Sen. Dick Durbin is justifiably frustrated. After months and months of negotiations with banks, consumer groups, housing advocacy organizations, and lawmakers, his much-needed mortgage bankruptcy reform bill appears headed for another sound defeat in the Senate. Once part of a more sweeping housing bill, Senate Democrats couldn't secure the 60 votes needed to pass a procedural vote. That means it will be stripped from the broader package and voted on separately, where the upper chamber will undoubtedly reject it for the fourth time.

Allowing bankruptcy judges to change payment schedules, lower interest rates, and reduce the principal owed to the current fair market value of a homeowner’s primary residence is not a radical proposal. It's something judges can already do on second properties and family farms. And it would help a lot of homeowners: An estimated 1 million Americans would be able to use bankruptcy under legislation approved by the House. Without it, as Durbin told the AP today, "we'd continue with what we have — more and more people falling into delinquency and foreclosure with no place to turn."

It can't be said that Durbin wasn't willing to negotiate. According to Hill sources, the latest compromise version included strict conditions governing which mortgages would be eligible and a 2014 sunset provision:

Only mortgages entered into before Jan. 1, 2009 would be open to judges to reduce. A mortgage would need to be delinquent for 60 days. A borrower would need to notify the bank of economic difficulty 45 days before filing for bankruptcy. Only mortgages under $729,000 would be eligible.

But that wasn't enough for the mortgage lenders and credit unions, which might be forced to "trim their profits" marginally if the bill became law. The banks lobbied conservative Democrats and Republicans incessantly to block the proposal, prompting an exasperated Durbin to state outright earlier this week that the banks "own" Capitol Hill. Now, the senator is throwing down the gauntlet. If the banks won't help taxpayers keep their homes, he won't dish them any more taxpayer dollars. Roll Call has the story (subscription required):

“This Senator wants to put the banking interests on notice. I am not going to be a party to shoveling billions more in taxpayers’ dollars your way if you won’t lift a finger to help these people who are facing foreclosure across America today,” Durbin said on the chamber floor. [...]

"We have sat down with the American Banking Association, with the community bankers, with major banks in America,” Durbin said. “Only one banking interest, Citigroup, has been supportive of this. Virtually every other banking operation has refused to meet with us, refused to negotiate with us, refused to come up with any kind of compromise.”

After receiving boatloads of federal assistance, this intransigence by the bloated and irresponsible banking industry is truly unbelievable.