Sens. Robert Menendez (D-N.J.), Frank Lautenberg (D-N.J.), Sen. Kirsten Gillibrand (D-N.Y.) and Charles Schumer (D-N.Y.) called for the suspension at a press conference in the Capitol today. In a letter yesterday to Secretary of State Hillary Clinton, the senators wrote:

As you may know, in 2007, BP and the Libyan government agreed upon a $900 million oil exploration deal, following two visits to Libya over the course of three years by then-Prime Minister Tony Blair. It was reported in September of last year that BP communicated to the British government concerns that possible delays in the release of al-Megrahi could throw the oil deal into jeopardy. Further raising suspicions about circumstances surrounding al-Megrahi’s release, the son of Libyan leader Moammar Gadhafi has made statements alluding to the fact that oil interests were part of the discussions.

Al-Megrahi was convicted in the 1988 bombing of Pan Am Flight 103.

A call to BP for comment was not immediately returned.

Sens. Jay Rockefeller (D-W.Va.) and Max Baucus (D-Mont.) at Tuesday's Finance Committee hearing (WDCpix)

Despite growing public support for a government-backed insurance option to compete with private insurers, a Senate panel on Tuesday twice beat back Democratic efforts to create such a plan.

One by one, public option proposals sponsored by Sens. Jay Rockefeller (D-W.V.) and Charles Schumer (D-N.Y.) were shot down by the Senate Finance Committee, with Republicans warning of a government takeover of health care, and at least one powerful Democrat arguing that the concept is simply impractical because it doesn’t have the support to pass the full chamber.

Illustration by: Matt Mahurin

“My first job is to get this bill across the finish line,” said Finance Chairman Max Baucus (D-Mont.). “I don’t see how the public option gets 60 votes on the floor.”

Baucus voted against both amendments.

Together, the votes mark a high-profile, if expected, victory for the insurance industry, which has argued that the creation of a government-backed plan would erode private markets at the expense of patient choice. It also represents a set-back for many Democrats and patient advocates, who contend that only a robust, not-for-profit insurance option will have the leverage to keep consumer costs low — and private insurers honest. A bill passed by the Senate Health, Education, Labor and Pensions Committee — and another moving through the House — includes such a plan.

President Obama, who supports the public plan, has tried repeatedly to downplay the plan’s significance, arguing that it represents just one sliver of the much larger health reform pie. But few have listened, and the issue has evolved into one of the most hot-button topics of the year’s health reform debate.

Under the Rockefeller amendment, the government would create an insurance option to compete with private plans on a newly proposed insurance marketplace, called an exchange. Rates would mirror those of Medicare for two years after the plan launched. Afterwards, plan administrators would negotiate new rates with providers, just as private insurers do now. The Congressional Budget Office estimates that the proposal would save $50 billion over 10 years.

Rockefeller said his proposal would act as “a counterweight” to “rapacious” private insurers, who routinuely put profits before care concerns.

The Schumer amendment was similar but wouldn’t have tied rates to Medicare.

Supporters were quick to point out that, under both proposals, no provider would have been required to accept the public plan, and no patient would have been forced to get coverage through it. “The people who don’t like it can dump it,” Rockefeller said. “That’s called free choice.”

Sponsors also emphasized that, after the initial federal funding, their plans would be paid by patient premiums, not government subsidies. “It’s going to be independent, self-financing and self-sustaining,” Schumer said.

Adding some weight to their push, a New York Times/CBS poll conducted this month found that 65 percent of Americans support “the government offering everyone a government-administered health insurance plan like Medicare that would compete with private insurance plans.”

But the outcome of Tuesday’s votes was largely decided before the debate began. Indeed, Senate Republicans have been clear that they won’t support support a health reform bill that includes the public option.

Sen. Charles Grassley (Iowa), the senior Republican on the finance panel, conceded that the current system has “shortcomings.” But Congress shouldn’t use those failures, he said, as reason to undermine the innovation that results when private markets compete against one another. The creation of a public option, Grassley said, represents “a slow walk toward government-controlled, single-payer health care.”

Yet a 2007 survey of insurance market concentration indicates that the private insurance market is headed that way already. Conducted by the American Medical Association, the nation’s largest physicians lobby, that survey found that, in most states, the top two insurers consume a large majority of the marketplace. In Maine, for example, the top two insurers control 88 percent of the insurance market. In both Montana and Wyoming, the number is 85 percent. Florida, where the top two insurers represent 45 percent of the market, has the lowest market concentration, AMA found.

Sen. Bill Nelson (D-Fla.) said those figures are indication that the private model is, by itself, moving toward the single-payer model. “That doesn’t sound like a lot of competition to me,” said Nelson, who opposed the Rockefeller amendment but voted in favor of Schumer’s proposal.

The Rockefeller amendment fell 8 to 15, while Schumer’s proposal failed 10 to 13. Aside from Baucus, Democratic Sens. Blanche Lincoln (Ark.) and Kent Conrad (N.D.) also voted against both proposals. Conrad has been the leading proponent of private, health care

Still, public option — hopeful that the prominent debate will lend the public option some momentum — are also vowing to bring it up again as the health reform debate rolls on.

