Banks That Got Bailout Money Still Oppose Bankruptcy Reform « The Washington Independent
It sure looked last week like allowing bankruptcy judges to modify mortgage loans and keep people in their homes finally was getting somewhere. After two years of opposing any such move, Citigroup announced it was getting on board with the idea, with some limitations. Sen. Charles Schumer (D-N.Y.) praised the bank’s “courage” and predicted others would follow.
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.