Democrats will use the test vote and the hearings to pressure Republicans to back their housing initiatives or face charges of hypocrisy for supporting a government rescue for investment giants but not for struggling homeowners.

“If (the Bush administration) can spend all weekend figuring out a way to avoid a problem with Bear Stearns, you can spend a little time to keep people in their homes who were lured into deals ... that were fraudulent and harmful,” said Democratic Sen. Christopher Dodd of Connecticut, the banking chairman.

Behind the partisan disputes are several measures that enjoy broad support. They include letting states issue US$10 billion (euro6.33 billion) in tax-exempt bonds to refinance subprime loans; strengthening loan disclosure rules; and allowing businesses that have suffered losses to reclaim previously paid taxes.

A broader housing overhaul proposed by Dodd and Rep. Barney Frank, chairman of the House Financial Services Committee, faces an uncertain road.

Frank and Dodd want the Federal Housing Administration, the Depression-era agency that insures mortgages, to guarantee US$300 billion (euro189.92 billion) to US$400 billion (euro253.23 billion) in refinanced loans to troubled borrowers. Lenders would first have to agree to take a loss on the mortgages; borrowers would have to show they could afford to make payments on the new loans.

The plan would insert the government into the maelstrom of the subprime mortgage mess, with public money at risk should homeowners default. But it would rescue hundreds of thousands of borrowers from foreclosure and insure that lenders get something from their mortgages. That, in turn, could boost investor confidence in the value of mortgage-related investments.

“Some federal money is at risk, but we think we are doing the absolute maximum to protect the government and address the problem,” Frank said in an interview. “Unfortunately, the case for doing something gets stronger every day.”

Frank said he expects to send the measure through his committee in April. He is optimistic about getting at least some Republican support, especially given the pressures of the political calendar.

“For the Democrats, I don’t think you need an election to want to do this, but for the Republicans, it may make a difference, particularly for people from those areas that have been hardest hit,” said Frank, who is planning two days of hearings early next month.

Dodd said he wants to add his bill to the housing measure set for a vote Tuesday, but it is up against steep odds.

Bush has been cool to the idea of a big federal housing rescue. “The temptation of Washington is to say that anything short of a massive government intervention in the housing market amounts to inaction,” he said recently. “I strongly disagree with that sentiment.”

Republican Rep. Tim Walberg of Michigan, whose state ranks among the top 10 for mortgage foreclosures, according to the research firm RealtyTrac, Inc., said he had high turnout for two foreclosure seminars he held in his district over the break. But he added that Congress should be cautious about federal intervention.

“The bottom line is we don’t think the government should get in using taxpayers’ dollars to bail a large number of people out for decisions that they made on their own and contracts that they signed,” Walberg said.

Subscribe to The China Post and save.  Click hereSharePrintEmail

Write a Comment

Enter your comments - 800 characters max

Receive China Post promos

Respond to this email