By William Branigin and Lori Montgomery
The Senate today cleared the way for a vote on a bill to address the nation's housing crisis after Democratic and Republicans leaders agreed to negotiate a compromise that takes GOP objections into account.
Under the deal, Sen. Christopher J. Dodd (D-Conn.), chairman of the Senate Banking Committee, and Sen. Richard C. Shelby (Ala.), the panel's top Republican, will meet to "come up with a bipartisan substitute" to a bill that the GOP managed to block last month, said Sen. Mitch McConnell (R-Ky.), the Senate minority leader. The underlying bill then could be amended, he said.
In a key procedural test, Senators voted 94 to 1 this afternoon to allow the arrangement to proceed. Sen. Jim Bunning (R-Ky.) cast the lone no vote. Five senators were not present, including the three presidential candidates.
"The housing crisis has caused the economy to be in a state of distress," Senate Majority Leader Harry M. Reid (D-Nev.) said in announcing his support for the deal. "The goal is to do something about housing. . . . I believe the time has come for us to start legislating and stop talking about the need to legislate."
Reid set a deadline of midday tomorrow for Dodd and Shelby to come up with a compromise bill.
"This is a problem that is growing by the hour," Dodd said on the Senate floor. "It demands our attention. . . . It is now leaching into all aspects of our economy." He said nearly 8,000 homes are now being foreclosed upon each day across the country.
Democrats appeared to be intent on keeping a provision that would provide billions of federal dollars to buy foreclosed homes. They also want to keep a plan -- opposed by the White House and Senate Republicans -- that would give bankruptcy judges the power to cut interest rates and write down principal on troubled mortgage loans.
The original bill, introduced by Reid, combined several measures aimed at easing the nation's mortgage crisis. Called the Foreclosure Prevention Act of 2008, the bill was intended to provide $4 billion to state and local governments for the purchase and redevelopment of foreclosed and abandoned homes and $200 million for mortgage counseling.
The bill also contained provisions to strengthen disclosure requirements for sub-prime mortgage loans, authorize state housing agencies to float revenue bonds to buy homes in foreclosure and allow homebuilders to write off more losses from their taxes.
Among the senators who sponsored the bill were Democratic presidential contenders Hillary Rodham Clinton (N.Y.) and Barack Obama (Ill.).
Republicans blocked the bill Feb. 28, but Democrats decided to bring it up again after the Federal Reserve Board stepped in to rescue the Bear Stearns investment firm. "The administration has been very keen and quick to help Wall Street," said Sen. Jack Reed (D-R.I.). "The reality is we've got to help Main Street."
The Bush administration and Senate Republicans specifically objected to a provision in the bill that would change bankruptcy laws to allow judges to cut mortgage interest rates and reduce the outstanding balance on troubled loans. They argued that this would prompt lenders to tighten loan requirements and result in higher interest rates.
The White House also opposed providing $4 billion to redevelop foreclosed homes, saying that was too much money and would amount to a bailout for lenders and speculators while failing to offer much help to struggling homeowners.
In debate on the Senate floor this morning, Sen. Arlen Specter (R-Pa.) said any legislation should not discourage lenders from providing money for home purchases in the future.
Democrats argued that the housing crisis demands urgent action.
"The news simply keeps getting worse," said Sen. Ken Salazar (D-Colo.). Home prices continue to decline steeply, and home sales are reaching record lows, he said. Just last week it was reported that home prices in the nation's 20 largest metropolitan areas suffered their largest drop in history, falling by more than 10 percent in one year, Salazar said.
"All across America, families are feeling the pain of the housing crunch," he said. "Congress has a duty to act."
Sen. Richard J. Durbin (D-Ill.) urged Republicans to refrain from using the threat of a filibuster to block the bill again. If members don't want to vote on bills, they shouldn't be senators, he said. "Let's not litter this graveyard of filibusters with this important housing stimulus bill."
Sen. Jack Reed (D-R.I.) argued that the bill is needed to help stabilize the housing market.
"We are seeing an economy that is sliding into recession," he said. "Now, with declining housing values, American families are being squeezed dramatically." The bill would "provide the surge of confidence to the economy which is a key factor in beginning the recovery," he said. "This legislation, if enacted, would help families keep their homes."
By William Branigin and Lori Montgomery
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