The financial services industry is in trouble over its role in crashing the world economy, but that doesn't mean its lobbyists have lost all their muscle on Capitol Hill.
Exhibit A: The Senate delivered a stinging rebuff to President Obama and consumer advocates Thursday by rejecting a measure to help homeowners facing foreclosure.
The vote was 51 to 45, with 12 Democrats joining Republicans in opposing the proposal, under which bankruptcy judges could order lenders to reduce the principal on home mortgages.
The proposal, which sailed through the House in March, was a key part of Obama's plan to reduce the tide of home foreclosures.
Its defeat in the Senate marked a turnaround for the Democratic supporters of the bill, who had hoped that the party's new majority would boost its chances for passage.
Instead, Democratic leaders were furious to see bankers lobbying against consumer protection measures after Congress had approved enormous sums to shore up the financial services industry...
The success came after a nationwide lobbying effort by the ABA and others, including a video appeal from the chairman of the Mortgage Bankers Assn. urging members to come to Washington to lobby on the Senate vote.
...Judges handling bankruptcy cases can already reduce the principal -- and thus the size of the payments -- on a vacation home, car or boat, but not on a mortgage for a primary residence. The bill would have changed that. Sponsors hoped that would give banks an incentive to modify loans to give relief to borrowers facing foreclosure.