WASHINGTON, July 23 (Reuters): A major rescue package for the US housing market is scheduled to come to a vote in the House of Representatives Wednesday, with lawmakers agreeing final language late Tuesday and congressional analysts putting a $25-billion potential price tag on a new provision.
Designed to bolster Fannie Mae and Freddie Mac, the nation's biggest mortgage companies, the provision drafted by the Bush administration was added to a bill that has been in the works for months.
The overall measure now has wide, bipartisan support in both the House and the Senate, said Barney Frank, chief architect of the legislation.
The added provision, proposed by Treasury Secretary Henry Paulson, would give beleaguered Fannie and Freddie access to new, government capital in the form of loans or equity purchases.
The stock prices of both Fannie and Freddie have seesawed wildly in recent days on investor concern about whether the two government-sponsored enterprises, or GSEs, will be able to ride out the worst US housing market slump in decades.
The firms own or guarantee almost half of the nation's $12 trillion in outstanding residential mortgage debt. They are playing an increasingly vital role in the housing market, with foreclosures up, home values down and global capital in full retreat from private markets for securitised mortgage debt.
In estimating the potential cost to taxpayers of the Paulson proposal, the nonpartisan Congressional Budget Office (CBO) said it was uncertain whether the GSEs would ever need to tap the capital line that Paulson wants to offer.
The CBO's $25-billion estimate was couched in language that made clear the cost could also be zero, if the capital line is never tapped. At the same time, the CBO said there was a slim chance that the GSEs' losses could top $100 billion.
The White House has urged Congress to move quickly to approve the Paulson plan, citing the GSEs' importance.
But a Bush administration spokesman Tuesday evening criticised Democrats on Capitol Hill over the 694-page bill that will include Paulson's GSE rescue plan.
Paulson used a speech in New York and television interviews Tuesday to push for passage of his GSE rescue plan, a key part of a package for which some senators signalled support.
"We remain optimistic about the prospects for this legislation," said the Senate Banking Committee's leaders-Christopher Dodd and Richard Shelby-in a joint statement Tuesday evening.
If the package moves through the House Wednesday, it would then go to the Senate. Once approved by the Senate, possibly before the weekend, the bill would go before President George W Bush.
While the White House favours much of the bill, it has threatened to veto it over a provision that calls for almost $4 billion in grants to states and communities for buying and repairing foreclosed homes in distressed neighbourhoods.
The White House opposes the measure because it says it helps lenders and not homeowners. Democrats backing the grants dispute this, saying that foreclosed homes drag down property values for surrounding homeowners.
