Democrats, Paulson fight to keep housing bill moving

By Kevin Drawbaugh

WASHINGTON (Reuters) - Congressional Democrats and the Bush administration scrambled on Wednesday to shore up support for a major housing market rescue bill, as Republican backing for it faltered on doubts about attaching a plan to bolster Fannie Mae and Freddie Mac.

Some conservative Republicans were balking at a proposal unveiled over the weekend by the Treasury Department to prop up Fannie and Freddie, the nation's largest mortgage finance companies, amid a deepening U.S. housing crisis.

Treasury Secretary Henry Paulson went to Capitol Hill on Wednesday evening for meetings with lawmakers from both parties on his proposals for Fannie and Freddie, which are known as government-sponsored enterprises, or GSEs.

He emerged from the sessions sounding upbeat about his prospects. "I feel very confident and optimistic that there is broad-based support for moving quickly in getting GSE reform done ... sometime next week," Paulson told reporters.

"It's something I want to see done quickly," he added.

The secretary wants to give the GSEs temporary access to unlimited cheap capital, in the form of government loans or equity investments -- if they need it to remain viable.

With markets nervous about the housing slump, the stock prices of Fannie and Freddie have been hammered in recent days, although they rebounded strongly on Wednesday. Amid a general bank stock recovery, Fannie shares closed up 30.8 percent at $9.25, while Freddie shares rose 29.9 percent to $6.83.

Paulson's proposal has been sharply criticized by some Republicans as too open-ended and too risky for taxpayers. Republican leaders in the House of Representatives have demanded hearings to further scrutinize the proposal.