The US House of Representatives voted 188-241 to reject a measure that would have given bankruptcy judges the ability to reduce principal balances and change the terms of mortgages for the financially distressed homeowners.

first tuesday take: Apparently Main Street, and its hundreds of thousands of distressed homeowners, aren’t considered “too big to fail.”

It appears Congress means to continue turning a blind eye and crossing its fingers in hopes that Main Street’s foreclosure crisis will fix itself if kicked down the road long enough. They’ve apparently taken a page out of the lender’s “Extend-and-Pretend” book on this one.

Barring a market miracle (which no one is foolish enough to hope for except lenders, speculators and politicians), the distressed properties will continue to slowly turn into foreclosures, which will slowly be churned into more inventory to be slogged through in the coming months. With the more-than-likely slow job growth in 2010, where are the buyers to be found for this new glut of housing?

Perhaps it will take more foreclosures for these politicians to get off their (lender-funded) moral high-horses and make the necessarily difficult decision to restore cramdown authority to bankruptcy judges. Who knows — they might even remember that it’s the voting public, and not banks, who they’ve promised to serve…

For more information on the unemployment picture, see the first tuesday blog article Analysts see unemployment peaking this month.

Re:  U.S. House Rejects Mortgage “Cramdown” Measure from Reuters and the New York Times