Senate Finance Committee Chairman Sen. Max Baucus (D-Montana). Baucus was one of 12 Democrats to vote against cram-down provisions. (Photo: AP)
A new analysis from a government watchdog group shows senators who killed off a consumer-friendly change in law aimed at addressing the foreclosure crisis received more money in campaign contributions from the industries their vote aided.
Senators who voted against the consumer-friendly amendment received $3.98 million from the financial industry during the 2008 election cycle, while proponents of the bill received $2.65 million.
The amendment in question would have allowed bankruptcy judges to adjust or "cram down" the amount of money borrowers owed their lenders on their primary home in order to avoid foreclosure.
Banking and finance special interests fought hard against the provision, arguing that the ability to adjust these mortgages would make mortgage lending much more risky and expensive, increasing the difficulty of getting a loan in the first place, and increasing the cost to borrowers.
Consumer advocate groups who have long favored this reform pointed out that this type of mortgage adjustment is already available for vacation homes, yachts and almost every other type of loan.
Legislation allowing judges to adjust first mortgages would have saved up to 1.7 million homes from foreclosure, according to the Center for Responsible Lending (CRL), a nonprofit consumer-protection organization. An estimate by CRL predicts an astounding 2.9 million foreclosure starts in 2009, and an estimated 9 million foreclosures by 2012. Foreclosures breed more foreclosures by decreasing the property values of entire neighborhoods. The total devaluation caused by this foreclosure spiral could total $1.9 trillion, according to the CRL projections.
An analysis by the citizen advocacy group Common Cause shows that the Republican and Democratic senators who voted against the amendment had received more money in campaign contributions from the banking industry than those who voted in favor of the amendment.
"Until we change the way we pay for Congressional campaigns, average homeowners will be helpless when up against the power of the banking industry and its millions of dollars spent on campaign contributions and lobbying," said Bob Edgar, president of Common Cause.
The amendment was opposed by every Republican in the Senate except for Sen. Jeff Sessions (R-Alabama) who did not vote. According to the Common Cause analysis, these members received an average of $77,150 from mortgage bankers and brokers, commercial banks, and finance and credit companies during the 2008 election cycle.
But these 39 Republicans needed Democratic help to kill the bill. And they got it.
The 12 Democratic senators who crossed the aisle to vote with Republicans were Max Baucus (Montana), Michael Bennet (Colorado), Robert Byrd (West Virginia), Thomas Carper (Delaware), Byron Dorgan (North Dakota), Tim Johnson (South Dakota), Mary Landrieu (Louisiana), Blanche Lincoln (Arkansas), Ben Nelson (Nebraska), Mark Pryor (Arkansas), Arlen Specter (Pennsylvania) and Jon Tester (Montana).
These Democrats received more money from the financial industry than their Republican counterparts did, averaging $81,256 during the 2008 election cycle.
Democrats who voted in favor of the amendment received an average of $58,894 in the same time period.
These averages leave out some notable figures who received large contributions.
An opponent of the amendment, Sen. Max Baucus (D-Montana), received $207,430 in 2008 from these financial industry sources. As the chairman of the Senate Finance Committee, Baucus remains a key player in legislation targeted at the financial industry. As chairman, he holds sway over the consideration of bills aimed at reregulating the financial sector in the wake of the financial collapse. Senator Baucus has come under fire from progressive forces for his recent attempts to prevent consideration of a public health care plan.
The chairman of the Senate Banking Committee, Chris Dodd (D- Connecticut), topped the list, raking in $912,744. Senator Dodd defied the trend and voted for the provision despite the cash coming his way. Dodd faces a tough 2010 reelection fight in part because of his perceived ties with the financial industry.
Senate leadership received handsome gifts, with Senate Majority Leader Harry Reid (D-Nevada) and Minority Leader Mitch McConnell (R-Kentucky) receiving $208,650 and $343,700 respectively. Reid voted in favor of the amendment, while McConnell voted against it.
Many of the Democrats who sided with the financial industry in the "cram-down" vote were instrumental in blocking a proposed 15 percent cap on interest rates that credit card companies can charge. Senators Baucus, Byrd, Carper, Johnson, Landrieu, Lincoln, Ben Nelson, Specter and Tester joined with Senators Daniel Akaka (D-Hawaii), Evan Bayh (D- Indiana), Jeff Bingaman (D-New Mexico), Maria Cantwell (D-Washington), Kay Hagan (D-North Carolina), Ted Kaufman (D-Delaware), Patty Murray (D-Washington), Bill Nelson (D-Florida), Mark Pryor (D-Arkansas), Jeanne Shaheen (D-New Hampshire), Debbie Stabenow (D-Michigan) and Mark Warner (D-Virginia), in opposition to the anti-usury bill sponsored by Vermont's Independent Sen. Bernie Sanders.
Many of these Democrats are members of the self-proclaimed moderate caucus in the Senate.
The sponsor of the "cram-down" amendment, Sen. Dick Durbin (D- Illinois), had harsh words for his colleagues after the defeat.
"And the banks - hard to believe in a time when we're facing a banking crisis that many of the banks created - are still the most powerful lobby on Capitol Hill. And they frankly own the place," Durbin said.
Durbin received $175,050 in the 2008 election cycle from the financial industry.