The U.S. Senate is due to vote finally Saturday to approve a major housing market rescue bill, including federal financial assistance for Fannie Mae and Freddie Mac, the mortgage titans whose shares fell again in early Thursday trading.
A handful of Senate Republicans who are trying to amend and delay the legislation will run out of options Saturday, allowing the Senate to vote, said aides from both parties.
A last-minute deal could bring an earlier vote Friday on the bill, but both parties said that looked unlikely.
The House approved the election-year bill Wednesday by a 272-152 vote hours after President
Bush abruptly dropped an earlier threat to veto it.
The bill would offer new emergency financing to Fannie Mae and Freddie Mac, the largest mortgage finance companies, while setting up a new regulator for the two government-sponsored enterprises (GSEs), and creating a fund to help thousands of distressed American homeowners refinance into more affordable mortgages.
Fannie and Freddie own or guarantee nearly half of the $12 trillion in outstanding U.S. home mortgage debt and are playing an increasingly crucial role as the nation's housing market struggles through its worst slump since the Great Depression.
The pace of existing home sales fell to a 10-year low in June, the National Association of Realtors said Thursday.
That data undermined gains from earlier in the week in Fannie and Freddie shares, which rose before the bell on Thursday, buoyed by the House passage of the bill.
But the shares reversed after the market opened, falling as investors locked in profits following a 32 percent rise over the last two weeks. "It's profit-taking by people who bought the stock at $6 and $7 -- they've made a lot of money and are taking some money back," said Marshall Front of Front Barnett Associates in Chicago, which holds Fannie Mae shares.
Fannie's shares were 9.1 percent lower at $13.63 around noon in New York on Thursday, while Freddie's shares were down 8.2 percent at $9.92.
Home Sales Data Troubling
The housing bill has boosted market confidence in the GSEs' ability to ride out the housing market slump, but Thursday's data drove home to investors the severity of the problems that lie ahead, said said Michael Cheah, portfolio manager at AIG SunAmerica Asset Management in Jersey City, New Jersey.
"The big picture is that home prices are still going to drop more, even from here," Cheah said.
New York Federal Reserve Bank President Timothy Geither told a House committee Thursday that recent financial crises justify big changes in financial oversight at Fannie and
Freddie, a project that lawmakers are targeting for 2009.
"There (is) going to have to be some very fundamental rethinking of the future of these institutions," he said.
Securities and Exchange Commission Chairman Christopher Cox told the same hearing his agency would soon offer a proposal to expand emergency curbs on short selling of 19 financial stocks, including Fannie and Freddie, to the entire market.
In the Senate, Democrats' hopes for a quick vote on the housing bill were dashed Wednesday evening when South Carolina Republican Sen. Jim DeMint persisted with an effort to attach an amendment that would bar lobbying and political donation activities by Fannie and Freddie.
That caused Senate Majority Leader Harry Reid, a Nevada Democrat, to invoke procedural tactics to limit debate, setting up a stand-off with DeMint, who was unlikely to back down, but
whose power to block a final vote will expire by Saturday.