Banksters Win One, Lose One in Congress

Yesterday, the U.S. House of Representatives handed bankers in the credit card industry a defeat. But almost simultaneously, mortgage bankers won big in the Senate. Senator Richard Durbin lamented [1] that the banks “are still the most powerful lobby on Capitol Hill. And they frankly own the place.”

This is a tale of two tallies.

In the U.S. House, H.R.627 [2], the Credit Cardholders’ Bill of Rights Act passed by the overwhelming margin of 357 to 70. This measure, sponsored by Rep. Carolyn Maloney (D-NY), would prevent credit card companies from:

• Hiking interest rates any time and for no reason.
• Applying newly-increased interest rates to prior existing balances.
• Imposing major penalties for minor transgressions.
• Imposing late fees even when it is proven that payment was mailed on time.
• Imposing finance charges on balances repaid on time.
• Marketing and issuing cards to young people who are clearly unable to repay debt.

It should surprise no one that polls show Americans overwhelming support this bill. Because they were afraid of a voter backlash, most Republicans supported H.R. 627 on the final vote. But first, almost all of the Republicans voted to kill the bill in a parliamentary maneuver—a motion to recommit that failed 164 to 263.

The bill now moves to the Senate where a similar measure, S. 414 [3]—the Credit Card Accountability, Responsibility and Reform Act (Credit CARD Act) sponsored by Senator Chris Dodd (D-CT)—was approved by the Banking Committee on a straight party-line vote of 12 to 11. Senate Majority Leader Harry Reid indicated that he will try to bring the bill to the floor sometime next week.

That will be a much tougher fight. The Dodd bill has no Republican support, it will need 60 votes to overcome a filibuster, and the progressives couldn’t even get 50 votes for a different, but equally important, banking bill…

Yesterday in the U.S. Senate, the banks won the key vote [4] on S. 896, the Helping Families Save Their Homes Act, which has already passed the House as H.R. 1106. The vote was on Senator Durbin’s amendment that would allow judges to modify residential mortgages in bankruptcy. (This provision is saddled with extremely bad message framing—they call it “cramdown.”)

Even though the Durbin amendment was supported by President Obama, it failed 45 to 51 with 11 “centrist” Democrats voting against.

The argument for the Durbin amendment is that we should treat residential mortgages the same way we currently treat business mortgages, vacation home mortgages, and secured loans on boats and cars. The court tries to work out a payment plan designed to prevent the loss of the secured asset. In fact, residential mortgages were treated this way in bankruptcy court until 1978.

Without this bankruptcy provision, President Obama’s plan to address the housing foreclosure crisis will essentially be limited to federal subsidies—which can’t do a lot of good. There’s a reasonable argument that everyone, banks included, would benefit from the bankruptcy provision and Citibank has endorsed it. But all the other banks ganged up to defeat it.

There is a moral to this story. No matter what progressive measure President Obama proposes, and no matter what slightly-compromised but still strong legislation is passed by the U.S. House of Representatives, it won’t become law without the support of the so-called “moderate” Democrats in the Senate.

Here are the Democrats who voted against the Durbin amendment: Max Baucus (MT), Michael Bennet (CO), Robert Byrd (WV), Tom Carper (DE), Byron Dorgan (ND), Tim Johnson (SD), Mary Landrieu (LA), Blanche Lincoln (AR), Ben Nelson (NE), Mark Pryor (AR), Arlen Specter (PA), and Jon Tester (MT). The credit card legislation—and all other progressive priorities—are in their hands. We’d better figure out a way to swing them to our side.