Under a modified version of proposals made by the Bush administration, the Treasury Department would gain authority to inject capital into the two largest US mortgage finance companies, through loans and equity investments.
The Treasury would be barred from providing aid that would cause a breach in the federal debt ceiling under the agreement, a constraint aimed at limiting taxpayer losses. The plan would give Treasury Secretary Henry Paulson power to restrict the companies' ability to pay dividends and require regulatory approval of top executives' salaries.
"The package we have got is fully acceptable to Treasury," along with lawmakers in the Senate, said Frank, a Massachusetts Democrat and chairman of the House Financial Services Committee. "Nobody is for everything that's in it or got everything in it he wanted, but we negotiated a lot with the Treasury and the Senate."
A Treasury spokeswoman didn't immediately respond to a request for comment.
A Congressional Budget Office estimate released yesterday put the cost of Paulson's plan at $25 billion, a figure below the total some lawmakers had expressed concern about.
The legislation would raise the limit on the size of the mortgages the companies may purchase. The new cap would be $625,000, or the median home price plus 15 percent, whichever is lower, Frank said.
Frank's counterpart in the Senate is sued a statement indicating he backs the bill now progressing in the House.
"We have been engaged in extensive and largely fruitful discussions with our counterparts in the House" and with Bush administration officials, Democratic Senator Christopher Dodd said in a joint statement with Republican Senator Richard Shelby. "We remain optimistic about the prospects for this legislation."
Dodd, of Connecticut, is chairman of the Senate Banking Committee and Shelby, of Alabama, is the panel's top Republican.
Paulson, who proposed a rescue program on July 13, reiterated yesterday the plan is aimed at restoring investor confidence in the two companies.
Fannie Mae has dropped about 45 percent in the past month, and Freddie Mac has tumbled about 60 percent, on concern the companies have insufficient capital to cover write-downs and losses.
Lawmakers wrapped the plan into a housing bill that would create a program aimed at helping an estimated 400,000 people with subprime home loans refinance into 30-year, fixed-rate mortgages backed by the government.
The legislation includes tax breaks to help prop up the housing industry, including what would be the equivalent of an interest-free loan worth as much as $7,500 for first-time homebuyers.
The Senate may vote on the legislation as early as tomorrow, said Jim Manley, a spokesman for Senate Majority Leader Harry Reid of Nevada. The bill would then go to President Bush for final approval.
Fannie Mae and Freddie Mac own or guarantee about half of the $12 trillion in outstanding home loans.