Earlier this month, the House of Representatives passed cram-down legislation designed to allow judges to write down the principal and interest on some mortgages to allow homeowners to stay in their homes, a goal that is a central pillar of President Obama's housing legislation. But even the House version passed only after certain concessions were made to moderates seeking a more "lender-friendly" bill.

The House approved "cram down" legislation that would allow troubled homeowners to ask bankruptcy judges for relief from mortgage debts -- but only after Democratic centrists won concessions making the bill more lender-friendly.

President Barack Obama has endorsed giving judges new authority to modify mortgages as a key response to the wave of foreclosures sweeping through the economy. Supporters of the move say the proposal to give courts cram-down authority could spur mortgage servicers to move aggressively to help borrowers, in order to avoid having modified loans forced on them by a judge.

Much of the financial-services industry opposes the proposal, saying it would create uncertainty in an already troubled market and force them to raise the cost of lending. Nodding to those business arguments, a coalition of moderate Democrats blocked an earlier version of the bill. The moderates argued that greater efforts were needed to ensure that homeowners make good-faith attempts to work with their lenders, before going into bankruptcy.

Ultimately, the legislation passed 234-191 after concessions were made but that doesn't seem to be enough to quell the pro-corporate wing of Senate Democrats, a wing that is led by our favorite moderate Evan Bayh.

Senate Majority Leader Reid said today he would drop a cram-down provision from a House-passed banking bill if the language threatened to keep the Senate from passing the overall bill. The provision would allow a bankruptcy judge to reduce a homeowner's mortgage principal. "If we can't get the votes for that, and I am hopeful we can -- I am semiconfident we can -- then what I'll do is take that off [the bill] and do the other banking provisions," Reid said at a Christian Science Monitor breakfast. Reid said he would work to keep the package intact, but raising the prospect of pulling the provision seemed to acknowledge assertions by Sen. Evan Bayh, D-Ind., and others that the cram-down bill cannot pass due to opposition from Republicans and some Democratic moderates.

Bayh and Judiciary ranking member Arlen Specter are pushing an alternative bill that narrows the range of borrowers who could have their mortgage principal reduced. Lobbyists tracking efforts by Senate Majority Whip Durbin to drum up industry and Senate support for a measure like the House bill said talks appear stalled. Eliminating or watering down the cram-down provision would be a win for the banking industry...

Jane Hamsher does a good job of linking Bayh's advocacy on behalf of the banking industry in the Senate with the hauls in donations he takes in as well as his own personal connections. Which is really too bad, considering, as Jane notes:

Indiana has a huge foreclosure problem (see map). It's estimated that giving bankruptcy judges the ability to write-down mortgages would cut the foreclosure rate by 20%, without any cost to the taxpayers. But Bayh doesn't seem to be responsive to that concern. I wonder why...

David Waldman takes down the very idea that the position Bayh is advocating here is in any way moderate.

Again, nearly 2/3 of the American public supports giving assistance to homeowners struggling with their mortgage payments and facing foreclosure. Two-thirds.

So obviously, the Senators who oppose 2/3 of the electorate are... "moderates." [...]

The compromise has already been hammered out in the House. The banks got the fairest deal they could get without gutting the bill entirely. But because Evan Bayh's become intoxicated by the attention he garnered from having obstructed a few bills earlier, he now obstructs each new one as a matter of policy.

Waldman also has some must-read advice for Harry Reid on this matter HERE.

For a glimpse of a Democrat who's fighting for homeowners and not legislating on behalf of banks, watch this excellent speech from Sen. Jeff Merkley below.