Yesterday, Sen. Harry Reid (D-NV) announced that he plans to bring the long-delayed cram-down bill — which would allow bankruptcy judges to “cram-down” mortgage payments for troubled homeowners — to the Senate floor for a vote next week. However, it will reportedly be introduced only as an amendment, a form in which “it appears likely to lose.” In fact, Sen. Bob Corker (R-TN) has gone so far as to pronounce cram-downs “dead.”

So what is happening to this common sense proposal to address the housing crisis? First, it has been caught in a web of special interest lobbying. Various banks and credit unions have been involved in the negotiations, with different parties walking away from the table at one point or another. One lobbyist opposing the bill crowed about the mess, saying that “chaos is good.” Republicans have also been staunchly opposed to the bill, spreading various falsehoods about its effects.

While not completely necessary, it would have been helpful for the banks to support cram-downs. But Republican senators apparently pushed bailed out banks — that are operating thanks to taxpayer money — to not accept any compromises on the measure. According to CongressDaily:

GOP senators had put pressure on three big banks that were left negotiating — Bank of America, JPMorgan Chase and Wells Fargo — not to give in, according to sources. They were concerned the three lenders might agree to a compromise like Citigroup did earlier with [Sen. Dick Durbin (D-IL)], especially as they face pressure to strike a deal with Democrats because of other criticism leveled at them, including their use of Troubled Asset Relief Program funds, credit cards and mortgage lending practices. Citigroup is still feeling the wrath of GOP leadership.

JP Morgan, Bank of America, and Wells Fargo are all TARP recipients, and may have been enticed by Durbin’s offer to attach cram-downs to a bill raising the FDIC’s deposit-insurance limit. So which is worse here? Banks accepting taxpayer dollars while fighting against a measure meant to help taxpayers, or GOP Senators pushing them to continue doing so when a compromise is on the table?

Ending the tide of foreclosures is a key part of halting the economy’s slide. So as the New York Times editorial board wrote this morning, “Republican senators need to understand that a vote against this reform is a vote against economic recovery“:

As foreclosures add to the glut of unsold homes, house prices will continue to fall. That will lead to more foreclosures — declining equity is a risk factor for default — and more defaults and foreclosures will hamper the banks’ recovery and further constrain credit. And so on.

We were quite surprised to see a Center for American Progress report being cited on the Senate floor by Sen. David Vitter (R-LA) yesterday. Unfortunately, what he said was just another in a string of “fuzzy math” and distortions defending the broken energy status quo and push for more of the same failed Bush-Cheney energy policies that caused the average family’s spending on gasoline end electricity to skyrocket by more than $1,100 per year.

Vitter said:

“According a preliminary estimate based on the Center for American Progress data, 271,000 oil and gas jobs would be destroyed annually by the administration’s proposed new taxes and fees on energy.”

Watch it:

This is a totally fabricated distortion of our 2008 report, “Green Recovery: A New Program to Create Good Jobs and Start Building a Low-Carbon Economy.”

We wondered where Vitter got it — it turns out this talking point has been circulating for some time, appearing in a document put out by the American Petroleum Institute, in a messaging memo from the oil-backed group Freedom Works, and on a set of talking points hosted on ConocoPhillips’ web site.

The point is a complete distortion of our data (nothing new for conservatives when it comes to energy policy). Our “Green Recovery” report shows that a two-year $100 billion federal investment in a green recovery program, including investments in energy efficiency and renewable energy, would create approximately 2 million jobs. The same amount of money invested in the oil industry would create 542,000 jobs over two years or…271,000 per year.

Apparently, they’ve taken this to mean that President Obama’s energy plan would cost 271,000 lost oil and gas jobs every year, which is simply not what the report says. Read more

Today, the nation’s 19 largest banks will start learning “how they fared in important federal examinations — and which among them will need another bailout from the government or private investors.” The government doesn’t plan to publicly disclose the results of these “stress tests” until May 4.

According to testimony delivered by Treasury Secretary Timothy Geithner on Wednesday, “the vast majority” of banks are well-capitalized. However, the stress tests are going to reveal the plight of the largest banks — which hold most of the assets in the U.S. — and thus are the ones to be concerned with. And if some preliminary analyses are any indication, things don’t look good.

According to analysts at Keefe, Bruyette & Woods (KBW) — which conducted its own stress test on 17 of the 19 banks that the government is examining — the U.S. banking system “might need as much as an additional $1 trillion in capital.” And as Bloomberg found, “bad assets at the biggest lenders almost tripled on average in the past year”:

Pittsburgh-based PNC Financial Services Group Inc. saw nonperforming assets — those no longer accruing interest — jump more than fivefold in the first quarter from a year earlier. They more than quadrupled at U.S. Bancorp in Minneapolis. At 13 of the largest U.S. banks, bad assets increased 169 percent on average from a year ago.

As Kevin Drum wrote “if [the KBW] report is even roughly accurate, I really have no idea how Tim Geithner is going to tap dance his way around the N-word much longer”:

If KBW is right — and their estimate certainly seems to be in the right ballpark — and a substantial fraction of that capital turns out to be needed by half a dozen of the biggest banks, where is it going to come from? The Times report is very antiseptic, but it’s a fantasy to think that any bank “on the verge” will be able to raise private capital, and the Treasury’s TARP money is nearly exhausted. So then what?

Indeed, Bloomberg concluded that banks “may have a hard time persuading investors to give them cash” due to the number of bad assets they hold, while there is increasing concern that Geithner’s plan for removing the assets will unceremoniously flop.

House Financial Services Chair Barney Frank (D-MA) also announced yesterday that “he no longer plans to expedite a bill that would allow the government to place large financial companies into receivership.” So we’re essentially left in no man’s land, with a growing number of assets, limited tools with which to combat them, and no political will to nationalize and break apart the very worst firms.