Liberals want mortgage 'cram down' in stimulus

Liberal Democratic lawmakers railed Thursday against the tactical decision of President Obama and House leaders to leave a bankruptcy “cram-down” provision out of the economic stimulus package.

The provision would let bankruptcy judges to shrink, or “cram down,” mortgages for homeowners who owe more than their home is worth.


Obama and Democratic congressional leaders say they strongly support it, but the financial industry and Senate Republicans oppose it. So the White House and Democratic leaders worry that making the provision part of the stimulus would complicate their efforts to build GOP support in the Senate, where Republicans have enough strength to support a filibuster.

But at a hearing on the provision Thursday, Democrats said that too many people are losing their homes to worry about Republican votes or financial industry objections.

“I believe the ‘fierce urgency of now,’ requires us not only to pass this out of committee, but to pass it in the stimulus,” said Rep. Steve Cohen (D-Tenn.), citing Martin Luther King Jr. “Because we know the stimulus is going to pass.”

Fellow Judiciary Committee member Maxine Waters complained that the banking industry should not be allowed to block the bill.

“They’ve owned this Congress [for] way too long,” said Waters (D-Calif.).

But Obama economic adviser Jason FurmanJason FurmanOn The Money: Five things to know about the August jobs report Dates — and developments — to watch as we enter the home stretch In surprise, unemployment rate falls, economy adds jobs MORE made it clear to House members last week that the administration does not want the cram-down provision in the stimulus because it would complicate efforts in the Senate.

A spokesman for Sen. Dick DurbinRichard (Dick) Joseph DurbinSupreme Court nominee gives no clues in GOP meeting Warren won't meet with Barrett, calling Trump's nomination an 'illegitimate power grab' Conservative group unveils ad accusing liberals of attacking Barrett's faith MORE (D-Ill.), who negotiated a compromise on cram-downs with Citigroup Inc., last week disputed that Obama was opposed to putting it in the stimulus.

But House Majority Leader Steny Hoyer (D-Md.) confirmed Obama’s position Thursday in his weekly session with reporters.

“I think it would probably hold things up in the Senate,” Hoyer said. “President Obama, as you know, said he is for doing this but would prefer not to do this in the package because this package is so critical to get this done.”

House Speaker Nancy Pelosi (D-Calif.) said Thursday she is “open” to passing the cram-down provision in the stimulus bill. But she stressed that the stimulus is urgent and there are other ways to pass it.

“We have a lot of work to do, and, as has been indicated, we have a deadline and a sense of urgency that we need to get the job-creation part of this done,” Pelosi said. “We will have other legislation, or a free-standing bill, but we will get it done.” 

Republicans signaled their opposition in the Judiciary hearing, saying it will drive up future mortgage rates and encourage homeowners to file for bankruptcy to lower their mortgages.

“Americans undoubtedly want solutions to the foreclosure crisis,” said Rep. Lamar Smith (Texas), the top Republican on the committee. “But I do not believe they want solutions that amount to absolving borrowers of their personal responsibility.”

Mike Soraghan can be reached at