WASHINGTON - The Senate was poised to pass a landmark housing bill that contains several tax-exempt bond provisions following an overwhelming vote to limit debate on the measure yesterday.
By a veto-proof margin of 83 to 9, Senate members agreed to limit debate on the $300 billion Housing and Economic Recovery Act of 2008 yesterday afternoon, indicating the bill will probably be approved by a huge margin.
The Senate had been expected to vote on the bill yesterday but, at press time, the vote had not begun and Senate Banking Committee chairman Christopher Dodd, D-Conn., a key sponsor of the measure, said that several amendments had been proposed but that not all of them would garner votes.
The vote is significant because Senate Republicans have blocked several votes to limit debate on other bills recently, including a tax extenders bill. The housing bill, by contrast, appears to have broad bipartisan support.
Sources said that if Senate members did not vote on the bill yesterday, they likely would today.
In the tax-exempt area, the bill would provide an additional $11 billion of mortgage revenue bonds to state and local housing finance agencies that could be used to refinance subprime mortgages as well as to provide new mortgages to first-time homebuyers. The bill would also repeal the alternative minimum tax on all housing bonds permanently.
Once approved, the bill will be sent to the House, where lawmakers will attempt to rectify it with their own housing stimulus measures, which were approved in three separate bills. While House leaders have said they are dedicated to getting the bill passed and to President Bush before the August recess, there are a few differences between the chambers that need to be rectified. Senate members did not fully pay for the bill's costs by including revenue-raising offsets, and House leaders hope to find a way to pay for the roughly $2.4 billion that still needs to be offset in order to adhere to pay-go rules.
But once the House and Senate reach a compromise on the legislation, it would then be sent to the president, who has threatened to veto it, claiming it would bail out irresponsible lenders and borrowers.
One tax-exempt bond provision the administration wants removed from the bill is a proposal that would provide an additional $4 billion in Community Development Block Grants funds to allow local governments hit hardest by foreclosures to purchase and refurbish or raze foreclosed properties. The CDBG program provides grants to state and local governments to fund economic development projects. The grants can be used in projects financed by municipal bonds. The proposal in the Senate bill is a scaled-back version of the House proposal to provide $15 billion of CDBG funds.
But the administration warned in a statement: "The principal beneficiaries of this type of plan would be private lenders who are now the owners of the vacant or foreclosed properties instead of struggling homeowners."
Sources expect that an amendment will be offered to remove the CDBG provision from the bill.
The White House also objected to a provision that would permit the federal home loan banks to guarantee tax-exempt debt besides housing bonds, arguing that with the current problems in the housing sector, the banks should be concentrating their resources on housing, not expanding their reach to other areas.
But sources said yesterday that since the FHLB proposal was included in both the House and Senate bills, it will likely remain in the bill. Also, the provision by itself is likely not enough to merit a veto from Bush, they said.
Sen. John Kerry, D-Mass., told reporters at a press conference yesterday that the additional changes the bill will undergo as the House takes it up will make it more difficult for the president to veto it.
"In the end, it depends what you work out," he said at a press conference. "If we get an agreement with the House, it will be a broad-based [bill], and it will be at the president's peril to veto it."
Kerry cited the farm bill that was enacted into law last month as an example. After a prolonged and labored conference to negotiate the final bill from the House and Senate versions, Congress overruled two presidential vetoes of the measure. The second veto came after a clerical error nullified the initial one.
Whether or not the CDBG amendment passes or fails could serve as an indication as to how lawmakers plan to handle the president's threatened veto, sources said. If the amendment fails, it could indicate that Congress is confident it can muster the votes needed to overturn a veto. But if the amendment passes and the CDBGs are removed, it could show that lawmakers are attempting to craft a bill that both addresses major issues and receives the president's signature.
In addition to the CDBG and FHLB provisions, the bill would expand and modernize the Federal Housing Administration and provide an independent regulator for Fannie Mae, Freddie Mac, and other government-sponsored enterprises. The bill would also create a revolving fund financed with GSE profits, which would be dedicated to financing affordable housing developments.