WASHINGTON, July 23, 2008
House Passes Homeowner Rescue Bill
President Drops Opposition To Law Granting Government Aid To Homeowners And Lenders
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Play CBS Video Video House Bails Out Lenders The House has passed a bill which will grant $25 billion to embattled mortgage giants Fannie Mae and Freddie Mac. As Jim Axelrod reports, President Bush has relented and will sign the bill.
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President George W. Bush had objected to a $3.9 billion provision in the homeowner bill, saying that it was aimed at helping bankers and lenders, not homeowners who are in trouble. (AP)
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(AP/CBS)
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Timeline Credit Crunch Feeling the squeeze? Here's a look at actions and statements from key players in Washington.
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News Tools Foreclosure Rates A state-by-state look at foreclosure rates, which were up 81 percent nationwide in 2008.
The 272-152 vote reflected a congressional push to send election-year help to struggling borrowers and to reassure jittery financial markets about the health of two pillars of the mortgage market.
Hours before the vote, President Bush dropped his opposition to the measure, which is now on track to pass the Senate and become law within days.
After the president said he wouldn't veto, shares of Fannie Mae shot up by close to 12 percent and shares of Freddie Mac rose by 11 percent, reports CBS News chief White House correspondent Jim Axelrod.
The White House swallowed its distaste for $3.9 billion in grants the bill would provide for devastated neighborhoods. The Bush administration gains the power to throw a lifeline to Fannie Mae and Freddie Mac as part of the measure that also is designed to rein in the government-sponsored mortgage firms.
Mark Zandi of Moody’s Economy.com said that the move was "absolutely necessary," Axelrod reports.
"If this hadn't been passed, I think confidence would have completely evaporated. You would have seen Fannie and Freddie on a financial precipice," Zandi said.
The administration and lawmakers in both parties teamed to negotiate the measure, which accomplishes several Democratic priorities, including federal help for homeowners, a new permanent affordable housing fund financed by Fannie and Freddie and the $3.9 billion for hard-hit neighborhoods. The grants are for buying and fixing up foreclosed properties.
"It is the product of a very significant set of compromises," said Rep. Barney Frank, D-Mass., the Financial Services Committee chairman. "We are dealing with the consequences of bad decisions and inaction and malfeasance from years before. Obviously, it requires a joint effort. "
In a statement on the bill, the White House said parts of it "are too important to the stability of our nation's housing market, financial system and the broader economy not to be enacted immediately."
Mr. Bush had objected to the neighborhood grants, saying they would help bankers and lenders, not homeowners who are in trouble. Still, Dana Perino, the White House press secretary, said a showdown with Congress over the funds would be ill-timed.
It was a striking split for Mr. Bush and many congressional Republicans. GOP leaders denounced the housing legislation as a bailout for irresponsible homeowners and unscrupulous lenders, even as they acknowledged it was probably necessary.
"It's a bill that I wish I could support. It's a bill that the market clearly needs ... but this is not a bill that I can support," said Rep. John A. Boehner, R-Ohio, the minority leader.
Still, 45 Republicans - most from districts ravaged by the housing crisis - voted "yes," reflecting the political potency of the package at a time when economic concerns are foremost in voters' minds.
The measure hands the Treasury Department the power to extend the government-sponsored mortgage companies an unlimited line of credit and to buy an unspecified amount of their stock, if necessary, to prop up Fannie Mae and Freddie Mac, two companies chartered by Congress. The firms back or own $5 trillion in U.S. mortgages - nearly half the nation's total.
Sen. Richard C. Shelby of Alabama, the senior Banking Committee Republican who was his party's lead negotiator on the measure, said Bush's turnabout reflected political reality.
"They looked at the Hill, they counted some votes and they see there's pretty broad support for this," Shelby said.
He and Sen. Christopher J. Dodd, D-Conn., the committee chairman, said they would push for swift approval of the measure without any changes.
"We'll be anxious to move this product along," Dodd said .
But conservative GOP senators led by Sen. Jim DeMint, R-S.C., were threatening to slow the measure unless Democrats allowed a vote on barring Fannie Mae and Freddie Mac - whose political operations are legendary - from lobbying and making campaign contributions. Senators' objections could delay enactment of the measure until next week.
Before Wednesday's vote, Treasury Secretary Henry Paulson told reporters that completing the measure was "a strong message that we are sending to investors" that would play a key role in "helping us turn the corner" on the housing crisis.
Congressional analysts estimate that a government rescue of the mortgage giants could cost $25 billion, but they predict there's a better than even chance it won't be needed.
The bill would let hundreds of thousands of homeowners trapped in mortgages they can't afford on homes that have plummeted in value try to escape foreclosure by refinancing into more affordable, fixed-rate loans backed by the Federal Housing Administration. Lenders would have to agree to take a substantial loss on the existing loans, and in return, they would walk away with at least some payoff and avoid the often-costly foreclosure process.
The plan also creates a new regulator with tighter controls for Fannie Mae and Freddie Mac and modernizes the FHA.
It includes about $15 billion in housing tax breaks, including a credit of up to $7,500 for first-time buyers who purchase homes between April 9, 2008, and July 1, 2009. It also allows people who don't itemize their taxes to claim a $500-$1,000 deduction on their 2008 property taxes. That chiefly benefits homeowners who have paid off their loans and can't claim a federal tax deduction for mortgage interest.
And it increases the statutory limit on the national debt by $800 billion, to $10.6 trillion.
