WASHINGTON — A united call from Democratic leaders on Capitol Hill for the Bush administration to step up its handling of the mortgage crisis appeared to be more about political maneuvering than a substantive outline of a new plan, industry analysts said Wednesday.
On the one hand, the rare assembly of Senate Majority Leader Harry Reid, House Speaker Nancy Pelosi, and a slew of top House and Senate banking committee members demonstrated just how much attention the mortgage issue is getting on Capitol Hill. On the other hand, Democratic leaders carefully tiptoed around committing to a broad bill to rein in subprime practices and seemed more interested in blaming President Bush for problems in the housing market.
Analysts said the press conference was part of an effort to shift the attention to Republicans in advance of the 2008 presidential election.
"The Democrats want to develop a second front for the 2008 elections: the economy, in addition to the Iraq war," said Larry Sabato, the director of the University of Virginia's Center for Politics. "They believe that they can ice the election for their party if the Republicans are on the defensive... Part of the strategy is to force the administration to take the blame for every bad aspect of the U.S. economy, especially the housing market."
The press conference attracted a who's who of financial services lawmakers, including Senate Banking Committee Chairman Chris Dodd, House Financial Services Committee Chairman Barney Frank, and Joint Economic Committee Chairman Charles Schumer.
The lawmakers demanded that the Bush administration lift the portfolio caps on the government-sponsored enterprises immediately to fuel market liquidity, boost funding for foreclosure prevention, and establish a housing czar to cut through red tape and oversee workout arrangements for borrowers.
"It's never been clearer how detached from reality President Bush is," Sen. Reid said. "This is a national crisis. It's too bad it's taken so long to realize we've got a crisis. The Federal Reserve has had more than 15 years to see a problem developing, and they essentially didn't react when they should have. That's why Democrats demand the president join us in a few simple procedures we think will help a lot."'
But lawmakers gave only vague explanations about how a housing czar would be in a better position to fix the mortgage market's problems than Congress.
When asked what a housing czar could accomplish, Rep. Pelosi replied: "It elevates it to a priority that addresses the urgency of the problem and ? puts responsibility in one place to make some of these things happen. It's one thing to talk about them. It's another thing to do them."
In response to the same question, Sen. Schumer said: "It just helps focus attention, and it's needed for that reason. No one is focusing on the real problem. We are trying to with this."
Sens. Schumer and Dodd, along with Rep. Frank, agreed that comprehensive GSE reform was a goal, but none of the lawmakers gave any indication that the market turmoil could get a Senate bill out of limbo soon. (A GSE bill passed the House in May.)
Lawmakers also threatened to pass a bill that would lift the GSE portfolio caps temporarily if the Bush administration does not do so voluntarily.
Republicans seemed unimpressed with the Democratic initiative.
"The only new idea that the Democrats suggested today is the appointment of a 'czar' to oversee efforts to address the subprime issue," said Sen. Richard Shelby of Alabama, the Banking Committee's top Republican. Democrats probably will not "find anyone with more expertise or resources" than Treasury Secretary Henry Paulson.
The Bush administration released a statement to reporters that emphasized steps it has already taken on the issue, and asked why Democrats have not passed GSE and Federal Housing Administration reform bills yet.
Political analysts were quick to call the press conference a political stunt. "It's purely symbolic," said Brian Gardner, a political analyst with KBW Inc.'s Keefe, Bruyette & Woods Inc. and a former aide to Rep. Richard Baker. "The Democrats can blame the administration for being too slow ? but they've been in charge for nine months now, and there hasn't been a lot coming out of the Senate Banking Committee."
But industry representatives said the event signals a commitment to legislative action. "It's a sign of their concern... to help borrowers who can stay in their homes remain in their homes," said Kurt Pfotenhauer, the head lobbyist for the Mortgage Bankers Association.
