* Committee leaders fail to round up more Democrats
* Unlikely to convince Senate leader to bring up bill on
* Bill likely to clear panel with narrow majority next week
By Margaret Chadbourn
WASHINGTON, May 9 A bid by the leaders of the
U.S. Senate Banking Committee to secure more support from
Democrats for a housing finance reform bill has fallen short,
likely dooming their effort to push the legislation to a vote on
the Senate floor.
Committee Chairman Tim Johnson, a Democrat, and Senator Mike
Crapo, the panel's top Republican, last week delayed a vote on
the bill to build more backing for the plan, which would wind
down taxpayer-owned mortgage financiers Fannie Mae and
But sources familiar with the negotiations said a group of
six hold-out Democrats informed the leaders on Thursday they
would not vote for the bill, which the panel plans to consider
next week. Bloomberg News first reported the decision.
Johnson and Crapo still have at least 12 "yes" votes - six
Democrats and six Republicans - to get the bill through the
committee. However, the lack of stronger Democratic support
makes it unlikely they will be able to convince Senate Majority
Leader Harry Reid to allow a vote on measure on the Senate
Analysts say Reid is wary of bringing up legislation ahead
of congressional mid-term elections in November without strong
support from his fellow Democrats.
"Johnson-Crapo will clear the committee with either 12 or 13
of the 22 committee members voting to advance the bill," said
Isaac Boltansky, a policy analyst at Compass Point Research &
Trading, in a client note. "Although the proposal will clear
committee, we do not believe that it will receive a floor vote
The legislation always faced long odds. Even if it cleared
the Democrat-led Senate, it would have to be melded with any
measure that might make it out of the Republican-controlled
But the decision by the six Democratic senators - Charles
Schumer of New York, Robert Menendez of New Jersey, Jack Reed of
Rhode Island, Elizabeth Warren of Massachusetts, Sherrod Brown
of Ohio and Jeff Merkley of Oregon - nevertheless is a big
setback to the Obama administration's effort to enact housing
legislation this year.
In early morning trading, Fannie Mae's common stock was up
about 2.16 percent at $4.25, while Freddie Mac's was up about
2.68 percent at $4.21 as investors bet the companies might
survive. Preferred shares for both companies
gained nearly 3 percent.
Under the bill drafted by Johnson and Crapo, Fannie Mae and
Freddie Mac would be replaced with a system in which mortgages
are mostly backed by private capital. The government would step
in only after private interests had shouldered large losses.
The two companies absorbed $187.5 billion in taxpayer aid
after being rescued by the government in 2008, although they
have returned to profitability and have now paid more in
dividends to the government than they received in support.
The goal of lawmakers and the Obama administration is to
remake the U.S. housing finance system to limit the chances of
the government ever having to ride to the rescue again.
Fannie Mae and Freddie Mac, which own or guarantee 60
percent of all U.S. home loans, buy mortgages from lenders and
turn them into mortgage-backed securities, which they sell to
investors with a guarantee.
Some senators and housing advocacy groups are concerned the
Senate bill would price out of the market some people who lack
wealth but who would nonetheless be good borrowers.
"Housing finance reform is going to pass out of the Banking
Committee next week with bipartisan support, which is a landmark
achievement for such a complicated and controversial issue,"
said committee spokesman Sean Oblack. "We have made significant
progress bridging the divide among those previously undecided,
and the committee vote is just a first step."
"Those involved in the negotiations have indicated they are
interested in continuing to work together to try and find common
ground, so the Banking Committee will keep working after
favorably reporting out the bill next week," he added.
(Reporting by Margaret Chadbourn; Editing by Chizu Nomiyama)