Legislation to allow bankruptcy judges to modify mortgages failed last week, ending the most recent charge to bring further reform to the banking industry which, along with wall street profiteers, is largely being blamed for the sub-prime mortgage meltdown and the continued credit crunch.
The measure, if passed, would have enabled bankruptcy courts to reset mortgage terms, extend repayment periods, reduce interest rates and fees and adjust the principal balance of mortgages so homeowners can avoid foreclosure. The effort was seen as the logical extension of the current legislation, which currently gives bankruptcy judges the power to restructure any legally binding contract between two parties.
With bankruptcy rates already rising, it would be expected that thousands of loans would come under the microscope of bankruptcy judges with the ability to rewrite loan terms according to what the borrower could afford; and with the possibility of little or no regard to the risk underwriting guidelines of the lenders. Some believe the measure failed due to the lobbying of powerful banks, as that group would stand to lose the most if this measure moves forward.
Other financial legislation passed through the House recently, with a push from President Obama, that would create a Consumer Financial Protection Agency, to which banks, lenders, hedge funds and private capital firms would have to report. The legislation also gives the government wide sweeping ability to break up large financial institutions that pose a threat to the stability of the US financial system. The fate of the bill currently lies in the Senate.
It is not clear whether these two important pieces of legislation will have the momentum to carry through in time to affect a rebound from the current crisis, but it is clear the winds of change are coming to wall street.
Comments
Thanks for the information. The banking industry is too powerful and has too many people in their pockets to make a difference for the little guy.
The financial institutions (Banks) have too many politicians and powerful people in their pockets. Time to have a Boston Tea Party! Power to the people! The rich get richer the poor get poorer. No middle, just rich and poor! More starving, more homeless in the richest country in the world or should we say the most in debt thanks to the banks and wall street.
Thanks for the article. It is frustrating because it seems that special interests are always served. It's whomever has the lobbyists that seems to win. The people should have lobbyists. Oh yeah, we do, our votes. If you believe in something vote for it, and get off your fanny and go down to DC and be as much of a pain in the butt as those lobbyists. I am curious to see what happens with that consumer protection agency and other bills still in congress. Keep the articles coming.
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