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.

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