WASHINGTON — The Democratic-controlled Senate on Thursday defeated a plan to spare hundreds of thousands of homeowners from foreclosure through bankruptcy, a proposal that President Barack Obama embraced but did little to see through.
A dozen Democrats joined Republicans in the 45-51 vote to scuttle the measure, which Obama had said was important to saving the economy and promised to push through Congress. But facing stiff opposition from banks, Obama did little to pressure lawmakers who worried it would encourage bankruptcy filings and spike interest rates.
"The vote today was a bipartisan rejection of an interest-rate hike, which is exactly the wrong solution for jobs, homeowners and the economy," said Senate Republican leader Mitch McConnell of Kentucky.
Democratic leaders lamented that they were powerless, with the 45 votes falling far short of the 60 to overcome procedural hurdles. The newest Democrat, Sen. Arlen Specter of Pennsylvania, voted against it.
"The banks that are too big to fail are saying that 8 million Americans facing foreclosure are too little to count in this economy," said Senate Majority Whip Dick Durbin of Illinois, who championed the measure and had spent weeks negotiating with financial lobbyists in a bid to strike a deal.
Obama long has backed the proposal to give debt-ridden individuals the option of asking a bankruptcy judge to reduce their mortgage payment. He cited that support last fall as he privately lobbied skeptical Democrats to back the $700 billion Wall Street bailout. And once he was president, he had promised, he would push for its passage.
In February, the newly inaugurated president included the proposal as the stick in a housing plan full of carrots for the banking industry.