“This isn’t the first word on the public option,” Schumer said, “and it won’t be the last.”

When New York Gov. David Patterson appointed Gillibrand to fill the Senate seat vacated by Secretary of State Hillary Rodham Clinton, critics attacked her tough stance on illegal immigration, saying her prior support for cracking down on illegal immigration and making English the official language of the United States, along with her opposition to giving illegal immigrants access to driver’s licenses, showed she was out of touch with large numbers of New York Hispanics.

The New York Times reported in January that one Hispanic state lawmaker had said Gillibrand’s immigration record “borders on xenophobia,” and other Hispanic assemblymen said they were looking for a Democrat to mount a 2010 primary challenge against Gillibrand, shortly after her appointment.

The Spanish-language newspaper, El Diario La Prensa, wasn’t pleased either.

If Gov. David Paterson wanted to deliver a slap to immigrant New Yorkers, he effectively did so with his appointment yesterday of Representative Kirsten Gillibrand.

Shortly after Obama announced Tuesday he would back Sotomayor for the high court, Gillibrand’s office put out a statement saying the junior senator from New York had spoken with the president and praised his decision.

In Judge Sotomayor, we have a superbly qualified jurist, who understands, respects and connects with the people whose lives will be affected by the Court. Judge Sotomayor will bring invaluable experience and much needed diversity to our nation’s highest court.

In fact, Gillibrand said, she and Sen. Charles Schumer (D-N.Y.) sent Obama a personal letter on May 1 recommending he pick a Hispanic nominee for the court.

Latinos are a large and growing segent of our society that have gone grossly underrepresented in our legal system. Indeed, while Latinos comprise around 15 percent of the population, only about 7 percent of federal judges are Latino.

Sotomayor — who served on the U.S. Court of Appeals for the Second Circuit, was a District Court judge for the Southern District of New York and an assistant district attorney in the New York County District Attorney’s office — may seem a no-brainer pick for New York’s senators. But the letter from Gillibrand and Schumer also recommend a Latino from the other side of the country_Interior Secretary Ken Salazar, who hails from Colorado.

Gillibrand has shown signs of softening her stance on immigration — she said she supported a moratorium on immigration raids shortly after she was appointed to the Senate — but many in the immigrant community were waiting for proof. Last month, The New York Daily News reported she was backing comprehensive immigration reform.

Whether Hispanic voters see her support for Sotomayor as another olive branch or an attempt to claim credit for an Obama decision remains to be seen.

Not so fast.

Despite Citi’s cooperation, the rest of the banking industry isn’t joining hands to sing “Kumbaya” on this one, reports American Banker. (subscription required.) Other banks either want an even narrower version of the measure Citi supports – or nothing at all. From American Banker:

“Citi’s an important player, but we’ve got virtually a unanimous position from the rest of the industry that thinks this is the wrong way to go,” said Bill Himpler, executive vice president of federal affairs for the American Financial Services Association.

The reason something that sounds as boring as bankruptcy modification is important is simple: It actually works. It stops foreclosures. Even the threat that it might occur can stop foreclosures. And that’s a big contrast to everything else out there, all those loan modification programs and repayment plans. So far they aren’t getting the job done.

The lending industry has always hated the idea and has always gotten its way . But there’s a new regime in town, and this could wind up as part of the stimulus package.  Citi seems to be figuring out which way the wind blows before everyone else. Some in the banking industry even complained to American Banker about Citi breaking ranks to support bankruptcy modifications.

The other lenders may continue the fight, and they may make it longer and more difficult, but their winning streak may still be over, with or without Citi at their side.

From American Banker:

Though the banking industry has opposed such a bill for two years, lawmakers have agreed to narrow the scope of the legislation to win industry support. So far, Citigroup Inc has indicated it would back the compromise. At a press conference this afternoon, lawmakers are expected to unveil a bill that would only apply to nontraditional loans originated before the law’s enactment date. The legislation would also require that borrowers made good-faith efforts to work with their lenders to rework their mortgages before initiating the bankruptcy process. Lenders who violated the Truth in lending Act would also waive certain priority creditor rights afforded under bankruptcy protection.

American Banker’s sources said Citigroup approached Sen. Charles Schumer, D-NY, with the possible compromise in December. The bank, the recipient of government bailout money, feared a tougher version would be enacted in a new Obama administration. Negotiations are ongoing, according to American Banker:

Citigroup’s negotiations continued this week with Sen. Richard Durbin, D-Ill., the primary Senate sponsor of the mortgage bankruptcy bill, and Senate Banking Committee Chairman Chris Dodd, who has been a vocal advocate of the legislation. “The senator has been in touch with Citi since last year and as recent as this week and is working together with Dodd and Durbin to try to make this happen,” said an aide to Sen. Schumer. It’s unclear how quickly the legislation could move — or whether other banks will sign on to the Citi deal. Sen. Schumer said in a statement he wants to attach the bill to the economic stimulus package.

Also there’s no word yet from housing advocates as to whether they’ll support the compromise. Still, considering the idea never had a chance of seeing daylight for the past eight years, any progress is better than nothing. The fact that banks and lawmakers are even tackling this also suggest how severe the foreclosure crisis has become.