Senate rejects cramdown for homeowners

Surveys show that homeowners have a very high turnout rate in elections. That is probably one reason the so-called "cramdown" mortgage restructuring by judges was nixed by the senate yesterday.

Of course, it doesn't hurt when banks all across America were screaming bloody murder about it. And, I would like to think that regular homeowners who pay on time every month despite the hardships didn't want to foot the bill for those who are less responsible.

ABC's Byron Wolf has the details:

The vote on a so-called "cramdown" proposal, which President Obama supported during the presidential campaign, was 45-51 despite support from the president and the endorsement of one large bank, Citigroup. Read more on Citigroup's endorsement of the plan HERE. The mortgage restructuring proposal needed 60 votes to pass so it didn't even come close to passing. Several Democrats, including the newest Democrat, Sen. Arlen Specter of PA, opposed cramdown.

Senators will vote on a bill to upgrade voluntary programs that entice banks to restructure loans, but do not force them, sometime next week.

Perhaps the Chrysler analogy is a bit of a stretch, but on the Senate floor, Sen. Dick Durbin, D-Ill., the author of the proposal, was distraught, his voice dripping with sarcasm as he described failed negotiations he had with banks and banking associations.

Durbin said on the Senate floor that in negotiations, the banking industry argued that restructuring primary home loans -- secondary home loans and luxury loans for items like yachts can already be restructured by a bankruptcy judge -- would create a moral hazard in this country.

"Senator, you don't understand the moral hazard here," Durbin paraphrased the banking argument. "People have to be held responsible for their wrongdoing. If you make a mistake, darn it, you've got to pay the price. that's what America is all about."

"Really, Mr. Banker on wall street? that's what America is all about?" he railed.

Durbin has it right but not for the reasons he thinks. The point is valid, however; no bailouts for anyone or give them to everybody. The very same people who are most opposed to cramdown also opposed the bank bail outs. No inconsistency there.

Durbin and the Democrats would do well to take heed of what people are telling them; enough is enough.