by Zach Carter, TMC MediaWire Blogger 

On Thursday, lawmakers bowed to pressure from the bank lobby and killed a crucial piece of anti-foreclosure legislation, poisoning the economy in an effort to keep money flowing to Wall Street. Meanwhile, jobs continue to disappear, retirement accounts are evaporating and families are struggling to cope with economic hardship.  

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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.

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On Tuesday, the Helping Families Save Their Homes Act, a bill sponsored by Jon Conyers in the House that would empower judges to write down the principal and interest payments on some mortgages (aka "cram-down legislation"), will finally come up for a vote. The bill had been delayed thanks to effective pressure from the financial services industry on Blue Dog and New Democrats. President Obama and progressive Democrats in Congress support the legislation and in fact it would be central to Obama's plan to help keep more Americans in their homes (watch Brave New Foundation's interview with Conyers for a more complete picture of the bill.)

So, what level of pressure will the Obama administration apply to get this cram-down bill passed in its current form? As Chris Bowers notes, Shaun Donovan will be going directly to the House caucus on Monday.

On Monday, Housing Secretary Shaun Donovan will speak to House Democrats, and make a direct appeal for not narrowing or otherwise watering down the cram-down legislation. The administration does hold a lot of sway with congressional Democrats right now, and is riding high in the polls, so this appeal might just work. Let's hope so.

But the pressure is going to have to come from us as well. To that end, over at FightingForOurHomes, Brave New Foundation is asking that we call our representatives to urge them to support this legislation and that we sign their petition that reads:

Judicial modifications of home mortgages is a modest fix that will prevent hundreds of thousands of families from facing the devastation of foreclosure. This sensible legislation will help working and middle class families stay afloat in challenging times. We urge our elected representatives to stand up for homeowners by supporting H.R. 1106 and its counterpart in the Senate.

The banks have received their bailouts; it's time for working homeowners to be put first.

In addition, tomorrow, MoveOn members in certain districts (with representatives on the fence) should expect an e-mail blast urging them to do the same.

The fact is, as Chris Bowers points out:

In advance of the vote, The Center for Responsible Lending has a useful chart up showing that 800,000 homeowners, or 10% of all American homeowners facing foreclosure, could be saved from foreclosure by "cramdown" legislation. Among the 86 congressional districts represented by either a New Democrat or a Blue Dog, 143,672 homeowners are projected to be saved from foreclosure by cramdown legislation.

Sadly, the pressure on the centrist Dems to, at best, water down this legislation and at worst, kill it, is considerable; it's our job to let those House members know that we're watching and we'll hold them accountable if they side with banks over homeowners.

Check out BNF's brand new video that exposes the corrupt mortgage business and profiles one former homeowner who represents exactly the sort of situation that cram-down legislation was designed to prevent:

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