WASHINGTON — For Senate Banking Committee Chairman Chris Dodd, the stakes at a vote Tuesday on his bill to stem the housing crisis could not be higher.
If the bill achieves a strong bipartisan vote, he will have succeeded in breaking a four-year deadlock on legislation to reform the government-sponsored enterprises, and winning Republican support for a plan the GOP had dubbed a bailout. He also will have restored confidence in his leadership as chairman, which since he took the reins a year and a half ago has produced few legislative accomplishments.
If he fails, however, he will deal a significant political blow to fellow Democrats who are hoping to use a fix to the housing crisis to pickup seats from Republicans in the elections this fall.
"It is important for Senator Dodd to get a bill," said Andy Laperriere, the managing director of International Strategy and Investment Group. "The housing problem continues to get worse and the political pressure to act continues to grow. The Democrats as the party in power in Congress are under a lot of pressure to deliver something."
The tentative deal Sen. Dodd struck with the committee's No. 1 Republican, Richard Shelby, would marry two housing goals and represents a win for both sides. Sen. Dodd and the Democrats won support for a measure that would let struggling borrowers refinance into cheaper mortgages insured by the Federal Housing Administration after lenders and servicers accept steep haircuts. Republicans received in return tougher language in the GSE measure that allows a new agency more flexibility to raise capital and get a better handle on the enterprises' mortgage portfolios.
"On its face, it's quite significant because we've not had agreement between Republicans and Democrats … on a GSE bill," said Erick Gustafson, a lobbyist with the Mortgage Bankers Association. "If they are able to conclude that agreement in actual legislative language … it has the potential to be a historic development."
The compromise appears to justify Sen. Dodd's strategy in combining the FHA and GSE bills into one package, though putting them together could have made it too complicated.
Instead, Sens. Dodd and Shelby used elements of one to smooth passage of the other.
Sen. Shelby objected to the FHA refinancing plan because it would be funded by the federal government. But Sen. Dodd agreed to use a proposed affordable housing fund derived from the GSEs to cover the costs of the FHA program to eliminate government contributions.
"It's a great deal … it's the kind of compromise that reflects how the Senate works," said an industry lobbyist, who spoke on condition of anonymity. "You've got a very strong chairman and a very engaged ranking member and each has an agenda and they found common ground to get what each wanted; giving up stuff that they probably otherwise wouldn't have agreed to."
If the deal wins support on Tuesday, it would also elevate Sen. Dodd's reputation as chairman of the Banking Committee. During his failed bid at the Democratic presidential nomination last year, observers had come to feel comfortable commenting on how Sen. Dodd's campaign was distracting him from committee business.
He was criticized for the frequency and tone of press releases the campaign issued that did not jibe with the lack of legislative action from a committee over which he had control.
Even a newcomer to the committee, Sen. Bob Corker, welcomed Sen. Dodd "back to the Senate" after he dropped out of the presidential race in January.
Sen. Dodd turned red at the time, saying, "I never left the Senate."
Since then he has taken steps to hold more meetings on the credit crisis and joined House Financial Services Committee Chairman Barney Frank in pushing the FHA refinancing plan, but there remained doubts he could get a bipartisan vote large enough to help give the bill some momentum.
Sen. Dodd attempted to add the FHA language to a housing stimulus bill in April, but came up short when Sen. Shelby balked at the plan.
As negotiations on the GSE and FHA bill dragged on Thursday, some thought a deal that had appeared imminent had slipped away. While Sen. Dodd could win a party-line vote, such a move would virtually guarantee the bill would not go very far.
In a brief interview Thursday, Sen. Dodd said he would not consider the deal a success until it had passed the committee. "I don't want to talk about accomplishments until this gets done," he said. "I've been closer to the water's edge than this and still seen things not get done before."
Sen. Dodd went on to say that galvanizing the political interests of 20 other senators toward one outcome was a delicate balancing act.
"I don't expect a unanimous vote," he said. "If I can get the bulk of them to agree, then we can get this cooked."
The deal still could fall apart for Sen. Dodd, observers warn. Leaving the bill aside for a few days provides additional time for interested parties to seek changes and for other members to weigh in.
"This still is an uphill climb for them to reach a deal on this," said Howard Glaser, a mortgage industry consultant. "Time is not necessarily on the side of an agreement, because the longer it's out there, the more the flaws become apparent to different constituencies. … The failure to get a deal done in the heat of the moment opens it up for battleground in the next few days."
Even if Sen. Dodd gets his deal through the committee, he still could face further obstacles when negotiating with House leaders to settle differences between the chambers' bills.
Rep. Frank said in a brief interview early Thursday that he would not negotiate in the press, but he reiterated that the affordable housing trust fund is critical to him and that the first year of the fund should be dedicated to rebuilding the Gulf Coast from the hurricanes of 2005.
"I feel very strongly about including money for the affordable housing trust fund," he said. "And the first year of that is dedicated to [Hurricane] Katrina. We have an obligation to assisting people in New Orleans and they have not had enough assistance."
