing efforts to influence legislation and the Obama administration on a range of issues related to credit card policy, foreclosures and home loan modifications, among others.
The banks spent slightly more at the beginning of 2009 than the last three months of 2008, but roughly 20 percent less than during the first quarter of 2008 before the financial crisis enveloped the economy. The eight banks spent a combined $6.25 million on lobbying at the beginning of 2008.
JPMorgan Chase & Co. and Citigroup were the biggest spenders on lobbying at the beginning of this year, spending $1.3 million and $1.25 million, respectively. Still, for Citigroup, the numbers represent a drop of $200,000 from a year ago. The firm, receiving roughly $50 billion in aid and commitments from the government, has cut its lobbying expenses in each of the last four quarters.
The banks are trying to project the notion that they are reducing their lobbying expenditures, which they are—by a small percentage in almost all cases. But could any group of distressed homeowners match the $1.3 million spent by just one bank—Citigroup—for lobbying in the first three months of 2009? [back]