Barney Frank Considers Cramdown Law (real headline)

Frank Considers Cramdown Law
Rep. Barney Frank, D-Mass., said slow progress in assisting troubled homeowners could lead to a new push to change bankruptcy laws.
By United Press International
September 10, 2009

WASHINGTON, Sept. 10 (UPI) -- Influential congressman Barney Frank, D-Mass., said slow progress in assisting troubled homeowners could lead to a new push to change bankruptcy laws.

Frank, chairman of the House Committee on Financial Services, said Congress should revisit the issue of allowing bankruptcy judges to modify mortgages if the banking industry does not increase the pace of its help to homeowners, The Washington Post reported Thursday.

The federal Making Home Affordable program, relying on industry cooperation, has lowered payments for 360,165 homeowners since March, the Treasury reported. Its goal was to help 500,000 homeowners by Nov. 1.

An effort to provide bankruptcy judges with the power to modify home loans -- a practice called "cramdown" -- failed earlier this year, passing narrowly in the House, but failing in the U.S. Senate, the Post said.

The possibility of allowing judges permission to modify loans has met with opposition from lenders.

A cramdown provision would "seriously prolong our housing recovery by decreasing mortgage credit," said Rep. Spencer Bachus, R-Ala.

Why leave it up to a judge? Why let the bench legislate?

Congress, why not just legislate the maximize allow mortgage interest rate at Prime or below. How about credit cards next?
No more 18-21% or higher for anyone, legislate it to say 8%.

Oh, that’s right ... you can’t. Without p*ssing off your money backers and lobbyists. Ya, it’s okay.

We, the lowly citizen and money borrower, know who’s pockets your in and where you bread is buttered.

And it’s not the voters.

Cramming down mortgages means that the contract between lender and borrower is altered ex post facto to deprive the lender of the security bargained for. In essence, the bank loses its priority rights to the property which have been hypothecated as security for the loan and the bank is reduced to the status of a general creditor and thus defenseless to the whim of the bankruptcy judge.

So we have the government monkeying with the right of parties to make a contract. The government interferes with the right to make a contract and it does so ex post facto. This is reminiscent of the Obama administration forcing the bondholders in the Chrysler deal to give up their security to favor the unions which had contributed heavily to Obama's campaign.

Manifestly, banks are going to charge more to make loans which are unsecured.

Of course this will be justified by the fact that the government has poured $1 trillion into the banks and therefore government is morally justified in taking the security advantage away from the banks. Once the government insinuates itself into these affairs there is virtually no end to the concessions it feels justified in demanding.

For example, if the government is providing health insurance called Medicare and fat people are driving up the cost of health care because they get diabetes, the government is now proposing to make fat children attend fat camps. The government is also considering taxing sugary drinks. Ultimately, the government feels justified in telling the elderly that their health care costs too much and they must die. Once the government provides a benefit it can extract virtually any condition (read: penalty) it wants, even on people who themselves do not receive the benefit -like the Chrysler bondholders.

When the federal government has the potential power to incarcerate fat kids in fat camps it is time to consider whether we as a people should return to a government which is limited to express powers listed in article 1 section 8 of the United States Constitution. It is the departure from the authorized powers which starts the chain reaction which leads ultimately to fat camps, death panels, toilet bowls that will not flush, deficits which cannot be curbed, debts which cannot be paid and a currency soon to be as worthless as Confederate scrip.

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