ng package aimed at bolstering the sagging U.S. economy, despite his objections to including US$3.9 billion for neighborhoods hit hardest by foreclosures. The House of Representatives was expected to vote on the bill Wednesday, and it could become law as early as this week. Under the bill, the government would help struggling homeowners get new, cheaper loans and would be allowed to offer troubled mortgage giants Fannie Mae and Freddie Mac a cash infusion.
The Bush administration and lawmakers in both parties teamed to negotiate the measure, which pairs Democrats’ top priorities — federal help for homeowners facing foreclosure and US$3.9 billion for devastated neighborhoods — with Republicans’ goal of reining in mortgage giants Fannie Mae and Freddie Mac while reassuring financial markets of their stability.
Bush had objected to the neighborhood grants, which would be for buying and fixing up foreclosed properties, saying that they were aimed at helping bankers and lenders, not homeowners who are in trouble.
White House press secretary Dana Perino announced Bush’s switch in a telephone conference call with reporters. “We believe this is not the time for a prolonged veto fight, but we are confident the president would prevail in one,” she said.
It was a dramatic split for Bush and congressional Republicans, many of whom are angrily opposed to the housing legislation, which they call a handout for irresponsible homeowners and unscrupulous lenders.
At a closed-door meeting Wednesday morning, House Republicans denounced the plan, although it is clear they do not have enough votes to prevent it from becoming law.
Rep. John Boehner, the Republican minority leader, told colleagues that he would “vote against this bailout bill, and that taxpayers deserve a lot better than this,” according to a senior party aide.
The measure hands the Treasury Department the power to extend the government-sponsored mortgage companies an unlimited line of credit and buy an unspecified amount of their stock, if necessary, to prop up Fannie Mae and Freddie Mac, two companies chartered by Congress. The two companies back or own US$5 trillion in U.S. mortgages — nearly half the country’s total.
“The positive aspects of the bill are needed now to increase confidence and stability in the housing and financial markets,” Perino said. “While we have concerns with other aspects of the bill, it is important that the new authorities are put in place promptly. And so President Bush will accept Secretary (Henry) Paulson’s recommendation to sign the bill.”
With Congress just 10 days away from leaving Washington for a five-week vacation break, she added, the possibility of waiting until mid-September for the housing measure “is not a risk worth taking in the current environment.”
At the Treasury Department, Paulson told reporters that he urged Bush to sign the bill despite its inclusion of the “wasteful” US$3.9 billion in grants. He said its enactment would be “a very important message that we are sending to investors around the world” that would play a key role in “turning the corner” on the housing crisis.
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