WASHINGTON (AP) -- Sen. Charles Schumer plans to offer a broad economic proposal for the government to offer a financial lifeline to those banks that are willing to renegotiate mortgages for those on the brink of losing their homes.
The New York Democrat is an outspoken advocate for the financial industry, since so many of those workers are in his home state. Aides said the senator plans to outline his plan on the Senate floor Thursday afternoon.
Under Schumer's model, the government would give capital infusions or loans to banks in return for an equity stake, similar to the deal struck with insurance giant AIG earlier this week.
In return, the banks would lift objections to legislation allowing loan modification for homeowners in bankruptcy. Currently, a person in bankruptcy cannot renegotiate the terms of their mortgage, unlike other kinds of debt.
Schumer's plan is an alternative to another proposal in Congress to create a federal agency to buy up bank debt, shifting potential losses onto U.S. taxpayers. It would be similar to the Resolution Trust Corp., which lawmakers established during the 1980s savings and loan crisis.
(Copyright 2008 by The Associated Press. All Rights Reserved.)
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