A hotly-debated housing bill aimed at helping struggling homeowners and shoring up Fannie Mae and Freddie Mac is next headed for the Senate. Sens. Chris Dodd, D-Conn., and Richard Shelby, R-Ala., discuss the details.
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The sweeping legislation passed by the House of Representatives yesterday now goes to the Senate, which is expected to approve the measure in the days ahead.
Among its key elements: it the bill authorizes the Federal Housing Administration to guarantee up to $300 billion in more favorable mortgages for struggling homeowners; it allows the Treasury Department to increase its line of credit to mortgage giants Fannie Mae and Freddie Mac and buy stock in both companies, if needed; and it creates a strong, new regulator to oversee the firms.
For more on the measure, we are joined by its principal author on the Senate side. He's Democratic Sen. Chris Dodd, the chairman of the Committee on Banking, Housing and Urban Affairs.
And the ranking Republican on that committee, Sen. Richard Shelby of Alabama.
Gentlemen, thank you both for being with us.
SEN. CHRIS DODD (D), Connecticut: Thank you.
Sen. Dodd, to you first. A big and controversial part of this bill is aimed at shoring up confidence in Freddie Mac and Fannie Mae. But according to the Congressional Budget Office, the price tag for this, it's not clear. It's anywhere from zero to $100 billion. Does that worry you?
SEN. CHRIS DODD:
Well, the number I think they used, Judy, was $25 billion. And the report further went on to say that there's a greater than 50 percent chance this authority will never be used.
Sec. Paulson, in conversations with Sen. Shelby and I privately, as well as in public testimony, has emphasized that he has a strong determination not to have to use this authority.
But as you point out in your — in setting up the question, the implicit guarantee was not strong enough for many of the debt-holders, many of whom are outside of the United States. A lot of this debt is being held by countries all over the world, and they were getting nervous about all of this.
And so the secretary of the Treasury came up with this idea, an 18-month plan — we'll be watching it very carefully — to shore up that confidence in these important institutions. And with that, we hope we'll stabilize this market, liquidity will continue to flow, and we'll get back on our feet on what has been the epicenter of this problem, and that is the foreclosure crisis.