The Corner

Senate Poised to Pass Mortgage Bailout

The U.S. Senate has taken up the Dodd-Shelby Countrywide Financial Bailout Act of 2008. Sen. Kit Bond, a Missouri Republican, is speaking against the bill right now on the Senate floor:

BOND: While I would like to keep as many homeowners in their homes as possible, this strategy is more likely to result in a large bailout for lenders, while protecting a very limited number of borrowers.

In particular, [the Congressional Budget Office] estimates that under this program, quote, “Mortgage holders would have an incentive to direct their highest-risk loans to the program,” close quotes. For a modest write-off, lenders who were in a number of cases either fraudulent or negligent in their treatment of borrowers will be able to clear out many of their problem loans.

At the same time, CBO estimates that the cumulative default of the home program would be about 35 percent, meaning that one out of every three loans refinanced would fail. Creating a new federal program that takes on the worst of the worst subprime loans, which will hurt [the Federal Housing Administration] and ultimately the taxpayers, is extremely troubling.

As the Editors wrote yesterday, “The U.S. Senate is about to enact a massive subsidy for Countrywide Financial less than a week after revelations that the company’s ‘Friends of Angelo’ sweetheart-loan program included two U.S. senators. It seems unthinkable, but it’s true.”

Given that those two U.S. senators are Democrats — and that one of them is the Dodd of Dodd-Shelby — you would think the Senate Republican leadership would have a pretty easy time opposing this bill, right? Sen. McConnell?

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