UNDERNEWS

Undernews is the online report of the Progressive Review, edited by Sam Smith, who has covered Washington during all or part of one quarter of America's presidencies and edited alternative journals since 1964. The Review has been on the web since 1995. See main page for full contents

January 28, 2009

PROGRESSIVES AND THE BAILOUT

Renae Merle, Washington Post - A measure allowing bankruptcy judges to modify the mortgages of troubled homeowners, including cutting the principal they owe, cleared a key congressional committee. Under legislation passed by the House Judiciary Committee, a bankruptcy judge could change the terms of a loan by reducing its interest rate, extending its length, or lowering the principal or loan balance. These are known as "cramdown" provisions.

"While bankruptcy reform may not provide all of the answers to this crisis, surely it provides a common sense and practical approach to helping stop the spiral of home foreclosures, which are not helping anyone," committee Chairman Rep. John Conyers Jr. (D-Mich.) said. . .

The committee agreed that if a judge lowered the principal owed, the homeowner would have to share the profit from any sale of the property with their lender. The panel also approved a Republican amendment excluding people who have committed mortgage fraud from receiving such modifications. But there were fewer amendments than expected, and the bill passed 21 to 15. . .

Banking executives privately acknowledge that some type of legislation is likely to pass and are arguing that its scope should be limited.

The Hill - Liberal Democratic lawmakers railed against the tactical decision of President Obama and House leaders to leave a bankruptcy "cram-down" provision out of the economic stimulus package. The provision would let bankruptcy judges to shrink, or "cram down," mortgages for homeowners who owe more than their home is worth.

Obama and Democratic congressional leaders say they strongly support it, but the financial industry and Senate Republicans oppose it. So the White House and Democratic leaders worry that making the provision part of the stimulus would complicate their efforts to build GOP support in the Senate, where Republicans have enough strength to support a filibuster.

But at a hearing on the provision, Democrats said that too many people are losing their homes to worry about Republican votes or financial industry objections. "I believe the 'fierce urgency of now,' requires us not only to pass this out of committee, but to pass it in the stimulus," said Rep. Steve Cohen (D-Tenn.), citing Martin Luther King Jr. "Because we know the stimulus is going to pass."

Fellow Judiciary Committee member Maxine Waters complained that the banking industry should not be allowed to block the bill. "They've owned this Congress [for] way too long," said Waters (D-Calif.). . .

House Speaker Nancy Pelosi (D-Calif.) said Thursday she is "open" to passing the cram-down provision in the stimulus bill. But she stressed that the stimulus is urgent and there are other ways to pass it. . .

David Sirota, Open Left, January 22- The U.S. House publicly rebuked the Obama administration's economic team, voting overwhelmingly to disapprove the second half of the Wall Street bailout money that Obama has been demanding. Because this resolution of disapproval was rejected by the Senate, the House's vote does not have the force of law (both chambers would have needed to pass the bill in order to block the money). However, this is a major victory for the progressive movement in that the House has formally gone on record against kleptocracy.

What's great about this vote is its juxtaposition of true bipartisanship with Beltway buypartisanship. Indeed, the House vote for the resolution of disapproval forged a coalition of about a third of the Democratic caucus and most of the Republican conference - all voting for a progressive cause: namely, preventing Wall Street from ripping off the American taxpayer. Though we are led by the media to believe that "centrism" means corporatism, this vote is the kind of populist bipartisan coalition that reflects the real centrism in the country at large - a centrism where the "center" is decidedly against letting big corporations raid the federal treasury.

Couple this vote with the House's vote to attach more strings to the bailout money, and with our work in getting the Senate - through Ohio Sen. Sherrod Brown (D) - to pass a bailout regulation bill, and we're seeing real progress - or, dare I say, the possibility of real, actual, substantive change.

Let's remember that this economic fight isn't over - not by a longshot. The The Politico reports that at his confirmation hearing, incoming Treasury Secretary Tim Geithner - one of the architects of the current kleptocratic bailout - suggested that he may ask Congress for even more bailout money. That means the House's display of strong bipartisan opposition and our work getting the Senate to support tough restrictions is laying the groundwork for the next fight. . . .

All in all, we should be pretty unhappy that another $350 billion of taxpayer cash - or roughly $1,100 for every man, woman and child in America - is likely headed to Wall Street, no strings attached. But other than failing to stop that money (an almost impossible task because the new president could have effectively vetoed his way to the money), the legislative wrangling over the bailout has been a huge success for the progressive movement. We've helped build a bipartisan coalition in Congress on these issues, and forced the new administration to - at least rhetorically through letters - acknowledge the deep concerns we have with kleptocracy. In defeat, we have scored some real victories that we can build off of.

Elana Schor, Talking Points Memo - I wondered last week why the $825 billion House stimulus bill gave the short end of the stick to mass transit, despite vows from President Obama and other Dems to wean the country off its obsession with gas-guzzling car travel. After all, the House bill contains only $10 billion for transit compared with $30 billion for road-building -- a $20 billion-plus cut from the infrastructure stimulus proposal put forth last month by Rep. Jim Oberstar (D-MN), chairman of the House transportation panel.

It looks like Oberstar himself shed some more light on the question two days ago, while Washington was in the thick of inauguration fever. In a speech to the U.S. Conference of Mayors, Oberstar explained why ground-breaking infrastructure projects got sliced: to make room for tax cuts. Here's how he put it:

"The reason for the reduction in overall funding -- we took money out of Amtrak and out of aviation; we took money out of the Corps of Engineers, reduced the water infrastructure program, the drinking water and the wastewater treatment facilities and sewer lines, reduced that from $14 billion to roughly $9 billion -- was the tax cut initiative that had to be paid for in some way by keeping the entire package in the range of $850 billion.

"But I'll say that our portion is the one that really creates the jobs. Our portion of it is the one that's going to put people to work because unlike anything else, these jobs can't be outsourced to Bangalore, India."

Trading high-speed rail for more tax cuts? Hmmm ...

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