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May 1, 2009

"Cramdown" shot down: Victory for the rule of law

There is so much that is wrong with the notion that a judge can look at a contract, legal and supposedly binding, entered into with the full knowledge and consent of both parties..... and at a whim simply rewrite the contract to the benefit of one of the parties.

This is exactly what President Obama wanted to allow judges to do with the mortgage "cramdown" bill. Congressional Democrats seemed ready to march in lockstep with this plan to wreck the mortgage lending industry, with the bill sailing through the House effortlessly.

But, as the Wall Street Journal reports, a few Senate Democrats showed a spark of rational thought (or, perhaps, a pang of conscience). Enough of them joined the united GOP to kill the bill:

The power of a united minority was on beneficial display yesterday, as Senate Republicans defeated the budget bankruptcy "cramdown" bill. Credit goes to Arizona's Jon Kyl and Minority Leader Mitch McConnell, who kept their party together to beat destructive legislation that had easily passed the House and was one of President Obama's housing priorities.

The cramdown would have allowed bankruptcy judges to rewrite contracts to reduce the amount that people owe on their mortgages. But a bipartisan majority understood that relief for today's troubled borrowers would be paid with higher rates on the next generation of homeowners, as lenders priced the added risk into mortgage contracts.

A dozen Democrats joined Republicans in the 51-45 vote, and even Pennsylvania turncoat Arlen Specter gave his former GOP comrades an assist. Speaking for millions of renters and nondelinquent borrowers, Mr. McConnell said that the vote "ensures that homeowners who pay their bills and follow the rules won't see an interest-rate hike at the whim of a bankruptcy judge."

This is but one battle in General Obama's war against free-market capitalism and the rule of law. Obama and his statist army are still advancing, so I'm sure we haven't seen the last of insane ideas like this.

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