WASHINGTON — Nine months into the worst housing crisis in a generation, Congress this week took up the most aggressive government plan so far to break spiraling home foreclosures and tumbling house prices that threaten to pull the economy down.
But even as a key House committee began to mark up the bill Wednesday, there were signs that the measure could be caught up in a crippling political crossfire.
Mortgage industry intransigence, voter anger over possible government aid for speculators and economists' fear that thousands of homeowners might just walk away from troubled loans are contributing to a potential stalemate.
Election-year politics also is playing a role.
If the government fails to act -- whether with the House bill or some other equally large-scale approach -- the nation's economic troubles could continue for several years.
The rippling effects of the housing crisis have forced families from their homes, choked credit, destroyed jobs, undermined consumer spending and inflicted huge losses on financial institutions.
"This is a recession that is significantly different from a typical recession because the single biggest cause is not the cyclical excess of supply over demand in the economy but the sub-prime crisis and its reverberations," said Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee and chief architect of the rescue plan.
The heart of the House plan is a proposal to require both lenders and mortgage holders to accept significant losses -- about 15 cents on the dollar -- in exchange for federal guarantees that the reduced loans would be repaid.
On that basis, the bill calls for the government to orchestrate the refinancing of hundreds of billions of dollars' worth of troubled mortgages. Borrowers and lenders must agree voluntarily to participate in the plan.
In recent weeks, the Bush administration and the financial industry have acknowledged the need for greater government action. But now both seem emboldened to try to block the Frank bill and a similar Democratic measure starting through the Senate.
Administration officials have sought to break political momentum for the Frank plan by unveiling their own proposal, one that they say would be less costly and just as effective.
But the administration's numbers show that its plan to expand slightly the Federal Housing Administration would help only an extra 250,000 troubled homeowners, or about the same number as now face foreclosure in a single month.
