In a Fix, GOP Drags Its Feet

The bill passed the House last week, with more than three dozen Republicans voting for it. Why the House Republican leadership decided to oppose the bill remains a mystery. The most charitable explanation was that it ran afoul of its free-market ideology. The more likely explanation is that it understood that the economy had become the most salient political issue in the coming election, and it was determined to deny the Democrats who control Congress the chance to show they had done something about it.

Whatever the reason, Republicans leaders were apparently successful in pressing the White House to stop negotiating with Frank and oppose the legislation. Suddenly, Treasury officials who had signed off on the portions of the bill dealing with Fannie and Freddie began raising new objections. And the White House announced that President Bush would veto the bill, calling it a bailout for speculators and lenders and complaining, alternatively, that it would not help many homeowners and that it would cost far more than the estimated $2.5 billion over five years.

The White House arguments are unadulterated rubbish.

For starters, the refinancing program is limited to primary residences of people who live in the houses that are facing foreclosure -- in other words, homeowners, not speculators.

And in most instances it would require lenders to write off 25 percent or more of the original loan amount, while borrowers would be required to pay a 1.5-percentage-point fee a year to cover the cost of FHA insurance, an exit fee if they are able to refinance the loan or a portion of the profit if they wind up selling the house.

That is not a bailout -- it is nothing more than a modest extension of what the FHA has been doing for 70 years and what the Bush administration itself is proposing in its own FHA modernization plan.

As for the program's impact, I suppose it is possible that it won't wind up helping many people, just as it is possible that it becomes so wildly popular that it winds up refinancing millions of mortgages. But certainly both could not be true.

Is the House bill perfect? Of course not. There's special-interest junk in there that needs to be taken out. And some safeguards are probably necessary to ensure that the refinancing program doesn't attract lots of people whose credit histories are full of bad decisions and nonpayments. But these can be negotiated and fixed during the legislative process as long as there continues to be a good faith effort to get a good bill.

Unfortunately, that good faith is quickly evaporating thanks to the partisan posturing of House GOP leadership and the White House's cynical propaganda. This has only emboldened Senate Republicans, already an inflexible lot, to dig in their heels.

Yesterday, in a brief conversation, Richard C. Shelby of Alabama, the ranking Republican on the Senate Banking Committee, went so far as to call the Senate version of the housing bill a "sham" as it relates to regulating Fannie and Freddie -- even though most of it closely tracks his proposal from 2005. Shelby made clear he would also oppose any program that would involve government funds to help homeowners avoid foreclosure. All of which undercuts his other promise, to meet the "the other side halfway."

According to the polls, Bush is already at risk of becoming the Herbert Hoover of the 21st century and congressional Republicans are well on their way to the most disastrous election since the post-Watergate balloting of 1974. They could certainly seal their fate by failing to strike a housing deal while it is within reach.

Steven Pearlstein will host a web discussion today at 11 a.m. athttp://washingtonpost.com. He can be reached atpearlsteins@washpost.com.