House Democrats: GSEs unlikely to need Fed infusion

WASHINGTON (Reuters) - Two senior congressional Democrats said on Monday they expect that housing finance giants Fannie Mae and Freddie Mac will survive without needing to tap cheap government capital.

But both lawmakers said they hope to move ahead within days on proposals from regulators to make billions of dollars in federal funds available to Fannie and Freddie, just in case.

The proposals from the Treasury Department and the Federal Reserve will be part of a broader housing bill, said the head of the House of Representatives Financial Services committee.

Interviewed on Bloomberg television, committee Chairman Barney Frank said the bill -- already passed by the Senate -- could be passed by the House this week. Once any legislative differences with the Senate were resolved, he said, a final bill would go to the White House to be signed into law.

"It will get attached to the housing vehicle," Frank said of the regulators' proposals to make capital available to Fannie and Freddie. "We will do that in the House, I believe, this week and it will then go to the Senate."

Congress was responding urgently on Monday to dramatic moves made over the weekend by the Bush administration to restore sagging market confidence in Fannie and Freddie, which together finance about half of U.S. homes.

"The stability of Fannie Mae and Freddie Mac is crucial to America's mortgage market," said House Majority Leader Steny Hoyer, a Maryland Democrat, in a statement in which he pledged "timely consideration" of the regulators' proposals.

Freddie passed an early test of market attitudes on Monday when buyers flocked to its sale of $3 billion in debt. Share prices in both Fannie and Freddie declined sharply last week on uncertainty about the deepening U.S. housing crisis.

Fannie's shares were down again on Monday by 2.5 percent at $10.00 in early afternoon on the New York Stock Exchange, while Freddie's were down 9.0 percent at $7.05.

Freddie Mac Treasurer Timothy Bitsberger said after the successful weekly debt sale that it was "business as usual."

With home values falling and foreclosures on the rise, the government is scrambling to minimize wider damage to the economy from the steepest housing slump in decades.

The Treasury and the Fed on Sunday called for measures to lend money to the government sponsored enterprises, or GSEs, and buy equity stakes in Fannie and Freddie if needed.

Frank, a Massachusetts Democrat, told CNBC television that the measures proposed by Treasury and the Fed were "a kind of reassurance to people that help will be there, even though we don't think it will be needed."

He said in a CNN interview that investors were "inaccurately" worried about Fannie and Freddie possibly becoming insolvent. Frank is a key proponent of comprehensive housing legislation meant to reform how mortgage markets work.

He said, "We got into trouble because there was not adequate regulation of the mortgage business ... The one thing people should be confident about (is that) we are not going to have any more of this. We have learned now not to do this."

In related news, the Federal Reserve Board on Monday passed rules aimed at cracking down on misleading and deceptive practices in the mortgage lending industry, including a ban on prepayment penalties for many risky loans.

(Reporting by Kevin Drawbaugh, Glenn Somerville, Karey Wutkowski and Patrick Rucker; Editing by Andrea Ricci)