By: David Rogers

A massive mortgage rescue bill advanced in Congress on Wednesday, powered by President Bush’s endorsement but leaving House Republicans and the administration badly split over the government’s response to the current housing crisis.

“I am very disappointed,” Minority Leader John A. Boehner told Politico. The Ohio Republican said he did not learn until Tuesday night of Bush’s decision to drop his earlier veto threats and embrace the bill. At a party caucus meeting, the leadership was applauded after urging a no vote, and former Speaker Newt Gingrich (R-Ga.) jumped back into the fray, telling Republicans at the same meeting that it was in their interest to vote no and thereby separate themselves from the White House.

“I told them it was very good for House Republicans to take a stand on their own, separate from the administration,” Gingrich told Politico. “If I were Treasury Secretary [Henry] Paulson and I were given unlimited authority, I’d like it, too. But it’s an absurd bill. If a Republican administration wasn’t supporting it, it wouldn’t get five Republican votes.”

Rank-and-file conservatives were equally blunt. “When it was announced, there was kind of a moan,” Rep. Tom Price (R-Ga.) said, recalling the caucus’ response when Bush’s decision was announced. “My personal reaction is that it is unconscionable.”

“There he goes again,” said Rep. Pete Hoekstra (R-Mich.). “When he really has a chance to stand up and take a tough stand, he’s not there.”

As it was, just 45 Republicans — less than a quarter of the party — sided with the president when the House voted Wednesday afternoon. Although the measure passed easily, 272-152, the defections underscore the perils facing Cabinet secretaries such as Paulson who have tried to bridge the partisan divide in Congress to advance legislation.

His relations with Boehner have been strained in the past. And the secretary was weakened in this case by his Democratic partners, who insisted on adding costly provisions to the final bill that made his task more difficult with the Republican rank and file.

The Senate poses a second test, one in which Paulson — who spoke to Senate Republicans at their party luncheon this week — appears to have more strength.

Alabama Sen. Richard Shelby, the ranking Republican on the Senate Banking Committee, announced his support for the package Wednesday.

Senate Majority Leader Harry Reid (D-Nev.) hopes to complete its passage this week. But Reid still must overcome conservative demands for further amendments that risk forcing the measure back to the House. And with Congress due to go home in August for the summer recess, Paulson is fearful of any delay that could be misread by jittery world markets.

Standing with Shelby on Wednesday, Senate Banking Committee Chairman Chris Dodd (D-Conn.) hailed the bill as proof that the two parties can work together in a time of crisis. But even its authors admit the package is a gamble that commits huge resources to try to help homeowners and the mortgage industry ride out the drop in housing prices that has shaken the U.S. economy.

As much as $300 billion in new loan guarantees would be authorized, with a mandate for the Federal Housing Administration to step forward to define a floor for the housing market and help homeowners refinance and avoid foreclosure. Cities and states are promised nearly $4 billion in direct cash to buy up the foreclosed homes already affecting neighborhoods. And a $15 billion package of tax breaks includes provisions targeted to first-time homebuyers and working-class taxpayers who now can’t claim any deduction on their property taxes.

The greatest focus in recent days has been on a Paulson-crafted Treasury plan to boost investor confidence in the two mortgage finance giants, Freddie Mac and Fannie Mae. The bill gives Treasury new standby authority to extend credit to the so-called government-sponsored entities, or GSEs, and even, for the first time, to purchase an equity interest in Fannie and Freddie.

The increased government exposure is accompanied by tougher regulation of the companies, but Senate conservatives are also demanding an added condition: that the GSEs be banned from any lobbying of Congress, where they have successfully sought political protection in the past.

Sen. Jim DeMint of South Carolina and seven other Republicans asked Reid for a chance to offer this language as an amendment when the bill comes to the Senate floor. But mortgage banking and realty lobbies could try to weigh in to shut down debate and ensure quick passage.

In an exchange Wednesday night, Reid said he would join with DeMint in supporting a curb on Fannie and Freddie’s political activity, but on another bill — not the housing package.

“Speaking on behalf of President Bush, and I don’t do that very often, I don’t think we should do this,” Reid said, smiling. “I don’t think we should send this back to the House. I think we should complete it here.”

Reid has filed a series of procedural motions that set up what could be a final vote on Friday, absent some agreement to move sooner. And he may be helped by the fact that the Senate has an added stake in one of the bill’s provisions: raising the federal debt ceiling by $800 billion to $10.615 trillion.

The debt increase conforms with what was called for in the Democratic budget resolution last spring, but such increases are always politically sensitive for senators in election years. In this case, the debt limit takes on special importance because any Treasury expenditures to help Fannie and Freddie must be counted under the ceiling. Without some increase, Paulson would have little of the flexibility he wants to calm the financial markets.

Technically, the House had already approved the $800 billion increase — even before the housing bill — when it adopted the budget resolution. But Senate procedures require a separate vote, which was why the debt ceiling language was added to the package as part of the final compromise with Treasury.

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