Homeowners vs. Banks = David vs. Goliath (Sort of)
As we wrote this morning — and Mary tackles eloquently here — the banks appear to be winning the battle in the Senate over cramdown legislation that would allow bankruptcy judges to modify loans. They don’t want it, and without their endorsement, a number of Senate lawmakers will oppose it as well.
The naked dynamic, of course, is one of lawmakers siding with banks over homeowners even amid a growing housing crisis in which foreclosure filings have topped 800,000 already this year. But should we be surprised? Some housing experts say we shouldn’t.
David Abromowitz, a housing expert at the progressive Center for American Progress, said the powers of the finance industry to sway the votes of lawmakers remains extraordinary, despite the industry’s reliance on enormous taxpayer bailouts — and despite the new-found reluctance of big-bank employees to open their pocketbooks to Washington politicians (a trend Elana Schor pointed out here last week.)
The message is clear: Wall Street might be flailing — it might even be largely responsible for the housing crisis, rising unemployment and the general economic turmoil that’s circled the globe in the past year — but it retains the power and temerity to make demands and refuse compromises on Capitol Hill, and a large number of lawmakers will continue to follow its lead.
Part of the reason, Abromowitz says, is that the contest between Wall Street lobbyists and consumer advocates is a grossly lopsided one. “The banks and the lenders have an enormous lobby,” he said, while struggling homeowners “are a pretty diluted constituency. There’s no newsletter for people facing foreclosure … It’s a David and Goliath situation to start with.”
Only in this case, it appears that Goliath will emerge the winner.
Various estimates put the number of foreclosures cramdown would prevent at around 1.7 million. Are the political contributions of the finance industry more important to Senate lawmakers than 1.7 million families? It’s looking more and more like that’s the case.