If you want drama, turn off “America’s Next Top Model— and tune in to the Democrats’ troubled quest to pass bankruptcy reforms for homeowners.
[IMGCAP(1)]Beset by miscommunications, missteps and one Senator’s attempted end-run around key players, the Senate isn’t taking up the bill before Easter, if ever.
Though the measure was initially slated for Senate action this week, Senate aides said the fate of the legislation hinges on ongoing bipartisan talks with banking industry representatives, and that there’s only a 50-50 shot that a compromise will emerge to help homeowners in bankruptcy rewrite the terms of their primary home mortgages.
It seems the only thing keeping the “cramdown— measure alive is the dogged persistence of Senate Majority Whip Dick Durbin (D-Ill.) and the fact that it is a key component of President Barack Obama’s housing foreclosure mitigation plan.
As it stands, Durbin doesn’t have the 60 votes needed to overcome the certain filibuster of a measure that opponents say would drive up interest rates — something they contend would be less than helpful during the current meltdown of the nation’s housing market.
Even moderate Republicans, such as Sen. Olympia Snowe (Maine), are balking at bankruptcy changes in any form. Snowe said last week that the measure “could have a perverse effect on the markets and interest rates.—
With Republican votes scarce, getting to 60 became even harder last week when Sen. Evan Bayh (Ind.) — a Democratic participant in bipartisan talks with a handful of Republican Senators — decided to go rogue and team up with Sen. Arlen Specter (R-Pa.) on a possible alternative, according to two Democratic sources.
“It has not been helpful to have two fronts for the banks to deal with on this,— one Democratic source said of Bayh. “Banks are looking for wiggle room, and it doesn’t help having people provide it for them.—
Bayh and Specter could announce their plan to limit the bill to subprime mortgages as early as today, even as both Senators’ staff met with other key Democrats and Republicans on the measure Monday afternoon, sources said.
In what appeared to be a thinly veiled warning to Bayh and Specter, Sen. Charles Schumer (D-N.Y.) — who supports a broader bankruptcy change — issued a statement Monday drawing his line in the sand. “Limiting this bill to subprime and other exotic mortgages would reduce the bill’s effectiveness by up to 50 percent. We want to find a compromise that can gain support, but we will not water down this proposal for the sake of picking up a few additional votes,— Schumer said.
It also appears that Democrats have lost another key Republican negotiator. Sen. Bob Corker (R-Tenn.) had been active in talks over the bill until last week, but he has since pulled back.
“A couple of weeks ago — I’m just going to be totally honest — it looked to me like cramdown might be a fact, OK? And what our goal was, was to minimize the damage [to] make it as non-harmful as you can make it,— Corker said last week. “My sense is there’s been a momentum swing. … I think people have begun to realize how problematic a cramdown provision can be.—
Sen. Mel Martinez (R-Fla.) has also been engaged in talks with Democrats on the legislation.
Some observers trace the first cracks in the bankruptcy bill’s armor to an impromptu interview Durbin gave to American Banker magazine the night of Obama’s address to Congress. “It splintered things up a bit,— one lobbyist said.
Durbin had already secured an agreement from Citibank to support a bill that would allow bankruptcy judges to write-down all types of mortgages taken out prior to the bill’s enactment, but he appeared to tell American Banker that he was willing to limit it to the risky subprime loans that caused the wholesale collapse of the housing market.
That article caused the House to delay passage of its bill for a week while leaders attempted to quell a rebellion of Democratic centrists who were already uneasy about giving bankruptcy judges the power to renegotiate loans on primary residences. That effort largely worked, but not before the damage had been done to the sense of inevitability that the bill had enjoyed.
Indeed, Democratic sources said banks such as JPMorgan and Bank of America have been stalling on the deal as they get a feel for whether the momentum has shifted in their favor. “It could get to a point where [the banks] can’t take yes for an answer,— the lobbyist said.
Durbin has since said his comments in American Banker were misunderstood and that he was talking generally about his willingness to negotiate. He has repeatedly rejected the notion of limiting the bill’s applicability to subprime loans, saying the foreclosure problem has expanded to more homeowners.
Plus, Bayh is not the only Democratic problem for Durbin. Though Bayh actually supported a similar measure last year, 11 members of the Democratic caucus voted against it. And getting them back is not a foregone conclusion.
Some Senators, such as Mark Pryor (D-Ark.), said their support was still within reach, but others, such as Sen. Ben Nelson (D-Neb.), said they would “probably not— be swayed.
With only 58 Senators in his Conference, Senate Majority Leader Harry Reid (D-Nev.) would need to keep all of his Members and gain at least two Republicans to prevail on the floor.
Currently the only leverage Democrats have over the GOP is Republicans’ desire to beef up the Federal Deposit Insurance Corp.’s ability to save ailing banks and protect more of each depositor’s cash. Democratic supporters of the bill say that lure may also work on wavering Democrats from rural states.
Corker is already sponsoring an FDIC measure with Senate Banking, Housing and Urban Affairs Chairman Chris Dodd (D-Conn.), who has been intimately involved in negotiations on the bankruptcy measure.
But sources said Minority Leader Mitch McConnell (R-Ky.) may attempt to push the FDIC issue, while accusing Democrats of being held hostage to a controversial provision. One source said McConnell was attempting to clear the FDIC legislation with his Conference last week.
So, it appears Reid and Durbin need more time to get their act together on bankruptcy — or for more bad news to emerge on the housing markets — in order to regain their footing.
However, Reid spokesman Rodell Mollineau said the delay on the bankruptcy measure had little to do with the its own drama and more about the limited time the Senate has — given the additional floor time needed to pass an omnibus spending bill and the leader’s desire to re-pass a public lands bill this week. Before the Easter recess, Reid wants the Senate to complete the budget resolution as well.
Still, Mollineau said, “We will continue to work with Sen. Durbin and Sen. Dodd to ensure we have the votes when we move this bill forward.—