Citi's leash

A Senate bill aimed at giving strapped homeowners more leverage in renegotiating their mortgages cleared a hurdle Thursday when Citigroup Inc. dropped its opposition. The proposal from Sen. Dick Durbin, an Illinois Democrat, to allow so-called mortgage "cramdowns," would apply only to homeowners who have filed for Chapter 13 bankruptcy protection. The legislation, which is being advanced by top Senate Democrats, would let judges set new repayment terms for mortgage holders in bankruptcy court. Lawmakers say the measure is aimed at jump-starting broader efforts to renegotiate millions of underwater mortgages now weighing down the housing market. 

The story further explains that:

Until recently, Citigroup had fiercely opposed proposals to give bankruptcy judges latitude to change the terms of mortgages. Its about-face comes after the federal government has pumped $45 billion into the company since last fall. The government is now keeping the company on a tight leash.

The government had also previously agreed with Citigroup "to guarantee about $269 billion in highly illiquid mortgage investments," according to an account in the New York Times.  That does make for a pretty tight leash.  Senator Dick Durbin's comment on this shows how far through the looking glass we have gone:

This is the breakthrough we've been waiting for. To have a major financial institution support this legislation will create an incentive for others to come our way. I want to congratulate Citi for being open-minded about this...and playing a major leadership role.   [Italics mine]

A $300 billion leash around your neck does focus the mind.