This vote was on an amendment by Lindsey Graham, R-S.C., that would have created a new program allowing the FDIC to renegotiate the terms of certain troubled loans, and funneled $22.7 billion toward the program. The amendment was offered to a bill that is intended to help stimulate the flagging U.S. economy with a $900 billion cash infusion.
Graham said his amendment would allow the FDIC to deal with lenders to renegotiate mortgage loans that are about to go into default, including making use of interest rate reductions, extended amortization and principal forbearance. Graham said the director of the FDIC estimated that such a program, along with the money to fund it, could save about 1.5 million mortgages that might otherwise go under.
"Again, my colleagues, we can print money until the press breaks. If you do not deal with housing and banking, we are never going to shore up this economy. This is, I think, a very responsible amendment. We could do a lot more with this bill. But we have the ability to transfer funds from the underlying bill to the FDIC that could be used in a way to work with the private sector financial managers to help 1.5 million people from going into foreclosure in the next 14 months," Graham said.
Chris Dodd, D-Conn., said while he agrees that stopping home foreclosures is important, an economic stimulus bill isn't the venue in which to do it.
"I find myself somewhat at cross-purposes because, on the one hand I agree with what they are trying to do; on the other hand—I say this respectfully—I think we are undermining our cause by approaching it this way. We are diminishing the effect of the stimulus bill by doing something on housing, which is a legitimate issue but is not the subject of the debate of the underlying bill, and we are simultaneously potentially denying our opportunity to mandate that this new administration dedicate resources within the [funds] to deal exactly with the underlying cause of the economic crisis," Dodd said.
The amendment was rejected by a vote of 39-57. All but three Republicans present voted for the amendment. All but three Democrats present voted against the amendment. The end result is that the bill went forward without language that would have shifted $22.7 billion to the FDIC and allowed it to use the money to modify existing mortgages in danger of default.