President Bush signed into law on Wednesday a sweeping housing rescue plan aimed at helping an estimated 400,000 homeowners pay off their troubled mortgages and replace them with more affordable, government-insured loans. Shortly after 7 a.m. Mr Bush signed the legislation into law that he initially opposed, threatening to veto it as overly socialistic. Things apparently changed, as they usually tend to in politics.
The bill signing however, which was attended by several top advisers to the president, including the Treasury secretary, Henry Paulson, Director Brian Montgomery and other senior FHA leaders — was rather low-key. The event, certainly missed the usual fanfare and the self-congratulatory aspect that is rather characteristic in these procedures. But again, given the precarious state of the nation’s financial system ; that’s only understandable.
Tony Fratto, deputy assistant to the president and deputy press secretary, in a statement, according to WSJ said :
We look forward to put in place new authorities to improve confidence and stability in markets and to provide better oversight for Fannie Mae (FNM) and Freddie Mac (FRE). The Federal Housing Administration will begin to implement new policies intended to keep more deserving American families in their homes.
The bill will give Secretary Paulson full authority to increase Fannie and Freddie’s temporary line of credit and allow the agency to purchase equity in the firms. Both measures are aimed at easing worries of solvency and undercapitalized issues facing Fannie and Freddie.
The bill also includes an increase in the federal debt limit to $10.6 trillion and a $300 billion program to refinance loans for struggling borrowers.
Opponents to the bill argue that it rewards: lender-consumer “irresponsibility” while simultaneously allowing the government too big a role in the housing market.
“Providing authority to the secretary of the Treasury” – said David M. Walker, the former comptroller general of the United States and head of the Government Accountability Office — “to extend credit or to buy stock is one that will end up costing the taxpayers tens of billions of dollars”. [Vial IHT]
On the other hand, the bill’s supporters stressed the importance of providing assistance for both GSEs as well as more regulatory oversight as key contributors in re-establishing confidence and stability in housing and financial markets.