The White House, which initially denounced portions of the bill as too burdensome on the government and risky for taxpayers, dropped most of its objections in recent weeks in search of a swift deal. An urgent request by Paulson to throw Fannie Mae and Freddie Mac a federal lifeline acted as a powerful locomotive for a deal.
The bill sets a cap of $625,000 on the loans that Fannie Mae and Freddie Mac may buy and the FHA may insure. It lets them buy and back mortgages up to 15 percent above the median home price in certain areas.
Lawmakers abandoned efforts to place conditions on any Fannie and Freddie rescue, but the bill hands the new regulator approval power over the pay packages of executives at the companies.
It also counts any federal infusion for the mortgage giants under the debt limit, essentially capping how much the government could spend to stabilize the companies without further approval from Congress. As of Tuesday, the national debt that counts toward the limit stood at just under $9.5 trillion, roughly $350 billion below the statutory ceiling.
© MMVIII, CBS Interactive Inc. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press contributed to this report.
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See all 101 CommentsOUR MONEY, OUR CHOICE.!!!!!
OUR MONEY, OUR CHOICE.!!!!!
They finger print mortgage brokers?
That was NOT the problem!
Every credit card transaction is open to be reviewed by the IRS? *** !!?
And we still bail out everyone else''s mistake? NO THANK YOU. I''m calling my Senator, this should NOT pass the Senate and this should be vetoed!!
You do know it''s THE USA ( all the other people that were not stupid) that are paying this bill for the people who are.
This is socialism and our money is being redistributed to those that made bad and greedy choices, and are getting rewarded for it!
Posted by godseyesore at 09:29 AM : Jul 24, 2008
Funny, I don''t see it that way. Blaming GWB for something he personally didn''t champion seems a bit harsh. I grant you, he has done so many other questionable things that this seems aligned with his choices. But this is part of the economy, that we MUST have spikes in certain industries that spur growth. Everyone complains about $25B the tax payers have to bail out, but on the front end--we had six+ years of steady growth. Those 120% re-finance deals were pumped into the economy, and every sector enjoyed it through increased purchases. In some ways, if you consider that China holds many of the Fannymae/mac bonds, and we purchased many of their goods through imports--this whole cycle comes full circle.
JT
www.Ultimate-Anonymity.com
The average American gets prosecuted when they write bad checks.
http://digg.com/world_news/YOU_JUST_GOT_SCREWED_and_Nobody_Will_tell_you_URGENT
Find out what is buried in this insane bill.
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Posted by curse914
I agree, but this won''t happen. First they will prop up the price of the stock, then our government will purchase all the stock and then let it drop to nothing and finish things off with a bailout...
Just look at how they crafted the bill, you can see they left pleanty of room for this.
I love this part:
"And it increases the statutory limit on the national debt by $800 billion, to $10.6 trillion."
Don''t you just love how they bury little tid bits of information deep in the article?
Posted by brianbwb at 02:43 AM : Jul 24, 2008
You are exactly right! When people decide to go into medicine, they want to heal the other people. But somewhere down the line they decide some of us are less deserving of their care. Or is it that the insurance companies decide that for them?
Either way, we need to get rid of this imperilistic system.
No, we don''t want that, only those profiting from the bubble want it.
I say the government uses "eminent domain" to possess all the Fannie Mae and Freddie Mac mortgages, and restructures the mortgage contracts to a profit neutral state. This way, the house will still retain it''s value, the sellers get what they asked, the payers aren''t forced to deal with ridiculous interest rates, and our tax dollars don''t go to pay some bank CEO''s annual bonus.
Allow me to sound a bit, ahem, Republican on your points.
"Or maybe you will just die with his health plan."
As opposed to dying because the private firms renege on their corrupt contracts?
"How do like that the Obama Government will decide if you or a loved one really should get the surgery to keep them alive?"
Better than a bunch of elitist neocons making the decision based on whether or not you are rich.
"Or how about you drink or smoke or chew tobacco or any little thing and you are not allowed to get a transplant."
You make the conscious choice to screw up your body, then expect a handout, when those who don''t screw up deserve it more than you? Whatever happened to the "neocon" talking point about personal responsibility?
"Your Father is dying, he needs heart surgery, but he drinks a beer here or there, guess what, No heart surgery for him."
Same point as above. Too bad, but we all will die from something, and at any rate, how is this statement any different than what the privatized HMOs now practice, looking for any excuse to welsh on their bet?
Fixed rate = Fed rate increase. Maybe he''ll skip this one, bu not the next one.
If one of you would take the time to find out what this crazy man is really upto, you would be scared to death. Or maybe you will just die with his health plan. How do like that the Obama Government will decide if you or a loved one really should get the surgery to keep them alive? Or how about you drink or smoke or chew tobacco or any little thing and you are not allowed to get a transplant. Your Father is dying, he needs heart surgery, but he drinks a beer here or there, guess what, No heart surgery for him.
Stop and take the time to find out what Obama is really upto PLEASE! Don''t be blind.
So stop being a baby and suck it up like the rest of us just trying to make it day by day.
How dare you speak in that tone to anyone. Are you special or something?
Yes, that is precisely the case. These incentives have been added to the National Debt. Not only did you NOT receive any money, but because you are certainly in a higher tax bracket than the actual recipients, you and others like you will be called upon to pay back most of it. If it''s any consolation, my wife and I are in the same boat.
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