Citigroup Backs Mortgage Modification Bill . . . But Since When Do Banks Make The Laws?

As reported in various media outlets, Senators Schumer and Durbin reached an agreement with Citigroup, Inc. on changes to the proposed bankruptcy mortgage modification bill, over exaggeratedly named Helping Families Save Their Homes in Bankruptcy Act of 2009 .  The changes limit relief to existing mortgages and require debtors to jump through hoops by first attempting a loan modification with the mortgage holder so many days before filing bankruptcy.  It does not look like the deal helps people who are already trying to save their home through an existing bankruptcy or people who are already in an existing foreclosure case.  The bill is not yet law and some details might change, so we will have to wait for the final watered down version. 

Part of the settlement that Citigroup, Inc. negotiated with the Senators is that mortgage holders will be able to collect on claims that are subject to violations of federal consumer protection laws.  Instead of the claim being  voided, as the original version of the bill proposed, only fines will be assessed.  Victims of those violations will still have to pay the mortgage holder.  And the bill does not protect against predatory lenders who do this in the future.

When a local legal aid lawyer, who devotes her life to defending poor people in foreclosure cases, heard about the settlement, she screamed “Why was Citigroup even at the negotiating table?”  Good question Clarissa.

That same question was echoed by Wall Street guru Jim Cramer.  In his Today’s Outrage column Cramer asked “Since when do Congressional leaders need Citi’s — or any other company’s blessing on their legislation?”  Cramer said if Citi had any sense we would not need this legislation.

Why do people think politicians favor big business?  Why are people cynical and distrustful of Washington D.C. programs?  Does the ghost of Karl Rove still roam the capital?  Did John McCain really win the election?  Why did we think things would change?