Friday, May 1, 2009


If we needed further evidence that we don't live in a free market environment consider the following. On a 51-45 vote the U.S. Senate rejected a measure that would have allowed bankruptcy judges to reduce the principal owed on a home mortgage. This celebratory picture seems to capture the mood of the banking industry after they heard the news ...

More seriously, the idea behind the measure is tied to the following three arguments.

First, many mortgages were sold with little or no concern for whether borrowers could pay (because the financial sector was primarily concerned with securing debt contracts to wrap up into the toxic instruments they created). As such - the reasoning goes - the financial sector should have to face the music (of distressed debtors) for their part in creating bad loans that contributed to the mortgage mess. This sounds reasonable to me.

Second, supporters believed that by allowing judges to write down loan payments on a primary residence that borrowers facing foreclosure could stay in their homes. This would help housing prices stabilize across the nation. This also sounds reasonable to me.

Finally, by allowing bankruptcy judges to cut some of the principal from mortgage loans the measure - an amendment sponsored by Senator Dick Durbin (D-Ill) - would bring symmetry to bankruptcy law (which the Constitution requires). Consider this: Bankruptcy judges can already reduce payment amounts on distressed debtors who have vacation homes, luxury cars, and/or boats. Allowing Joe Six-Pack to enjoy the same bankruptcy laws that Rich Boys with Toys do makes sense to me as well.

So, who are the 12 Democratic Scoundrels who voted against the interests of the working class? Here they are: Max Baucus (Mont.)... Jon Tester (Mont.) ...Tom Carper (Del.)... Michael Bennet (Colo.) ... Robert Byrd (W.Va.) ... Byron Dorgan (S.D.) ... Tim Johnson (S.D.) ... Mary Landrieu (La.) ... Ben Nelson, (Neb.) ... Mark Pryor (Ark.) ... Blanche Lincoln (Ark.) ... Arlen Specter (Pa.).

So, here's the score over the past 10 years

1. DEREGULATION: Financial Services Modernization Act, 1999.
2. FAVORABLE LEGISLATION: Bankruptcy Laws, 2005.
3. FINANCIAL SUPPORT: The Mother of All Bailouts, 2008-2009.
I'm going to discuss this on tomorrow's program. Perhaps somebody can explain to me again how favorable legislation and congressional (non) actions like this help create the free market principles most Americans mistakenly think govern our nation.

- Mark

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