Dems Say Yes, Obama Says No to Bankruptcy ‘Cramdowns’ in the Stimulus

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The incoming president has demonstrably warm relationships with Democrats in Congress. I wonder, then, which side will back down first now that one thing is clear: Many Dems want the upcoming stimulus bill to include a provision allowing bankruptcy judges to modify the terms of primary mortgages for Americans facing bankruptcy (a policy known as ‘cramdown’); Obama thinks it’s a good idea, but doesn’t want it on the stimulus.

The latest affirmation of the Obama team’s stance came during this morning’s Senate confirmation hearing for Treasury Secretary-designate Tim Geithner.

What remains unclear is why the new administration believes the “cramdown” change would be better tackled in a separate housing bill. When Citigroup is already on board, and no less a Wall Street ally than Sen. Chuck Schumer (D-NY) tells the Journal that “we think it would be great to put this on the stimulus,” what’s the trouble here?

Late Update: To answer the commenters who cite the Obama team’s interest in locking down Republican votes for the stimulus bill … The notion that Democrats should delay one of their longtime priorities — one that would help millions of mortgage-holders avoid economic ruin, one that just won a major financial industry endorsement — to woo the GOP is fairly bizarre. And as we can see today, House Republican leaders aren’t likely to vote for the stimulus as it is.

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