WASHINGTON — Bankers who are fighting for changes to legislation that would let bankruptcy judges reduce mortgage debt could find themselves in a weaker bargaining position if the Senate goes ahead with an idea to join the measure with a separate bill that could lead to a massive reduction in deposit insurance premiums.

Senate leaders said Tuesday they are still figuring out how to craft the mortgage bankruptcy reform so that it will attract enough votes for passage in the chamber, but they are considering coupling it with a bill to increase the borrowing authority of the Federal Deposit Insurance Corp.

Sheila Bair, chairman of the Federal Deposit Insurance Corp, has said she would significantly reduce a planned 20 basis-point charge if the FDIC won such authority. The provision is already part of the House mortgage bankruptcy bill that passed the House last week.

"I've always been operating on the assumption that it would be combined for the very reason that [House Financial Services Committee Chairman Barney] Frank combined it in the House bill, which was to attract some banking support or at least to mitigate the opposition to the cramdown provision," said Brian Gardner, an analyst with Keefe, Bruyette and Woods.

The deal could shift the political dynamics in the Senate.

Sen. Jon Tester, D-Mt., said in a brief interview Tuesday he continues to have problems with the mortgage bankruptcy bill, but said community banks need relief from the high premium fee.

"I'll tell you I continue to see in those premium increases that the impact on community banks is huge," Tester said.

"And so we are going to have to figure out a way to get those down. On the other side of the coin, I'm not crazy about the cramdown provision."

He said if the two measures came as a package deal it would be a tough call.

"I'd have to weigh that out," he repeated. "That would be a difficult choice. It would be."

The lead bankruptcy bill in the Senate is one by Sen. Richard Durbin, D-Il., that would apply to existing mortgages. Durbin said Tuesday he wants to ensure the bill is passed soon and that it is not watered down so that it becomes too "meek" to do borrowers at risk of foreclosure any good.

As for joining it with the FDIC bill, Durbin said that was up to Senate Banking Committee Chiarman Chris Dodd. "He's the captain of the ship in terms of how we come to the floor," Durbin said.

Durbin is scheduled to have a press conference today with Senate Majority Leader Harry Reid on the bill.

Sen. Charles Schumer, D-NY, though, another lead advocate there, said sponsors still need to work to secure votes from both Republicans and Democrats and said they are open to changes.

"All of these things are up in the air," he said about combining bankruptcy with the FDIC borrowing authority.

"We believe we have to pass a bankruptcy bill. It's important to get a bankruptcy bill and right now we are working on trying to get the votes for it. We are willing to make some changes but we don't want to change the overall thrust of the bill."

Sen. Tom Carper, a moderate Delaware Democrat whose state is a major banking player, said in a brief interview that he would prefer narrowing the bill. He added that combining the two measures together would be a smart strategy.

"Actually that strategy of trying to put them together as a package — that's probably not a bad package," he said.

To narrow the bill, he said he wants to ensure that the bankruptcy courts are not overwhelmed with filings so that bankruptcy is saved as a last resort. He added he is not convinced that eligible mortgages should go beyond subprime.

"That should be the last step and not the first, and we need to make sure that people are taking full advantage of the recent Obama initiatives and other plans," he said.

On the types of loans that should be targeted, Carper added, "at least subprime."

Carper said he "would reserve judgment as to whether we should extend this opportunity to mortgages beyond subprime."

Sen. Jack Reed, D-RI, said he was not sure the FDIC and bankruptcy measures should be tied to each other, but said he wants to ensure other foreclosure prevention options remain viable.

"I don't see them as substantively linked," he said. "They are not totally unrelated, but I think just putting them together is not necessarily necessary."

In order to pass, the bill will have to secure near unanimous support of Democrats, and at least a few Republicans.

Sen. Mel Martinez, R-Fla., signaled Tuesday he was opening to supporting the bill, saying he wants to figure out if bankruptcy reform is an effective way or preventing foreclosures.

"I'm studying the whole issue, trying to decide where I want to come down," he said.

"Last year I was pretty… against it. That doesn't mean that I'm for it but it does mean that I want to really see that if there is a way."

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