Congress on Housing Crisis, Quick Housing Deal Not Likely

Divergent Views On Resolving Crisis Keep Parties Apart

WASHINGTON - March 28, 2008 - The last time Congress returned from a long break to confront economic problems, Democrats and Republicans quickly passed a $152 billion stimulus package. Next week, as lawmakers come back to work amid new problems in the housing market, there will be little chance of such a quick resolution.

Democrats and Republicans have staked out sharply different views about how — and whether — to advance legislation to help troubled homeowners and shore up the housing market.

Democrats take an interventionist tack, arguing that Republicans aren’t doing enough to address the economy.

Republicans warn against government overreaching, although a faction of the party argues that Congress should act amid the drumbeat of bad news.

Tensions have been exacerbated by economic policy pronouncements by the presidential candidates, who are similarly split along party lines.

The first skirmish will come next week when Senate Democrats push a housing package that includes allowing bankruptcy judges to alter terms of certain mortgages and raise the amount of mortgage-revenue bonds that states could issue for refinancing. Republicans blocked the same bill from coming up for debate on a procedural vote in late February, largely over the bankruptcy provision, which the White House and the banking industry also oppose.

Any chance of accommodation may come via a split among Republicans, some of whom are wary of appearing obstructionist and are pushing their own proposals.

In Tennessee last week, Republican Sen. Lamar Alexander told the Chattanooga Rotary Club that Republicans would “push an aggressive plan to provide relief for families” suffering from the housing slump. He backs a proposal from Sen. Johnny Isakson of Georgia to create a $15,000, three-year tax credit for purchasing homes in or near foreclosure. Mr. Isakson, a Republican, said he hopes the proposal is added to the Senate’s housing package.

“I don’t know how we go back and not do anything about it,” Mr. Isakson said. “Unless they went into a cave and locked the door in the last two weeks, nobody’s coming back not knowing what the public thinks about the housing market.”

Republican Sen. John Sununu, who is in a tough race this year to keep his New Hampshire seat, wrote an op-ed in the New Hampshire Union Leader newspaper calling for Congress to strengthen regulatory oversight of Fannie Mae and Freddie Mac, pass a temporary tax credit such as Mr. Isakson proposes and complete legislation updating the Federal Housing Administration, which the House and Senate have passed but haven’t reconciled.

Still, many Republicans say the government should avoid bailing out homeowners who made bad decisions. On Thursday, Republican aides circulated a survey by polling group Rasmussen Reports that showed 53% of the public thinks the government shouldn’t help homeowners who borrowed more than they could afford; 67% of Republicans said they opposed such help.

Federal Reserve Chairman Ben Bernanke is scheduled to testify at a hearing of the Joint Economic Committee Wednesday. Lawmakers are watching closely for signs of whether more legislative steps are needed. House Financial Services Committee Chairman Barney Frank (D., Mass.) wants to move quickly on legislation that would let the federal government insure new mortgages to help homeowners who owe more than their homes are worth. Senate Banking Committee Chairman Christopher Dodd of Connecticut is working on a similar plan.

In the past two weeks, while lawmakers were home, many heard rising concern about the housing market. “The need for action is clear, the White House’s reluctance to act is a little less strong, and the hand of those who are arguing for a real debate has been strengthened,” said Sen. Charles Schumer (D., N.Y.). But, he added: “Whether it’s been strengthened enough…remains to be seen.”

The main sticking point for the Senate bill is the bankruptcy provision, which Republicans, including Mr. Isakson, say would cause mortgage costs to rise. Many Democrats view the provision as a top priority and say it could help thousands of people keep their homes. As long as it remains in the bill, it appears difficult, and perhaps impossible, for the legislation to advance.

Some Republicans support other provisions in the proposal, including the mortgage-bond authority and a tax credit that would let home builders and other industries apply operating losses to previous tax bills.

For those elements to get through the Senate, Democrats would likely have to strip out the bankruptcy provision or allow a vote in the Senate to do so. Republicans also want a chance to vote on some of their own amendments. The Republicans would have to assure Democrats that they won’t demand votes on controversial issues, such as extending the 2001 and 2003 tax cuts, as part of the housing debate.

So far, no accommodations have been made, Senate aides said. Lawmakers expect to discuss such issues when they return next week.

Quick Housing Deal Isn’t Likely
By SARAH LUECK | Wall Street Journal