US Senate approves rescue bill

Mammoth PLAN: While the measure is meant to help struggling homeowners avoid foreclosure, critics said it would help lenders, not people trying to keep their homes AFP , WASHINGTON Sunday, Jul 13, 2008, Page 11
The US Senate on Friday passed a mammoth housing rescue bill aimed at helping thousands of Americans to keep their homes, amid a deepening mortgage foreclosure crisis.
The vote came was the government-backed mortgage giants Fannie Mae and Freddie Mac teetered on the brink of crisis, and went through after weeks of wrangling between Democrats and Republicans in Congress.The measure, which passed 63-5 in a sparsely attended end-of-week session in the 100-member chamber, will now be sent back to the House of Representatives, which has passed its own version of the legislation.The two bills will have to be combined before being sent to US President George W. Bush for his signature.Democratic Senate Majority leader Harry Reid said the bill, which sets up new oversight of Fannie Mae and Freddie Mac, which underpin trillions of dollars in US mortgages, would help many Americans keep their homes and shore up the wider economy.It would also fund a US$300 billion bailout for troubled mortgages.“This bill will help prevent another crisis of this magnitude, stop foreclosures before they begin and preserve for future generations the American Dream of home ownership,” Reid said.But some Republicans said the bill would not help the underlying problems in the mortgage market, and would reward irresponsible lenders and those who took out loans beyond their means.“It’s important that the actions the federal government takes do not interfere with the correction that must ultimately occur in the housing market,” said Senate Republican minority whip Jon Kyl, who voted against the bill. “The federal government should not bail out irresponsible lenders or speculators on the backs of American taxpayers.”White House spokeswoman Dana Perino said Bush objected to the bill providing US$4 billion in block grants to states to buy foreclosed homes, saying it “just helps lenders ... not people trying to stay in their homes.”“If this provision is in legislation that comes to the president’s desk, he will veto it,” she added in a statement.Shares of Fannie Mae and Freddie Mac were pushed to the brink of a meltdown on heightened concerns about their viability on Friday.In highly volatile trading, Freddie Mac plunged 51 percent and Fannie Mae 49 percent but recovered ground after a series of comments from US officials and a key US senator. At one point, shares were up nearly eight percent.At the close, Freddie’s shares had lost 3.1 percent at US$7.75 and Fannie’s 22 percent at US$10.25. The shares of the two firms have plunged around 75 percent since the start of the year.Senate Banking Committee chairman Christopher Dodd said: “There is sort of a panic going on today, and that’s not what ought to be. The facts don’t warrant that reaction, in my view.”“These institutions are ... fundamentally sound and strong,” the senator added.The latest action came amid a new report saying the government could put the finance giants in receivership, which would make their shares worthless.The New York Times said the Bush administration was weighing the possibility of having to place one or both companies in a conservatorship to protect them from the snowballing collapse of the US mortgage finance market.The two firms said in separate statements they were “adequately capitalized” and had ample liquidity despite swirling market fears.The Freddie Mac statement said speculation around the issue of conservatorship “does not accurately reflect the facts. Freddie Mac is not on the threshold of conservatorship because we are adequately capitalized.” Fannie Mae said: “As we work through this tough housing market, we are maintaining a strong capital base, building reserves for our credit losses, and generating solid revenues as our business continues to serve the market. We also have access to ample sources of liquidity, including access to the debt markets.”Freddie Mac has a loan portfolio of US$1.5 trillion and Fannie Mae’s is more than US$700 billion. Together they own or guarantee some US$5.2 trillion in loans, or about 40 percent of the total value of home loans in the US.US Treasury Secretary Henry Paulson, in a statement, offered no indication of imminent intervention.“Today our primary focus is supporting Fannie Mae and Freddie Mac in their current form as they carry out their important mission,” Paulson said. This story has been viewed 200 times.