Looking Up For Cram-Down

A breakthrough yesterday between Senate Democrats and, ahem, Citigroup has hopefully ended the deadlock over "cram-down" legislation.

Democratic lawmakers have reached a deal with Citigroup Inc. on a plan to let bankruptcy judges alter home loans in an effort to prevent foreclosures and urged other lenders to follow suit.

The lawmakers aim to attach the plan to President-elect Barack Obama's economic stimulus legislation, and said Thursday the change in bankruptcy law could ease the foreclosure crisis that has dragged the economy into the worst recession in decades.

The compromise between Citigroup and Sens. Richard Durbin of Illinois, Charles Schumer and Christopher Dodd of Connecticut, would be limited to loans made before the bill is signed. Obama has said he backs the concept.

Anything that will help keep people in their homes at this difficult time is a positive. But the fact that politicians have to negotiate with Citigroup, a company that received billions from the TARP program, is more than a little distasteful. Kevin Drum says that actually, the banks are a front.

Most of the reaction to this announcement has been dismay that Congress had to "negotiate" with Citigroup in order to pass this legislation, but it's important to get clear what's actually going on here. The negotiation wasn't really with Citigroup, it was with Senate Republicans, who have almost unanimously opposed this legislation in the past. With Citigroup on board, Durbin and Dodd and Schumer hope that other banks will hop on board too, and once the banks are on board then maybe a few of those legendary "moderate" Republicans will also see the light and do the right thing.

That's maybe worse, however, because it means that one of our two political parties has been wholly bought by banks. Of course, we knew that.