Paulson: Rescue bill key to solving housing crisis

WASHINGTON Paulson said the bill had some "wasteful" provisions such as a $3.9 billion measure to provide federal help for homeowners facing foreclosure. But he said he urged President Bush to drop his veto threat over this provision because of the other important elements in the bill.

"This is a very important message that we are sending to investors around the world," he told reporters Wednesday at the Treasury Department. He said it would play a key role in "turning the corner" on the housing crisis.

After intensive discussions, congressional negotiators and the administration reached a deal late Tuesday. The House was expected to vote on the bill later Wednesday.

The proposal would provide the Treasury Department the power to extend to Fannie Mae and Freddie Mac an unlimited line of credit and buy their stock for 18 months if necessary to bolster investor confidence in the two mortgage giants. Fannie and Freddie either guarantee or own more than $5 trillion of mortgages -- almost half of the nation's total.

Paulson said the deal would serve as an important confidence booster to financial markets, which have beaten down the value of the two companies' stocks in recent weeks over rising worries about how they will be able to cope with billions of dollars of losses on mortgage loans.

"The single most important thing we can do to get through this housing correction is a strong GSE bill," Paulson said of the measure, which will replace the current regulator for Fannie and Freddie with an agency with enhanced oversight powers. Fannie and Freddie are known as government sponsored enterprises.

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