Killing cramdown

KILLING CRAMDOWN…. For a while, it looked like “cramdown” had a real chance of passing. The measure, which would have given bankruptcy judges the authority to modify mortgages, was supposed to be the centerpiece of the Helping Families Save Their Homes Act. Instead, Democrats went up against the banking industry, including institutions getting bailout money, and lost.

The NYT had an interesting item yesterday on what transpired during the debate, most notably after Citigroup was convinced to endorse the idea.

While Mr. Durbin had trouble rounding up Democratic votes, Republican leaders kept their members — and potential renegade banks — in line.

Senator Jon Kyl, the Arizona Republican leading the charge against the bankruptcy change, told bankers there would be consequences if they dealt with the Democrats. According to an April 20 e-mail message between industry officials in touch with Mr. Kyl, he told them “not to make a deal with Durbin and then come looking to Republicans when they need help on something like regulatory restructuring.”

This is pretty extraordinary revelation, given the importance of the cramdown measure. The banking industry was moving towards accepting the concessions and the legislation, but the very Republicans doing the industry’s bidding intervened to make sure the bill was killed anyway.

Noam Scheiber helps put this in perspective.

[I]magine a hitman who’s been hired by some wealthy gangster-type. The gangster asks the hitman to knock off a local judge who’s been stepping on his illicit business activities. When the hitman calls to tell the gangster he has the judge in his sights, the gangster has a change of heart and decides it’s not worth the messiness. At which point the hitman gets angry and threatens to kill the gangster unless he bucks up and sees the hit through.

You kind of assume most hitmen are Sopranos-style sociopaths — they don’t mind killing, but they’re not necessarily bent on it. But this hitman is different. He’s genuinely evil.