Friday, June 20, 2008

Senate Debating Bailout. Bush Threatens Veto.

This news comes from Reuters, via The New York Times:
The White House threatened to veto a major housing rescue bill on Thursday just as the U.S. Senate began debate on it, setting up a partisan fight over legislation that backers say could save hundreds of thousands of distressed homeowners from foreclosure.

With home prices falling and foreclosures on the rise, Democrats in Congress were pushing for aggressive federal action, with the support of some key Republicans. But other Republicans were raising objections and seeking delay.

Congressional leaders were trying to hammer out a final bill and send it to President George W. Bush before lawmakers leave town at the end of next week for the July 4 holiday.

At its heart, the legislation would create a $300 billion mortgage rescue fund that proponents say would have the government backstop 400,000 failing loans....

"The federal government must not prolong necessary corrections in the housing market, bail out lenders, or subsidize irresponsible borrowing and lending," the White House said in a statement....

The Senate's bill, headed for a vote within days, closely resembles one already passed by the House of Representatives that has also drawn a Bush administration veto threat.

Both bills would create a $300 billion mortgage insurance fund under the Federal Housing Administration that would help homeowners struggling with mortgages to refinance, if lenders agree to erase part of the original loans....

Both bills would also retool the government regulator that oversees Fannie Mae and Freddie Mac, the congressionally chartered companies that are the nation's largest sources of mortgage finance, as well as raising the limit on the size of mortgages that may be financed by the two and the FHA.

The White House said in a statement that if the Senate legislation were sent to Bush as now drafted, "his senior advisers would recommend that he veto this bill."

The White House said the provision on sending aid to state and local governments would mainly benefit private lenders instead of struggling homeowners....

Some critics have said the legislation would unduly benefit Countrywide. There have also been questions about whether two Democratic senators—Connecticut's Christopher Dodd and North Dakota's Kent Conrad—received special discounted mortgages when they financed properties with Countrywide.
Please click here to send a quick email to your senators and President Bush to let them know you oppose the bailout.

As someone who voted for both Gore and Kerry, I don't say this often: Go George Bush!


  1. the CBO has a decent critique of the Dodd-Frank lender bailout.

    near the bottom, click "Federal Housing Finance Regulatory Reform Act of 2008"

    this coalition ( offers an "executive summary" that's a quicker read.

  2. I'm definitely not a big fan of government handouts ... especially in this case. However, I have to wonder whether these handouts wouldn't equally benefit those looking to purchase their first home as well as the homeowners who got themselves in trouble. While lower prices (as in "correction") make it easier for first time purchasers, I know from (long ago) experience that financing (as in its availability and affordability) is a much more important part of the picture for first time buyers. (I.e., it allows them to "eat an elephant one bite at at time" ...) And while we keep screaming "lender bailouts" the hard truth is that without affordable financing (which this bailout seems to ensure) we won't have too many first time buyers able to buy any property at any price. Just my two cents.

  3. I am also against this bailout!!!

  4. but affordable financing got us into this mess (partly)

    Go ahead, raise rates, require 20% down. See how fast home prices drop.

  5. Well went to the site and added my list. Actually spent $9.00 for hand delivery. Hope it was worth it:-)

  6. "without affordable financing (which this bailout seems to ensure) we won't have too many first time buyers able to buy any property at any price. Just my two cents."

    Lance, you're making more sense there (expect for the part where you seem to equate the bailout with future affordability). Yet, as someone already mentioned, it is the outrageous low interest rates which fueled this past speculative episode.

    The concern for a lot of us is that bailouts will just encourage similar bubbles either in housing again (though probably not any time soon) or in some other markets. It will encourage it by rewarding speculation (affordability will eventually allow speculators to continue to participate in the market); and by encouraging banks and investors to put their money on yet another developing bubble.

    And then, there is the moral hazard aspect...Ya know?

    --SSH Anon.