WASHINGTON — Even as a huge bipartisan majority in the Senate voted Saturday to send a sprawling housing bill to the White House, economists, consumer advocates and other analysts said the package of programs for cash-strapped homeowners and shaken mortgage lenders is unlikely to relieve the foreclosure crisis that is driving the nation toward recession.
"This is not the end of the housing crunch," said Jared Bernstein, a senior economist at the Economic Policy Institute. "Housing prices have already fallen 15 percent and they need to fall 10 percent more. This bill isn't going to change that equation."
The Senate voted 72-13 to approve the bill, which seeks to halt the steepest slide in house prices in a generation, rescue hundreds of thousands of families from foreclosure, and restore confidence in the nation's largest mortgage-finance firms. Florida's two senators, Republican Mel Martinez and Democrat Bill Nelson, voted for the bill.
White House officials said President Bush is likely to sign it by midweek, despite his opposition to nearly $4-billion in aid to local communities.
During Senate debate, Sen. Chris Dodd, D-Conn., chairman of the Senate Banking Committee and one of the bill's lead sponsors, cited a litany of grim statistics about the mortgage crisis, including that an estimated 8,500 families a day are falling into foreclosure and that one in every eight homes is projected to enter foreclosure over the next five years.
"The American dream has become a nightmare for countless families," Dodd said, urging his colleagues to vote for a bill that he acknowledged is "not perfect … and will not perform miracles."
Both presidential candidates, Sens. John McCain, R-Ariz., and Barack Obama, D-Ill., expressed support for the legislation, though neither took a break from the campaign trail to attend Saturday's vote.
Republican lawmakers, particularly in the House, have blasted some of the measure's key provisions as bailouts for irresponsible borrowers and risk-addicted financial institutions that could wind up costing taxpayers hundreds of billions of dollars. Last week, the House approved the bill 272-152, with three-quarters of GOP lawmakers voting no.
With elections looming in November, many lawmakers felt compelled to respond to a crisis that has pushed more than 1.5-million families into foreclosure.
Analysts said lawmakers had little choice but to act. "Everything is so unstable and people are so panicky that I see a lot of this as an effort to calm people down," said Deborah Lucas, a finance professor at Northwestern University's Kellogg School of Management. "The whole bill is an attempt to change the equilibrium."
The legislation was hammered out over the past two weeks in bipartisan negotiations between lawmakers and Treasury Secretary Henry Paulson. His request for authority to prop up faltering mortgage giants Fannie Mae and Freddie Mac lent a final burst of urgency to legislation that had been proposed in March and propelled by crisis, starting with the collapse of the Wall Street investment bank Bear Stearns.
The measure grants Paulson's request for authority to extend an unlimited line of credit to Fannie Mae and Freddie Mac, a move aimed at reassuring global markets that the firms, which back nearly half of all outstanding mortgages in the United States, will not be allowed to fail. The package also contains provisions long sought by the Bush administration, including a strong new regulator for Fannie and Freddie and an overhaul of the Federal Housing Administration, the nation's largest provider of mortgage insurance.