Pay No Attention to the Party Behind the Curtain

| Fri Jan. 9, 2009 12:56 AM EST

PAY NO ATTENTION TO THE PARTY BEHIND THE CURTAIN....Citigroup has agreed to drop its opposition to "cramdown" legislation:

Key congressional Democrats on Thursday reached an agreement with financial giant Citigroup Inc. on a proposal to make it easier for bankruptcy judges to adjust the terms of home loans and possibly forestall many foreclosures.

....The breakthrough agreement boosts the chances that Democrats can push new laws through Congress that direct bankruptcy judges to rework mortgage terms by writing down the principal on the millions of homes that now are worth less than the mortgages they carry.

Most of the reaction to this announcement has been dismay that Congress had to "negotiate" with Citigroup in order to pass this legislation, but it's important to get clear what's actually going on here. The negotiation wasn't really with Citigroup, it was with Senate Republicans, who have almost unanimously opposed this legislation in the past. With Citigroup on board, Durbin and Dodd and Schumer hope that other banks will hop on board too, and once the banks are on board then maybe a few of those legendary "moderate" Republicans will also see the light and do the right thing.

Maybe it will work, maybe it won't. But it's Republicans that are the problem. Banks are just fronting for them.