WASHINGTON — 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.
"I am sick and tired of being asked to give billions to these banks," said Senate Democratic Whip Dick Durbin (D-Ill.), who threatened to oppose any further industry bailouts. "If they have no sympathy for homeowners facing foreclosure, I don't have any sympathy for them."
Travis Plunkett, legislative director of the Consumer Federation of America, attributed bankers' continuing clout to the fact that they are major financial players in campaign contributions -- to Democrats as well as Republicans.
According to the Center for Responsive Politics, commercial bank employees donated $22.5 million to congressional candidates -- more than half of it to Democrats.
The banking lobby will face another -- possibly tougher -- test next week when the Senate considers legislation to impose new consumer protections on credit card companies -- a measure with broader populist appeal. The House passed that bill Thursday by an overwhelming 357-70 vote; 105 Republicans voted for the bill, which would give consumers safeguards against unexpected interest rate increases, hidden fees and other alleged abuses.
Consumer advocates hope the strong House vote will give the issue more momentum in the Senate. But the Senate bill is more stringent and may draw even stiffer banking opposition.
Bank lobbyists welcomed their hard-fought victory on the mortgage measure.
