What is the impact of this on Banks' willingness to lend?: "Barney Frank threatens to stop foreclosures

Do these politicians understand that they help a few people out in the short run and really damage the loan market in the long run? Statements from Barney Frank and the President cause damage even if no bill is ever passed. From the AP:

A senior House Democrat threatened banks Wednesday that if they don't volunteer to save more homeowners from foreclosure, Congress will make them.
In a sternly worded statement, Rep. Barney Frank said Congress will revive legislation that would let bankruptcy judges write down a person's monthly mortgage payment if the number of loan modifications remain low.

Frank, chairman of the House Financial Services Committee, also said his committee won't consider legislation to help banks lend unless there is a "significant increase" in mortgage modifications.

Frank's statement was aimed at adding momentum to a deal struck Tuesday between Treasury Secretary Timothy Geithner and more than two dozen mortgage companies. The two sides agreed to set the goal of adjusting 500,000 loans by Nov. 1.

But it was far from clear whether that would happen.

Loan servicers say they are still trying to play catch up to a deluge of customer requests by hiring and training thousands of new employees. Banks also are trying to sort through which customers face a legitimate financial hardship.

Also, many loans have been bundled and sold to investors as securities, complicating efforts to modify the terms.

Congress tried earlier this spring to pass legislation that would give people a chance to keep their homes by filing for bankruptcy. But while President Barack Obama said he supported the measure, he did little to see it through and it was defeated amid an aggressive lobbying effort by banks. . . . .