WASHINGTON – Just when it appeared yesterday that a deal was at hand on the massive bailout of the mortgage markets, the talks apparently broke down when a group of Republican lawmakers opposed to government intervention introduced their own proposal that would have the government insure, rather than buy distressed mortgage assets.
Backers of the alternative plan called it a credible and less expensive alternative to the Treasury’s proposal which would also free up private capital and restore confidence to the troubled mortgage markets.
The offer came a growing numbers of lawmakers, both Republicans and Democrats were hearing broad criticism of the Treasury’s plans from their constituents, as they get ready to return home for this fall’s elections.
"The House and Senate negotiators have an agreement in principal, but it’s not clear if they have the votes to pass it yet," Brad Thaler, senior lobbyist for NAFCU, told The Credit Union Journal yesterday.
The Treasury’s plan would provide $700 billion to buy and manage distressed mortgage assets from banks, credit unions and insurers.
Among the conditions agreed to by the negotiators are provisions that would set limits on the pay packages for executives of some firms that seek assistance and a mechanism for the government to take an equity stake in some of the firms, so taxpayers have a chance to profit if the bailout plan works.
The plan would also require loan modifications for mortgages owned by the government, which means those owned by Fannie Mae and Freddie Mac and direct a portion of profits on any assets sold by the Treasury to an affordable housing fund.
The bailout plan has created unusual partners, pitting the Bush administration with congressional Democrats. But Republican members of the House and Senate were obviously opposed to the vast scope and cost of the Treasury’s plan.
Sen. Richard Shelby of Alabama, the top Republican on the Senate Banking Committee, emerged from the White House meeting to say the announced agreement "is obviously no agreement."
Both of Congress' Republican leaders, Rep. John Boehner and Sen. Mitch McConnell, also denied there was any deal.
