Last week, Illinois Senator Dick Durbin put forward a bill that would allow a judge to reduce mortgage principle during bankruptcy proceedings. Thankfully, it failed to gain enough votes, although 45 Senators voted to affirm the measure, including Iowa's Tom Harkin. Much-maligned (deservedly) Chris Dodd co-sponsored this atrocity. If you don't know how mortgage loans work, it's pretty simple: the bank acts as a broker between investors and and the person seeking the loan. The loan is then sold to investors, who believe that they will make their money on the investment plus interest. If a judge can arbitrarily reduce the amount due on the mortgage, it means that the investor eats that money, and makes the possibility of a loss on any given mortgage more likely. Question: What investor would put money into such a low-interest investment? Answer: None. Which then means that there are no investors for home mortgages. Home lending stops. Completely. Or, this would raise interest rates to cover the risk of loss on the investment. Which slows the economy greatly. (All of you who miss Carter-era interest rates, raise your hand...) This is the fastest way to kill the housing industry and the economy. The bill was cutely called "Helping Families Save Their Homes Act of 2009." More accurately it was "Assuring Nobody Can Obtain an Affordable Mortgage in the Future Act of 2009." Fortunately, 51 senators know enough about these simple economics, but frankly, it's damn frightening that 45 senators thought this was a good idea. All Democrat, I might add. "Oh, but look at how they care!" says the die-hard Democrat. Oh but look at what the "good intentions" of fools can do, say I. | 
