Senate GOP members blocked a proposal on Thursday by Democratic leaders to introduce a second economic relief bill focused on housing reform. The proposal, led by House Financial Services Committee Chairman Barney Frank (D-Mass.) and Senate Majority Leader Harry Reid (D-Nev.), would seek to allow bankruptcy judges to modify the principal amount of a borrower's mortgage during bankruptcy and would appropriate Federal funds to be used to buy bad mortgage debt. Democratic Senators had sought to invoke cloture in an attempt to secure speedy passage of proposed bill, called the Foreclosure Prevention Act, through Congress; the cloture rule requires 60 votes to essentially end debate and bring a measure to the Senate floor for a vote. CNN reported late Thursday that the Democrats fell 12 votes shy of the needed 60, an outcome that Sen. Reid painted as a win for Capitol Hill's newest enemy:
"The people on Wall Street are high-fiving. They just won again," Senate Majority Leader Harry Reid, D-Nevada, said after the vote. "The big banks just won again. The mortgage bankers won again. Oh, there are a few losers out there, like millions of consumers -- millions of people who are going into foreclosure or are about to go into foreclosure. They lost."
Republican Senators, however, said that Democrats were attempting to "create an issue" via the cloture motion. Senator Mitch McConnell (R-Ken.) is quoted by CNN as saying that he wants to give the bill consideration. "Now that the box has been checked on the other side, maybe we can get serious now about trying to do something that will actually make a difference," he said. Democrats have ratcheted up the volume in their criticism of the Bush administration's handling of the housing crisis in recent weeks, with Sen. Richard Durbin of Illinois most recently going so far as to compare the President to Herbert Hoover. “Senate Republicans joined with the Administration and the very people who brought us this mess, the mortgage bankers," Durbin said. "Their do-nothing leadership will cause this crisis to spiral farther out of control. It’s that kind of bold, innovative attitude which led Herbert Hoover to do nothing in the Great Depression.” “We’re not going to give up. Senate Democrats will return to this issue and I guarantee that the mortgage bankers will be in for a fight.” The MBA has voiced strong opposition to the proposal, and in particular to the proposed cram-down legislation, saying it will raise mortgage rates for all borrowers; President Bush has threatened to veto the legislation as it currently stands. Treasury Secretary Henry Paulson has also voiced his opposition to the bill, calling it a bailout for lenders, investors and speculators. Administration officials have hardened their stance in recent weeks, saying that private-party solutions put into place -- including the HOPE NOW Alliance and an ASF-led rate-freeze program for subprime borrowers -- need sufficient time to have an effect.