December 13, 2009 04:18 AM UTC

Cram-Down vs Cram It

•  
• by: JO

For a change, let’s start with some facts:

Fact: The United States experienced a large housing bubble which has burst, with a major follow-on impact on the entire economy.

Fact: Homeowners wishing to stave off foreclosure cannot obtain court-ordered adjustments of their mortgages in bankruptcy court. Congress–Republicans plus some Democrats, including Michael Bennet of Colorado–defeated so-called “cram down” modifications of the bankruptcy code in February 2009, and again in the House this week.

Fact: The federal government has taken steps to reduce mortgage interest rates to the lowest in more than half a century.

Fact: The federal government took dramatic steps, in TARP, to save financial institutions from insolvency after their own investments in inflated housing instruments left them exposed.

Fact: Despite government efforts to reduce interest rates, which in theory ought to allow homeowners to renegotiate mortgages and thereby save, potentially, hundreds of dollars in monthly payments–savings that could both be channeled into increased consumer spending and/or help forestall foreclosure–vast numbers of homeowners cannot obtain refinancing. The refusal of banks to refinance mortgages is a subject of consternation by the government and will be the subject of a White House conference on Monday in which President Obama will meet executives of several large institutions. Details: New York Times, here: http://www.nytimes.com/2009/12…

Fact: The behavior of major financial institutions is (a) controversial; and (b) apparently frustrating to the president, given his plans to meet with bankers at the White House. At the same time, these same banks have encouraged legislators to block “cram down” as a means of easing the burden on home-owners (at the apparent expense of the banks, although this is subject to argument), and these banks have contributed, via their PACs, to various legislators running for election in 2009, including Michael Bennet, who voted against cram-down in February. (Yes, the latter are facts, not opinions. The PAC contributions are on the record; so is Bennet’s vote.)

Fact: Although government policy has driven down interest rates, this has not resulted in a surge either in new mortgages or in refinancing, both of which might reasonably be expected to stimulate a major segment of the economy, housing, which has been depressed for about two years.

There has been considerable discussion on this site about Michael Bennet’s ties to the financial industry, partly dating from his days working for Philip Anschutz. Bennet’s supporters, some of them at least, have suggested that his close ties to these bankers is somehow an advantage to Coloradoans. While it’s clear to me how his ties are an advantage to bankers, both in Colorado and elsewhere, it’s far from clear how his support for, and from, this industry aids either the voters of this state, the mortgage holders of this state, the economy of this state, or the state of the country’s economy.

What does seem clear is that Bennet is favored by bankers, and votes in favor of bankers. Denver Post 12/12/09: “Bennet raised more than $400,000 from Wall Street firms in the first half of the year, more than all but four other senators.” The Post story, under the headline “Bennet joins with GOP to warn about Wall St. bill” http://www.denverpost.com/poli… quoted Bennet as saying:

“In view of the enormity of the issues at stake, it is my hope we can ultimately craft a bill that both Democrats and Republicans can be proud to support.”

The Post went on to say:

“Bennet’s approach to the bill is informed by his own experience – he earned millions restructuring bankrupt companies for billionaire Phil An schutz – but critics also point to the fact that Wall Street firms are among his most significant political donors.”

Question: Are Democrats–Democratic voters, that is–right to be highly concerned that Republicans be brought on board to any financial services reform bill? Is it reasonable to expect this will happen? Or is this a euphemism for saying, “Let’s not be reforming or regulating the financial services industry” and vaguely blaming lack of “bipartisan” support for failure to do so.

It’s a question, yes, but the fact is that Bennet is now, has always been, and will be in the future, snug as a bug in a safe-deposit box with his benefactors in the banking industry.

And THAT’s a very good reason he should NOT be the Democratic nominee for Senate. Republican, maybe, but not the Democrat.