WASHINGTON — Negotiations late into the night on Wednesday and right through Thursday were enough to get a bill to revamp the regulation of the government-sponsored enterprises to the brink of passing the Senate Banking Committee with bipartisan support.
But votes on the bill were postponed three times during the day as negotiations went on. By late Thursday, the two sides had largely reached an agreement — at least in concept — but no longer had enough lawmakers present to vote on the bill. Banking Committee leaders said they also still needed to finalize language and rescheduled the vote for Tuesday.
"We're not quite there yet," Sen. Dodd told reporters. "We have a couple of outstanding issues. In fairness, this is a very important piece of legislation. It deserves for members to have time to digest it. We're very close to having a very significant bill – a bipartisan bill."
Sen. Shelby said those issues were "little things," and largely came down to specific legislative language.
"We're together in concept, we're waiting on language," he said.
Sen. Shelby said he expected the White House would support the final agreement. The White House had vowed to veto the House version of the bill, arguing it was a bailout that put taxpayer money at risk.
"We've been working with the White House… on some principles that [President Bush] will agree to," Sen. Shelby said.
Senate Banking leaders had worked out most of the issues by Thursday morning, but spent much of the afternoon haggling over a final detail that stood in the way of GOP support for the legislation, which also includes a measure designed to stabilize housing prices.
Though they agreed that Fannie Mae and Freddie Mac would cover the costs of a new program in which the Federal Housing Administration would insure loans worth more than a home's value, the lawmakers were still debating how high that cost would be and how much should be allocated for it.
Sen. Dodd was seeking to allocate $1.7 billion — the same number the Senate Appropriations Committee has estimated — from a proposed affordable-housing program to be funded by the government-sponsored enterprises. But Sen. Shelby was seeking language to specify that the program would bear any and all losses from the FHA refinancings, even if they exceed $1.7 billion.
Sources said the final compromise would set aside 100% of the affordable-housing funds for the FHA program in its first year, 75% of the funds in its second, and 50% in its third.
The Senate Banking Committee vote was unique in recent memory. Instead of the usual brief vote-casting on a deal already worked out behind the scenes, three postponements were declared as committee leaders sought to reach accord.
Outside the committee room, industry lobbyists milled about, trying to get the latest information about negotiations, and congressional staffers darted between offices.
Caught in the hallway by reporters during the afternoon, Senate Banking Committee members were unclear about the deal's terms.
"I really don't know, I really don't," said Sen. Robert Menendez, D-N.J., when asked about the status of negotiations.
But he added that how to pay for the FHA program was "probably the most significant issue."
Anything remained possible until late in the night. Some sources had predicted that the committee would complete an accord and approve it on a bipartisan vote late Thursday. Others said a deal would not be reached and Sen. Dodd would push the bill through on a party-line vote.
Finally, though lawmakers said they had agreed on a compromise, it became clear the Banking Committee did not have a quorum to continue and needed to perfect the legislative language. The decision to delay until Tuesday will carry its own set of risks as interested parties, including Fannie and Freddie, will likely take the opportunity to lobby for changes to the compromised package.
The tentative compromise includes two pieces of legislation: the FHA refinancing plan and a measure that would create a new regulator for Fannie, Freddie, and the Federal Home Loan banks. Under the compromise, Democrats gave ground to Republicans on capital requirements and language restricting the mortgage portfolios of the GSEs.
Sen. Dodd's original bill would have let the new regulator temporarily raise minimum capital requirements only for reasons related to safety and soundness. The new deal would give the agency the power to compel the GSEs to raise capital for other reasons., including presumably systemic risk, sources said.
Though Sen. Shelby declined to comment on specifics of the deal, he said "I think this will be a big improvement from what we have today."
"At the end of the day, we'll have a stronger regulator and the GSEs will know what they need to have, and that's important to me and to the market," Sen. Shelby said.
The original Dodd bill also would have allowed a new regulator to rein in the enterprises' mortgage portfolios if they posed risks to the enterprises. Under the new deal, the agency would be allowed to consider the effect on the broader market and on counterparties when determining portfolio restrictions.
Sen. Shelby has argued for years that a new agency must have the power to raise capital requirements and reduce the portfolios due to systemic risk.
Sens. Dodd and Shelby, sources said, have agreed to pay for the FHA program by requiring Fannie and Freddie to set aside money in an affordable-housing fund.
Though the final product could change, the original legislation would require the GSEs to contribute an amount equal to 4.2 basis points per dollar of each enterprises' unpaid principal of total new business purchases.
