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US Senate passes housing rescue bill

The US Senate on Friday passed a mammoth housing rescue bill aimed at helping thousands of Americans to keep their homes, amid a deepening mortgage foreclosure crisis.
By HT Correspondent | AFP, Washington
UPDATED ON JUL 12, 2008 11:42 AM IST

The US Senate on Friday passed a mammoth housing rescue bill aimed at helping thousands of Americans to keep their homes, amid a deepening mortgage foreclosure crisis.

The vote came was the government-backed mortgage giants Fannie Mae and Freddie Mac teetered on the brink of crisis, and went through after weeks of wrangling between Democrats and Republicans in Congress.

The measure, which passed 63-5 in a sparsely attended end-of-week session in the 100-member chamber, will now be sent back to the House of Representatives, which has passed its own version of the legislation.

The two bills will have to be combined before being sent to President George W. Bush for his signature.

Democratic Senate Majority leader Harry Reid said the bill, which sets up new oversight of Fannie Mae and Freddie Mac which underpin trillions of dollars in US mortgages, would help many Americans keep their homes and shore up the wider economy.

It would also fund a 300 billion dollar bailout for troubled mortgages.

"This bill will help prevent another crisis of this magnitude, stop foreclosures before they begin and preserve for future generations the American Dream of home ownership," said Reid.

But some Republicans said the bill would not help the underlying problems in the mortgage market, and would reward irresponsible lenders and those who took out loans beyond their means.

"It's important that the actions the federal government takes do not interfere with the correction that must ultimately occur in the housing market," said Senate Republican minority whip Jon Kyl, who voted against the bill.

"The federal government should not bail out irresponsible lenders or speculators on the backs of American taxpayers."

Shares of Fannie Mae and Freddie Mac were pushed to the brink of a meltdown on heightened concerns about their viability on Friday.

In highly volatile trade, Freddie Mac plunged 51 per cent and Fannie Mae 49 percent but recovered ground after a series of comments from US officials and a key US senator. At one point, shares were up nearly eight percent.

At the close, Freddie's shares had lost 3.1 per cent at 7.75 dollars and Fannie's 22 percent at 10.25 dollars The shares of the two firms have plunged around 75 percent since the start of the year.

Senate Banking Committee chairman Christopher Dodd said: "There is sort of a panic going on today, and that's not what ought to be. The facts don't warrant that reaction, in my view."

The senator added: "these institutions are ... fundamentally sound and strong."

The latest action came amid a new report saying the government could put the finance giants in receivership, which would make their shares worthless.

The New York Times said the Bush administration is weighing the possibility of having to place one or both companies in a conservatorship to protect them from the snowballing collapse of the US mortgage finance market.

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