By Brian Faler
July 17 (Bloomberg) -- Treasury Secretary Henry Paulson tried to rally support yesterday for his plan to rescue Fannie Mae and Freddie Mac and said he is confident Congress will pass it by next week.
A growing number of lawmakers from both parties agree with his assessment, even if they don't back the legislation. House Minority Leader John Boehner, an Ohio Republican, said there's no question ``that this will become law and become law very soon.'' Senator Christopher Dodd, a Connecticut Democrat who is chairman of the Senate Banking Committee, expects a vote on the measure next week.
``I am optimistic that this is going to be done quickly,'' Paulson said yesterday.
Paulson asked Congress on July 13 to approve a three-part plan that would allow the Treasury to increase the credit lines of the two mortgage companies, buy shares in the firms if necessary and give the Federal Reserve what he called a ``consultative role'' in overseeing their capital requirements. The proposals are meant to restore confidence in the government- chartered companies which together own or guarantee more than half of the $12 trillion of U.S. home loans outstanding.
Boehner was among Republicans who on July 15 urged Democrats to hold hearings on the measure so they could get a better idea of how it would work. He said after meeting with Paulson yesterday that he hasn't decided whether to support the bill.
Dodd, Shelby
Paulson also met yesterday with Dodd and Alabama Senator Richard Shelby, the top Republican on the banking panel, to try to address concerns that Treasury would have too much power under the plan. Paulson declined to comment upon leaving that meeting.
``We had a very positive meeting, and think it's going in the right direction,'' Shelby said after the session. ``We're trying to do it right.''
Washington-based Fannie Mae and McLean, Virginia-based Freddie Mac have lost more than 80 percent of their stock market values this year on concern they don't have enough capital to survive the biggest housing slump since the Great Depression.
Lawmakers from both parties raised questions about how much authority Treasury should have.
``I want to make darn sure that, if we do this, that the American taxpayer is going to be protected,'' Dodd said earlier yesterday.
Paulson said he emphasized with lawmakers that Treasury's authority would be temporary.
`Tough' Issue
This issue is ``tough,'' Paulson said. ``There's never unanimity, but I'm feeling very good as a result'' of meetings today, he said.
Representative Jeff Flake, an Arizona Republican, said Paulson received a ``mixed'' reception from lawmakers.
``Everybody knows something has to be done. It's just a question of what are we willing to accept,'' Flake said.
Congress created Fannie Mae and Freddie Mac to expand homeownership by increasing mortgage financing and to provide market stability. The shareholder-owned companies make money by holding mortgage assets and on guarantees of mortgage-backed securities they create out of loans bought from lenders.
Debt from the government-sponsored enterprises ``is globally held in extensive amounts so we want to reassure that market that we understand the importance of this,'' Dodd said. ``And simultaneously, we need to reassure the American taxpayer that they're not going to be exposed to a massive bill at the end of the day. So striking that balance is what I'm trying to achieve.''
No Dividends
House Financial Services Committee Chairman Barney Frank has suggested prohibiting the companies from paying dividends if they tap a proposed increased line of credit with the Treasury. He also said regulators should be required to approve the compensation for top executives of Fannie Mae and Freddie Mac.
House Democrats postponed a vote on the rescue plan until early next week. Paulson had initially pushed for a vote this week.
``I think we're going to have it all done by the end of next week,'' Frank told reporters yesterday. Senate Minority Leader Mitch McConnell, a Kentucky Republican, said he doesn't expect the bill to get ``bogged down'' in the Senate.
Lawmakers plan to graft the rescue plan onto a pending housing bill that would allow thousands of Americans struggling with subprime loans to refinance into fixed-rate mortgages backed by the government. The measure would also install tougher regulators for Fannie Mae and Freddie Mac.
Bush Veto Threat
Frank said July 15 that Democrats may retain provisions opposed by the Bush administration to send $4 billion to communities to buy up foreclosed properties. The White House has threatened to veto the bill over those plans because administration officials say they would benefit lenders who own the vacated properties, not homeowners.
Representative Spencer Bachus of Alabama, the top Republican on the House Financial Services Committee, who also met with Paulson yesterday, said he preferred a stand-alone Fannie-Freddie bill.
``We don't need to deal with 40 different issues,'' he said. ``We need a clean bill.''
Fannie Mae dropped 27 percent July 15, its biggest slump since at least July 1980, while Freddie Mac declined 26 percent.
Fannie Mae rebounded yesterday, rising 31 percent to $9.25 in New York, while Freddie Mac climbed 30 percent to $6.83.
To contact the reporter on this story: Brian Faler in Washington at bfaler@bloomberg.net
Posts
No comments:
Post a Comment