The House has passed bankruptcy reform legislation that
dealt the banking industry its first major defeat since 1994. The bill,
passed 234-191, largely along party lines, encourages lenders to
renegotiate mortgages with troubled homeowners. If they can't, the bill
allows bankruptcy judges to modify the mortgages, a reform that bankers
have argued undermines the sanctity of a contract and rewards bad
behavior.
But their arguments fell on deaf ears in a chamber that has appropriated hundreds of billions of dollars in bailout funds for major banks.
"There are some people who said during the debate, 'Well, this bill rewards irresponsibility or bad choices.' Well, my goodness," said Rep. Artur Davis (D-Ala.). "Many people in my district feel that those [bank bailouts] rewarded irresponsibility and bad decisions, but they were done in the name of a broader interest. So on this issue, frankly, the banks were out of touch with the American people."
The argument that the bill would create chaos didn't influence lawmakers in this already chaotic environment. "The idea that this is all about destabilizing the real estate market -- that's just a bad joke," said Rep. Bill Delahunt (D-Mass.). "And looking forward, well, you know what, we can't look too forward because we're in this tsunami."
Financial Services Committee chairman Barney Frank (D-Mass.) said that the banks' winning streak was unsurprising, given that the GOP took Congress in 1995. But even with Democrats in power since January 2007, banks haven't lost any major battles.
"The Committee on Financial Services put out a bill to regulate credit cards in 2008. They didn't like that," Frank said, but noted the bill ultimately died. "Nothing passed both houses that they didn't like."
Energy and Commerce Committee Chairman Henry Waxman (D-Calif.) chuckled at the thought of the banks being on the losing end of a vote for once. "I'm not close enough to them to count their wins and losses, but they're pretty powerful," he said.
Rep. Mike Simpson (R-Idaho) said he wasn't sure about their win/loss record, either. "Hell, I don't know," he said. "I don't keep track of whether the banking industry wins or loses votes. We're trying to send a message to the banking industry? I don't know, I thought we were trying to pass legislation that would work and unfortunately this is not a good piece."
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