Global General

Special

Newsmaker

Asia Pacific

America

Middle East

Europe

Africa

White House says Bush will sign housing bill into law

(Agencies)
Updated: 2008-07-23 22:43

WASHINGTON - President George W. Bush will sign a housing rescue package into law despite opposing part of the legislation, the White House said on Wednesday, paving the way for measures to shore up the worst US home market since the Great Depression.

Graphic fact file on US housing finance giants Fannie Mae and Freddie Mac, which were put under Federal Reserve oversight and given bigger credit lines. [Agencies]

The dropping of the presidential veto threat spurred investors to snap up shares and bonds of mortgage finance companies Fannie Mae and Freddie Mac, which would receive an emergency government lifeline under the bill.

The House of Representatives was expected to approve the package later on Wednesday.

A White House spokeswoman said Bush will sign the measure because it is needed promptly to address the credit crisis. The White House has repeatedly expressed concern about a provision in the legislation that would provide grants to communities to buy and repair foreclosed homes.

"We do not believe we have time for a prolonged veto fight," spokeswoman Dana Perino said.

Shares of Fannie Mae and Freddie Mac, the nation's two biggest mortgage finance companies, surged after stock markets opened. Fannie Mae climbed 15.59 percent to $15.50, while Freddie Mac was up 9.79 percent at $10.65.

Risk premiums on debt issued by the two government-sponsored mortgage companies narrowed. Yield spreads on debentures from the two agencies shaved about 2 to 5 basis points early on Wednesday.

Related readings:  US housing rebound to be prolonged: Harvard study  Housing crisis brings Wall St arrests, veto threat  Dollar mostly lower as US housing starts fall  US Treasury 'flexible' on housing measures

The legislation "gives support for their debt structure. It makes it easier for them to raise capital," said Priya Misra, interest rate strategist at investment bank Lehman Brothers.

The housing measure comes as the US economy copes with a deep housing downturn and a credit crunch brought about by widespread mortgage failures. The latest blow to the economy was worry about the financial soundness of Fannie Mae and Freddie Mac, which own or have guaranteed almost half of the $12 trillion in US mortgage debt outstanding.

Lawmakers late on Tuesday put finishing touches on the legislation and congressional budget analysts put a $25 billion potential price tag on the provision to bolster Fannie Mae and Freddie Mac, which was drafted by the Bush administration and added to a bill that has been in the works for months.

The overall measure now has wide, bipartisan support in both the House and the Senate, Massachusetts Democratic Rep. Barney Frank, the chief architect of the legislation, said on Tuesday.

The added provision, proposed by Treasury Secretary Henry Paulson, would give beleaguered Fannie and Freddie access to new, government capital in the form of loans or equity purchases.