WASHINGTON — The Democratic-controlled Senate on Thursday defeated a plan to spare hundreds of thousands of homeowners from foreclosure through bankruptcy, a bill President Barack Obama embraced but did little to see it through.
A dozen Democrats joined Republicans in the 45-51 vote to scuttle the bill, which Obama had said was important to saving the economy. But facing stiff opposition from banks, Obama did little to pressure lawmakers who worried it would encourage bankruptcy filings and spike interest rates.
“The vote today was a bipartisan rejection of an interest-rate hike, which is exactly the wrong solution for jobs, homeowners and the economy,” said Senate Republican Leader Mitch McConnell of Kentucky.
The newest Democrat, Sen. Arlen Specter of Pennsylvania, voted against it, as did Sen. Michael Bennet, D-Colo. Sen. Mark Udall, D-Colo. voted for it.
“The banks that are too big to fail are saying that 8 million Americans facing foreclosure are too little to count in this economy,” said Senate Majority Whip Dick Durbin, D-Ill.
Critics said the forced easing, or “cram- down,” of a mortgage by a bankruptcy judge would have likely introduced additional uncertainty for financial investors.
The bill also would permanently increase the borrowing authority for the Federal Deposit Insurance Corp. from $30 billion to $100 billion. Increasing the FDIC’s credit would allow the agency to reduce large new premiums it has begun charging banks to insure deposits. The Senate is expected to vote on that measure next week.
