History Happens

Lawmakers and experts described the legislation as a landmark shift in the government’s role in the housing market, extending a helping hand to both Wall Street and Main Street. They said it would rank in importance with the creation of the Home Owners’ Loan Corporation to prevent foreclosures in the 1930s as part of the New Deal, and legislation in 1989 responding to the savings and loan crisis.

The bill, which began seven months ago as a modest attempt to help struggling homeowners, will now likely touch a vast array of borrowers, lenders, and investors: from owners in Colorado facing foreclosure to community banks in California and investment banks on Wall Street.

But the need rapidly to incorporate its request for the Treasury department to be given almost unlimited powers to invest in Fannie Mae and Freddie Mac, if necessary, had made the White House’s negotiating position increasingly difficult to sustain. The proposed bill also creates a new more powerful regulator for the government-sponsored mortgage companies – a long-time priority for the administration and many Republicans.