Sen. Jon Kyl, R-Ariz., is urging bankers to stand firm and not compromise on cramdown legislation because Senate Democratic leaders don't have the votes to pass it.
"There is no reason to concede on cramdowns when you have the votes to stop it," the high-ranking Senate Republican told the American Bankers Association (ABA) government affairs conference.
Kyl stressed that all 41 Senate Republicans, as well as a handful of Democrats, oppose cramdowns, which would allow bankruptcy judges to reduce the principal amount of a residential mortgage to the fair market value.
"You are well aware that such a change to the bankruptcy code would result in higher interest rates for all home mortgages actually what we don't need now," Kyl said.
Sen. Richard Durbin, D-Ill., has tied a cramdown bill to legislation that increases the Federal Deposit Insurance Corp.'s borrowing authority.
ABA members are hoping the Senate will pass the FDIC bill soon. Kyl assured the bankers the Federal Deposit Insurance Corp. borrowing bill "enjoys wide bi-partisan support" and the Senate can pass it without the cramdown provisions. "We will stand by you. We have the votes to defeat cramdown," Kyl said.