Rescue Plan Fractures Hill

Housing Bill Mixes Party Lines

Posted July 15, 2008 at 6:50pm

House Republicans balked Tuesday at backing President Bush’s plan to rescue Fannie Mae and Freddie Mac, prompting Democrats to sweeten the measure by adding a $4 billion foreclosure fund that Bush has threatened to veto.

Stocks in the two companies plunged again Tuesday as Democratic leaders pushed off votes on the package until next week, blaming Republican leaders who called for a full slate of hearings and floor debate before authorizing massive government investments in the private mortgage giants.

Republicans in both the House and Senate expressed concern about the prospect of putting taxpayers on the hook for huge losses and no longer appear willing to sign off on proposals from Bush without taking a hard look. At a press conference Tuesday, Bush urged Congress to pass the bill quickly.

House Minority Leader John Boehner (R-Ohio) and Minority Whip Roy Blunt (R-Mo.) issued a joint statement saying they backed some action while calling for a delay on the president’s package.

“It would be irresponsible for Congress to provide the proposed new authority without doing due diligence on the mechanics of the Treasury proposal and its potential implications for taxpayers,” they said.

Leaders are under pressure from Republican Study Committee Chairman Jeb Hensarling (Texas) and other conservatives who are worried about a bailout.

“The bottom line is the taxpayer is about to be the big loser here,” Hensarling said.

On the Senate side, several conservative Republicans said they would try to hold up the bill, but leadership was noncommittal.

In response to Republican opposition, Democrats said to pass the bill with votes from their side, they must make it more attractive by adding the $4 billion to buy foreclosed properties. Democrats had planned to keep it out of the underlying proposal because of the White House veto threat.

Rep. Spencer Bachus (R-Ala.), the ranking member of the Financial Services Committee, wrote Chairman Barney Frank (D-Mass.) urging a pared-down bill that would include new regulations for the mortgage companies but no authority to invest in them, and no other housing provisions.

The opposition to the administration’s proposals left Democrats dumbstruck and cracking jokes about GOP divisions.

“When I became chair of the Financial Services Committee, I didn’t know I was going to become the referee of Republican family disputes,” Frank said. “I think I want more pay for that.”

Frank later said the inclusion of the $4 billion fund risks a veto showdown but would appeal to Democrats. Frank said he has no choice but to look for Democratic votes.

“Where are the votes to pass a bill?” Frank said.

And Frank said that Bush’s massive new proposal opened the door to more provisions.

“Now he’s raised the stakes and so are we,” he said.

Frank questioned whether Bush would veto an urgent housing rescue package over the fund.

“It’s 4 billion lousy dollars,” he said.

Democratic leaders said the housing package would be delayed until next week given Republican opposition, but Frank blamed the annual Roll Call Congressional Baseball Game scheduled for Thursday and the fact that it is a get-out-of-town day for Members given that no votes are scheduled for Friday.

Frank said the short delay shouldn’t cause a problem.

“I think the markets will be fine as long as we are making progress,” he said.

A $4 billion offset is being included to comply with pay-as-you-go budget rules, Frank said.

But Ways and Means Chairman Charlie Rangel (D-N.Y.) declined to name what the offset will be.

Frank said Democrats would also add taxpayer protections to minimize risk, including ensuring that federal investments in the two mortgage giants are “very, very preferred.”

“We’re going to get paid before anybody else,” he said.

Frank also said that executives at the company would have to submit to having their compensation approved by regulators, and the companies would have to suspend dividends if they tap federal lines of credit.

Hensarling warned that a bailout out the two companies could effectively add $5 trillion to the national debt.

Frank disputed that figure.

“We are not in any way taking responsibility for their debt,” Frank said. “We are lending them money if we want to prevent a collapse of the market.”

Meanwhile, Democratic aides said Republicans were making a major political mistake.

“The far right has taken over the Republican Conference,” a Democratic leadership aide said. “They took this extreme conservative viewpoint that the White House isn’t even taking. … Doing nothing while people are struggling is not smart politics.”