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Senate Committee's Bailout Plan Wouldn't Expose Taxpayers

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The Associated Press

Published: May 21, 2008

WASHINGTON - Profits from government-sponsored mortgage giants Fannie Mae and Freddie Mac, instead of taxpayers, would back up a home loan rescue for up to 500,000 strapped borrowers under a plan approved by a key Senate committee Tuesday to pull the nation out of a housing crisis.
Democrats and Republicans banded together to push the plan through the Senate Banking Committee on a 19-2 vote, boosting the chances for a broad election-year housing aid package.

The centerpiece of the measure would give cheaper, government-backed mortgages to up to 500,000 strapped borrowers. Eight Republicans joined the panel's Democrats to back it, after extracting a major concession to pay for the foreclosure-prevention plan by diverting money intended to pay for housing for the poor.

The bill also tightens regulation of Fannie Mae and Freddie Mac, which would finance a new affordable housing fund that would temporarily pay for the foreclosure prevention program.

"If I were writing this on my own, it would look different, but it is a balance," said Sen. Christopher J. Dodd, the Banking chairman, who predicted the measure could clear Congress by July 4. "This is a major step forward."

"I believe the White House will support this," said Sen. Richard C. Shelby, the panel's senior Republican. "I don't know why they wouldn't."

The White House called that assessment premature.

Officials have warned that President Bush would veto a similar House-passed measure, calling it a burdensome bailout that exposes taxpayers to risk. The bill would let the Federal Housing Administration back up to $300 billion in new loans for homeowners who would be considered too financially risky to refinance into a fixed-rate, government-insured mortgage.

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