Senate drops plan to give homeowners a break in bankruptcy court

The idea was to give borrowers duped into abusive mortgages leverage in getting their loan terms adjusted. Such power, said the plan's chief proponent, Senator Dick Durbin, an Illinois Democrat, would have helped "more people than all of the provisions combined" in the rest the bill.

But Republicans and 10 Democrats, along with Connecticut independent Joe Lieberman, scuttled the bankruptcy provision. Opponents argued that, despite modifications by Durbin, the proposal would hurt more than it would help by leading mortgage lenders to ratchet up interest rates and thereby put another drag on the soft housing market.

The defeat of the bankruptcy plan highlighted a weakness that many people find with the bill - that it showers generous tax breaks on money-losing businesses like home builders but does little to help people in foreclosure.

The measure is advertised as helping people keep their homes and injecting demand into the crippled housing market. But its most costly provision simply gives tax cuts worth $25 billion over the next few years to businesses like home builders and banks.

Meanwhile, it provides just $3 billion in tax relief to homeowners over the same period, according to an estimate by the Joint Tax Committee, which explores for lawmakers the effects of tax legislation on the Treasury.

The benefits to businesses also dwarf the $4 billion in the measure that would be provided to cities and towns to buy and refurbish foreclosed and abandoned homes. That provision is aimed at stabilizing communities and preserving values of neighboring homes.

Homeowners would benefit from $100 million to provide counseling to people threatened with foreclosure and help them in negotiating with their lenders. The measure also would provide new authority for states to issue $10 billion worth of bonds to be used to refinance subprime mortgages.