If you want to know why we haven't heard much about the subprime mortgage mess from Democrats, it's because there's an intraparty fight brewing in the House of Representatives over what to do. The Judiciary Committee has the votes for a good bill, but the floor is a 'crapshoot'. Now, let's go into the housing crisis for a second so we can understand the dynamics of the fight. The housing crisis is hitting people all over the country in swing areas like the central corridor of Florida, so you'd think this would be a good time for Democrats to offer a solution. And they are doing so, or at least some of them are doing so.
Tthe reason the subprime mortgage meltdown is so problematic is because homeowners can't renegotiate mortgages for primary residences in bankruptcy court. If you declare bankruptcy, you still can't get out from under your mortgage debt, which essentially enslaves people whose home value has dropped lower than their debt amount.
The good news is that Brad Miller, Linda T. Sánchez, Barney Frank, and Mel Watt have a bill in Congress that empowers bankruptcy courts to restructure mortgages for primary residences. You can find out more here and here. It's a very sane and reasonable approach that lets people declare bankruptcy and get our from under horrific levels of debt.
The interesting news is that 16 fellow Democrats are opposing this bill because it will impact the Bankruptcy Bill provisions they passed in 2005. Who are these lovely people? If you guessed 'Blue Dogs', you'd be right. This is from Congress Daily:
As House Judiciary Committee Democrats quickly prepared last month to move legislation that would make it easier for bankruptcy judges to refashion home mortgages that are on the verge of foreclosure, the banking industry had to mobilize quickly to slow the bill they contend would rattle the shaky home mortgage market.
The bankers quickly worked sympathetic lawmaker offices with their in-house lobbyists. And they knew exactly whom to go to in order to stop the bill in its tracks: the Blue Dog Coalition of moderate-to-conservative Democrats.
Sixteen members of the coalition of business-friendly lawmakers sent a letter Oct. 16 to Judiciary Chairman Conyers asking him to delay consideration of the bill because it might undermine implementation of the 2005 bankruptcy overhaul law.
"We had concerns that a judge could come in and retroactively change the loan terms," said Rep. Dennis Moore, D-Kan., who organized the letter.
"I consider myself very consumer friendly; I also want to look out for business."
The Blue Dog letter forced Conyers to yank the bill from a full committee markup Oct. 24. He scheduled another hearing in the Judiciary Administrative and Commercial Law Subcommittee to go over concerns....
The letter represented the first time the Blue Dogs have flexed their political muscle in public this year on a business issue, much to the relief of lobbyists who are worried that a Democratic-controlled Congress will bring greater regulation and scrutiny of their industries...
Many K Street sources hope that as more substantial bills come forward -- tax overhaul, mortgage lending, and energy -- that the 47-member Blue Dog caucus will have more sway to make the outcome of any legislation less burdensome on business...
"We do a lot of reach-out to them for a lot of reasons," said Bruce Josten, executive vice president for government affairs at the U.S. Chamber of Commerce. "You have to work where you can work. They are go-to people."
Eight Blue Dogs joined in an Oct. 24 letter with other Democrats to Pelosi and Majority Leader Hoyer regarding two bills that would have restricted the use of how businesses could use Social Security numbers, stating the potentially adverse impact on financial institutions.
Those bills have not advanced to the House floor.
"We have tried when we can to have a clear understanding of where the Blue Dogs and where the [more moderate] New Democrats are on issues we care about. They can keep a bill from coming to the floor. If they are together, they can affect the outcome of something. ... They can affect the floor schedule," said one Democratic financial services lobbyist.
Aside from industry whore Dennis Moore, here are the other Bush Dogs that signed the letter. The letter is on the flip, and argues against amending the 2005 Bankruptcy Bill:
Lincoln Davis, John Tanner, Tim Mahoney, Jim Matheson, Alan Boyd, Jim Marshall, David Scott, Melissa Bean, Mike Ross, Baron Hill, Mike Thompson, Bart Gordon, Stephanie Herseth, Charlie Melancon, Dan Boren, Lincoln Davis, John Tanner, Tim Mahoney
What I find fascinating about the letter is how only 16 members of the Blue Dog caucus signed it, but the rhetoric speaks for the entire set of Blue Dogs. Do Patrick Murphy or Kirsten Gillibrand agree with these people? If not, why are they letting them trash their caucus brand?
As members of the Blue Dog Coalition, we are writing to commend Chairwoman Sanchez for conducting oversight hearings in her subcommittee on the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA), and to respectfully urge the committee to continue its oversight of BAPCPA but refrain from amending the law prematurely.
Blue Dogs voted overwhelmingly in support of BAPCPA, an important reform of our bankruptcy laws. A goal shared by Blue Dog supporters of BAPCPA is ensuring that those with the ability to pay back at least some of their debts do so, while preserving access to the bankruptcy system. Unfortunately, those who abuse the bankruptcy system end up penalizing other Americans who choose to work hard and pay their debts, and who still find it a challenge to obtain credit.
Moreover, we believe strongly in the need for corporate citizenship and responsibility in transactions with consumers, and in the need for fiscally sound governmental policies that not only serve to foster financial literacy but to provide a level playing field for consumers. Upholding these principles is important for the free market system to realize its full potential for economic growth, while preventing abusive practices.
Implementation of BAPCPA only began near the end of 2005, but bankruptcy filings are substantially lower than the levels reached prior to BAPCPA's taking effect. Although it is still early in the process, we believe that the numbers of Chapter 7 and Chapter 13 proceedings indicate that fewer abusive bankruptcy filings are occurring following the enactment of BAPCPA. As you know, this is one of the chief goals Congress intended to achieve.
This evidence underlines why it is important for Congress to continue to monitor how the new law is working, and reinforces our belief that it is premature to begin amending BAPCPA. Also supporting that position is the fact that the U.S. Government Accountability Office (GAO) has concluded that not enough data is available for the GAO to make a determination about how effective the credit counseling requirement has proven in practice.
Moreover, the Director of the Administrative Office of the United States Courts is required to report to Congress by July 1, 2008, on important aspects of BAPCPA. As you know, Section 601 of BAPCPA requires the Director to collect better and more detailed statistical data about bankruptcy filings, to analyze this data and to report that analysis to Congress. The detailed data to be gathered includes information on those with primarily consumer debt who have sought relief under Chapters 7, 11 and 13. We believe this report should be considered by the Congress before it initiates revisions of BAPCPA.
In addition, the U.S. Judicial Conference is in the midst of implementing final rules under BAPCPA and is expected to complete that task next year. Amending BAPCPA at this time would disrupt that process. Also, the federal courts are just beginning to review and interpret key provisions of BAPCPA and it would be prudent to let the results of the judicial process inform the debate before undertaking revisions of the law.
Accordingly, we respectfully urge you to refrain from moving forward on legislation amending BAPCPA until additional data is available regarding its effects, until its regulatory implementation has been completed, and until the judicial branch has provided greater clarity with regard to the manner in which its provisions are to be interpreted and enforced.
It's time to understand that Bush Dogs are part of a working conservative majority. They are not our friends, they are not our allies, they are political opponents who want to bail out wealthy investors and hurt people trapped in subprime mortgage markets. Politically, they are also the people hurting Democratic capacity to differentiate ourselves as populists and capture swing areas and exurban Republicans hurt by the housing meltdown.
Guns are one thing, but there is no strong grassroots movement in conservative districts on behalf of big banks. These people are simply whores for credit card companies and banking interests building profitable de facto debtors prisons.