Folks who come out against cram-downs because they don't think it's fair for people to get a break they're not getting may wish to consider this:
Cramdowns may be all that stand between us and further catastrophe.
Short of invalidating all non-interested third party Credit Default Swaps(aka We rigged them to fail bets), the best way to stave off their trillion$ in ill gotten redemption at U.S./AIG(aka The House) is to not have the underlying instruments collapse.
If the mortgages don't collapse, the swaps can't be cashed in. If they are modified, the banks are forbidden the fruits of their rigged bets.
As wholesale lenders, the banks underwrote all of these risky mortgages, knowing the borrowers were going to default when built-in 3-5 year teaser interest rates skyrocketed. So, using that insider information, they bet the mortgages would fail.
They bet on the cheap with mortgage insurance and credit default swaps. They got their global Big Buck investors to join in the insurance fraud.
But, the only way they can cash in their bets is if these mortgages fail. If people are thrown out and financially hobbled, they cash in on trillions of insurance fraud dollars courtesy of the taxpayer.
However, If they are forced to renegotiate terms they get only what they should have had in the first place. Steady repayment of a reasonable, yet very profitable home loan.
So, we can force the banks to take their lumps for trying to game the system, or we can piss and moan because someone might be getting the fairer deal they should have received in the first place.
FYI - for all those "it's not fair, it's not fair" folks - Cram-downs are allowed in bankruptcy proceedings for second homes and yachts but not for a primary residence. That's not fair.
UPDATE Per SnackDoodle below - Bankruptcy judges know lending laws. The banks fear these loans seeing daylight. If a bankruptcy judge finds these loans imperfectly formed, they become invalid, meaning not only might the borrower be in the clear - but, the criminal Credit Default Swaps that taxpayers are paying for would be nullified.