Senate Majority Whip Dick Durbin (D-Ill.) is considering amending Wall Street reform legislation to allow something similar to judicial modification of mortgages, a process known informally as "cramdown."
"We are looking at variations on that theme that might achieve that same result [as cramdown would] and I haven't made a final decision on whether we'll offer it on this bill yet," Durbin said on a conference call with reporters Monday. "We are considering some variations on that but they haven't been solidified as of today. I just want to see if the support is there."
A Durbin staffer said Wednesday that if Durbin does in fact offer a cramdown amendment, it will be different from a previous version of cramdown that failed spectacularly last year in a Senate vote after passing the House.
It was after that vote that Durbin famously said of the Senate that banks "frankly own the place."
"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," Durbin said in April 2009. "And they frankly own the place."
Banks lobbied hard to defeat cramdown last year, but Bank of America has had achange of heart, joining Citigroup in giving qualified support. Judicial modification, as Democrats prefer to call it, would give bankruptcy judges unilateral authority to reduce principal amounts owed on mortgages. Homeowner advocates say that the mere threat of cramdown would do a lot to encourage banks to modify mortgages for homeowners who owe more than their homes are worth. Durbin agrees.
"The arguments that I have been making over the past several years about this looming foreclosure crisis unfortunately turned out to be accurate beyond even my description," he said. "We now have millions of homes facing foreclosure in this country and the trend is growing. Had we passed the bankruptcy reform which I asked for several years ago, we could have at least slowed this down in many, many communities and forced renegotiation of mortgages."
UPDATE 5/17/10: Asked by HuffPost's Ryan Grim on Monday if he would offer the cramdown-related amendment he mentioned two weeks ago, Durbin said, "No."