Veto hint hits Senate bill on homes crisis

The White House on Tuesday weighed in strongly against a bipartisan plan to remedy the ailing housing market, suggesting it could veto the legislation the Senate is on the verge of approving.

Meanwhile, House Democrats headed toward a clash with the Senate over how to rescue people from the mortgage mess by unveiling a package of tax measures that diverge sharply from the Senate’s approach.

{mosads}“We need to provide relief to the buyers and families themselves, not just the banks and builders,” Ways and Means Committee Chairman Charles Rangel (D-N.Y.) said in a statement after introducing the tax package.

White House spokeswoman Dana Perino blasted the Senate legislation before a gaggle of reporters, saying it would “do more harm than good by bailing out lenders and speculators.”

But the move surprised Senate Republicans, who appeared to be in the dark about the Bush administration’s strong misgivings even after Vice President Dick Cheney attended their weekly Tuesday luncheon.

“You’re telling me something I was unaware of. It was unclear that the White House had a stated position yet on this bill,” Sen. Mitch McConnell (Ky.), the Republican leader, told reporters in response to a question about Perino’s statement.

Despite the administration’s qualms, the Senate on Tuesday afternoon agreed  to proceed to a vote on the bill. At press time, it was not clear whether that vote would be held Tuesday night or on Wednesday.

The bill includes more than $11 billion in housing-related tax relief, including a $6 billion tax break for loss-making companies strongly backed by the National Association of Home Builders.

The White House opposes a provision in the bill that would grant $4 billion in funds to states and towns for purchasing and renovating foreclosed properties as well as a tax credit for people buying foreclosed properties — an idea proposed by a Republican, Sen. Johnny Isakson (Ga.).

“We have serious concerns that these elements and others would do little to help homeowners avoid foreclosure or reduce housing inventory,” Perino said.

The White House’s qualms with these provisions outweigh its strong support of measures contained in the bill to modernize the Federal Housing Administration (FHA) and to raise the cap on mortgage revenue bonds issued by states, she added.

{mospagebreak}The Senate bill has also come under harsh criticism from consumer advocates, unions and groups representing borrowers, who complain that it does little to help people at risk of foreclosure. In particular, they decried the stripping of a provision from the bill that would allow judges to reduce mortgage debts on primary residences in bankruptcy.

And now, with Rangel’s repudiation of many of its key tax provisions, House Democrats appear to be piling on.

{mosads}In contrast to the Senate legislation, the House bill would grant a tax credit to first-time home buyers, which the National Association of Realtors pushed for, and boost incentives for developers of low-income housing.

That measure, Rangel argued, would “put builders to work and create affordable alternatives for families seeking new housing.”

The House bill, which Ways and Means will mark up on Wednesday, also scraps the Senate’s tax credit for buyers of foreclosed properties and the tax break aimed at home builders. And, unlike the Senate bill, it contains revenue raisers to offset its entire $11 billion cost.

That is likely to invite opposition from the business community, which has worked to strip pay-fors from tax legislation in this Congress. But it could win support from conservative Blue Dog Democrats in the House who hold budget discipline as their highest goal.  

“Who raises taxes in a recession?” asked Bruce Josten, the top lobbyist for the U.S. Chamber of Commerce.
Rangel proposes paying for the tax relief by requiring brokers to report the amount investors paid for a stock and by delaying a change allowing multinationals more leeway in how they apply foreign tax credits. Those provisions would raise roughly $8 billion and $3 billion, respectively, according to Ways and Means Committee estimates.

Josten said the provision affecting global firms would put his members at a “competitive disadvantage” with their foreign rivals.

However, the House bill won praise from the Mortgage Bankers Association, which said that both it and the Senate legislation would aid the housing market.

“This is all going to be helpful,” said Francis Creighton, the vice president of government relations for the trade group. “We don’t view the House and Senate bills as an either-or proposition.”

The House legislation has some overlap with the Senate bill, including a provision granting a standard deduction for property taxes for homeowners who don’t itemize their taxes and an increase in the cap on mortgage revenue bonds.

Senate Minority Whip Jon Kyl (R-Ariz.) said that it was “premature” to discuss whether Senate Republicans would negotiate with the House on housing legislation but indicated that large additions to the Senate compromise would be unwelcome: “I think it all depends on what the approach of the House is going to be.”

Aside from tax measures, House Democrats are also departing from the Senate’s approach in other ways. House Speaker Nancy Pelosi (D-Calif.) has signaled her support for the bankruptcy measure that was stripped from the Senate housing bill due to GOP opposition.

And on Wednesday, House Financial Services panel Chairman Barney Frank (D-Mass.) begins hearings on a proposal to have the FHA back up to $300 billion in refinanced mortgages for troubled borrowers — but only after lenders cut down the size of the loans first to make them more affordable for borrowers.

Senate Banking Committee Chairman Chris Dodd (D-Conn.) attempted but failed to include similar legislation to the Senate housing bill.