House Passes Rescue Bill

The measure faces a presidential veto and Republican opposition in the Senate.

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Although the House voted 266 to 154 on Thursday to pass a bill designed to help struggling borrowers avoid foreclosure, the effort to enact a large-scale housing rescue faces significant hurdles. The initiative will get stiff opposition in the Senate, where it now moves for approval, and President Bush has threatened a veto even if it makes it out of Congress.

From the Associated Press:

House Democrats passed bills that they know will never become law. Most Americans understand that we shouldn't create a taxpayer-funded bailout for lenders and speculators," said Tony Fratto, a White House spokesman.

The bill, which is being championed by Massachusetts Democrat Barney Frank, chairman of the House Financial Services Committee, would allow struggling homeowners to refinance into less costly loans guaranteed by the Federal Housing Administration.

To get the bill through the Senate—where Democrats hold only a slim majority—Republican support is key. Of the 39 Republicans who voted in favor of the House measure, most hail from regions hard hit by the housing crisis, according to the AP.

Democrats should be able to pick up some support from Republicans in the Senate whose states have been ravaged by housing woes as well. But to get the measure through, they will need to flip Alabama Republican Richard Shelby, the top GOP member on the Senate Banking Committee and the leading opponent of the legislation.

The good news for rescue supporters? Shelby is in "ongoing discussions" about the housing rescue with Democratic counterparts, according to his spokesman. So it appears a compromise is possible.

A banking industry lobbyist said yesterday that while the negotiations in no way guarantee that an agreement will be reached, "it's certainly better that they talk than that they not talk."

Bailout supporters should cross their fingers that those talks go well. Only then could Democrats start figuring out how they can get the While House to soften its position.