Obama loses against banks in Congress

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By S.A. Miller

Cram-down supporters had argued that giving judges the authority to renegotiate mortgages on primary residences - a power judges already have for loans on vacation properties and business real estate - would stem a rising tide of threatened foreclosures that could further destabilize the economy.

About 2.3 million U.S. households last year received foreclosure notes, and an additional 800,000 homes reportedly have received notices so far this year.

But the bill's opponents said the new bankruptcy rule would spur a wave of loan defaults by homeowners anticipating a mortgage bailout, add more uncertainty to the shaky housing market and force banks to raise interest rates for new homebuyers.

Mr. Obama has long promoted the cram-down idea, saying it would give mortgage lenders greater incentive to renegotiate with troubled borrowers to avoid a bankruptcy court battle.

Lobbyists for mortgage bankers and brokers last year gave more than $1.1 million to Democrats and about $686,000 to Republicans, according to campaign finance data compiled by the Web site OpenSecrets.org, which tracks money in U.S. politics.

Many of the senators voting against the bill were included on the list of the top 20 recipients of contributions from the mortgage banking industry, with some notable exceptions.

Sen. Christopher J. Dodd, Connecticut Democrat and chairman of the Senate Banking, Housing and Urban Affairs Committee, ranked No. 4 in money from the industry with $132,050. But he voted for the amendment.

Democrats who received large contributions from the mortgage banking industry and opposed the cram-down amendment included Sen. Mary L. Landrieu of Louisiana with $25,400, Sen. Tim Johnson of South Dakota with $23,500 and Sen. Max Baucus of Montana with $18,000.

The underlying housing bill is still alive in the Senate. It would extend a $500 billion credit line to the cash-strapped Federal Deposit Insurance Corp., which is reeling from having to bail out scores of banks.

In the House, the Credit Cardholders' Bill of Rights Act sailed through passage.

The bill was approved by a bipartisan vote of 357-70. The Obama administration lobbied hard for the bill, but the measure also had widespread support from consumers fed up with recent rate hikes on their credit card balances.

It would ban retroactive rate hikes and would prohibit banks from giving credit cards to consumers under age 18 unless they are financially independent.

"When it comes to credit cards, doing the right thing and playing by the rules just doesn't work because the companies are engaging in unfair, deceptive and anti-competitive practices. We are changing that today," said Rep. Carolyn B. Maloney, New York Democrat, the bill's sponsor.

The measure next goes to the Senate, where it appears to be gaining support.