The Housing Rescue Lifeline Moves Closer To Becoming Law
Wednesday, July 23, 2008SUSIE GHARIB: A massive housing rescue and foreclosure prevention bill is closer to becoming law tonight. The House passed a bill late today with bipartisan support. The legislation creates a stronger regulator and a federal backstop for Fannie Mae and Freddie Mac. It expands the Federal Housing Administration to refinance troubled loans, and gives money for state and local governments to buy foreclosed properties. President Bush now says he will sign the measure when it crosses his desk. As Stephanie Dhue reports, the bill's rescue plan for Fannie Mae and Freddie Mac drove support.
STEPHANIE DHUE, NIGHTLY BUSINESS REPORT CORRESPONDENT: Fannie Mae and Freddie Mac have long enjoyed an implicit guarantee that the government would not let them fail. House Financial Services Chairman Barney Frank helped craft the bill passed today making that guarantee more explicit.
REP. BARNEY FRANK, (D) MASSACHUSETTS: This is a balanced bill that includes a significant increase in the reform of Fannie Mae and Freddie Mac. It does give to the administration the ability to make some loans to them, or maybe buy shares with an instruction that they protect the taxpayer.
DHUE: Under the bill, the Treasury would have the power to extend the firms an unlimited line of credit. The Treasury can also purchase Fannie and Freddie stock for the next 18 months. The bill also permanently increases the individual loan amount Fannie and Freddie can buy to $625,000. While acknowledging that Fannie and Freddie are too big to fail, some Republicans, like Jeb Hensarling, objected to the plan.
REP. JEB HENSARLING, (R) TEXAS: We should not pass any legislation that doesn't ensure the taxpayers are never here again.
DHUE: But others, like Congressman John Campbell, voted for it anyway.
REP. JOHN CAMPBELL, (R) CALIFORNIA: I'm going to support this bill today. And I'm going to support it because we are in a position where we cannot afford to not have Fannie Mae and Freddie Mac in the marketplace.
DHUE: The Congressional Budget Office estimates the plan could cost taxpayers $25 billion. The hope is that passing the bill will stabilize the firms at no cost to the taxpayer. But Johns Hopkins University fellow Tom Stanton says it's impossible to predict the cost.
TOM STANTON, JOHNS HOPKINS UNIVERSITY FELLOW: We really don't know, housing prices are continuing to drop, we have to see whether and to what extent Fannie or Freddie have huge holes in their balance sheet and that will help determine the extent to which they are going to need propping up.
DHUE: The Senate must still pass the bill. A few Republicans have threatened procedural moves that will likely delay a vote, but won't derail the bill. Stephanie Dhue, NIGHTLY BUSINESS REPORT, Washington.
