Lawmakers to take last shot at housing bill

President has threatened veto of rescue proposal, but observers optimistic

(MSNBC) -- President Bush and Congress have settled their differences on terrorist surveillance and Iraq war money. Now attention turns to a potential housing rescue, probably the last major initiative with any chance of passing before lawmakers scatter to campaign for re-election.

Bush has threatened a veto. But lawmakers in both parties say the housing legislation is a political imperative, and negotiators see the makings of a summertime bargain.

For one, the measure contains elements that Bush long has demanded. They include modernizing the Depression-era Federal Housing Administration and creating a new regulator for the government-sponsored mortgage companies Fannie Mae and Freddie Mac.

Then there is the political reality for the president: Many Republicans are facing a darkening re-election outlook amid tough economic times and are reluctant to oppose a measure intended to address the crux of the financial crisis.

Sen. Richard C. Shelby of Alabama, the top Republican on the Senate Banking, Housing and Urban Committee, says he hopes Bush will reconsider his veto threat. Insiders said the tepid wording of the threat, combined with intense behind-the-scenes negotiating by Treasury Secretary Henry M. Paulson to reach a deal, suggest the White House may be doing just that.

"The American people expect us to provide effective and timely solutions the best we can," Shelby said.

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