Sen. Reid to defy Bush on foreclosure rescue plan

WASHINGTON (Reuters) - U.S. Senate Majority Leader Harry Reid said on Wednesday he planned to defy a threatened White House veto and try to win passage of a bill to curb rising home foreclosures by changing bankruptcy law.

“I have no expectation of reaching any agreement with the White House,” said Reid a day after the administration warned the bill would need changes to get President George W. Bush’s signature.

“I have tried for seven years” to reach agreements with Bush on a variety of issues, but have repeatedly failed, said Reid, a Nevada Democrat, at a news conference.

“So we are going to do what we think is best for the country,” Reid said. “If we get 67 votes (in the 100-member Senate to override a possible Bush veto), that’s great.”

The Senate could turn to the housing bill in the next few days, but it must first overcome a possible Republican procedural hurdle that would take 60 votes to clear.

“I think we are going to get more than 60 votes,” said Reid, whose fellow Democrats control the Senate, 51-49.

The White House on Tuesday threatened to veto the bill, which is the latest congressional response to the subprime mortgage crisis that threatens to tip the economy into recession and push many Americans out of their homes.

The measure would let bankruptcy judges erase some mortgage debt and provide billions of dollars to rehabilitate abandoned properties. The White House said the bill was too costly and an unacceptable bailout for lenders and speculators.

It had been expected to be taken up Tuesday by the Senate, but got pushed back for consideration of an Iraq measure.

Reid said he opposed dropping the controversial provision to modify present bankruptcy law by letting bankruptcy judges erase some mortgage debt. He said the bill has drawn support from community banks and credit unions.

However, “the big banks, there is nothing we can do to get them to help us,” Reid said. “This bankruptcy provision is fair.”

In the House of Representatives, another key Democratic lawmaker is crafting a plan to provide about $15 billion to help a million troubled borrowers, an aide said on Wednesday.

House Financial Services Committee Chairman Barney Frank, a Massachusetts Democrat, is developing the proposal which would involve the Federal Housing Administration and government purchases of distressed mortgages.

The five-year plan would apply only to owner-occupied homes and exclude investor-owned and second homes.

Frank is also working on another plan to provide as much as $20 billion in grants and loans to buy foreclosed or abandoned homes at or below market value.

(Additional reporting by John Poirier and Kevin Drawbaugh)

Reporting by Thomas Ferraro, editing by Richard Chang