WASHINGTON – Senate Majority Leader Harry Reid said Wednesday he has "no intention of trying to work something out with the White House" on a second economic stimulus package, this one focused on the current housing crisis.
"We're going to do what we think is best for the country. If we get 67 votes, that's great. If we don't, the president is going to have to veto this legislation," Reid threatened.
Congressional Democrats worked hand in hand with the White House on creating the first economic stimulus package, recently signed into law, but on a new proposal, they have said no dice.
Senate Democrats have introduced a bill that includes a controversial provision to the mortgage banking industry — it would restructure the bankruptcy code to allow homeowners to avoid foreclosure. Bankruptcy judges, under the bill authored by Senate Majority Whip Dick Durbin, D-Ill., could restructure a loan on a primary residence, something they cannot now do.
Earlier this week, the White House threatened to veto the bill, saying that it was just a cover for a lender bailout.
"In addition to being extremely costly, this new program would constitute a bailout for lenders and speculators, while doing little to help struggling homeowners," the White House said in a statement.
President Bush and larger mortgage lenders prefer to take a more hands-off approach, allowing lenders and troubled homeowners to negotiate new, more affordable home loan rates.
A number of vulnerable Republicans in 2008 are worried about a backlash at home and the pressure is on for them to support the bill. This comes as Federal Reserve Chairman Ben Bernanke said in congressional testimony Wednesday, "The economic situation has become distinctly less favorable," and signaled another cut in interest rates is likely.
Reid promised Wednesday, despite delays caused by Iraq-related legislation on the floor, that the Foreclosure Prevention Act of 2008 will be taken up by the end of this week. Republicans and Democrats tried to work out details Wednesday in hopes of having an agreement to take up the housing bill by Thursday afternoon.
Regardless of whether Republicans tried to take up the bill officially, a procedural maneuver that requires 60 votes for passage, with a veto threat in place, supporters of the bill need a crucial 67 votes to show the Bush administration they have the required support to override a veto. This is an extremely high hurdle, and if the votes do not appear to be there, there will be pressure put on Reid to remove the bankruptcy provision.
"I'm opposed to removing it," Reid said, though he did not expressly refuse to take it out.
Reid cited support of community banks and credit unions, but larger mortgage lenders and banks are vehemently opposed to the provision, saying they will be forced to raise rates on all lenders, if the at-risk group receives special treatment required under the bill.
Durbin counters this criticism by saying that all bankruptcy judges will be required to create loan terms at "fair market rates" — at the prime rate. Labor unions and the AARP also support the bill.
"The provisions in the bill to amend the bankruptcy code and allow judges to rewrite mortgage contracts will only add to the existing market uncertainty and increase costs on all consumers at a time when exactly the opposite is needed," David Kittle, chairman of the Mortgage Bankers Association said in a statement.