US Senate approves housing rescue bill as two more banks close

THE US Senate has approved an elaborate housing rescue plan to help thousands of home owners avert foreclosure and bolster mortgage finance giants that have struggled amid a volatile housing market.

But the move came as the Government shut down two more banks, taking the total to 10 that have been closed in 18 months. The Senate adopted the bill, which provides $US300 billion ($A313 billion) in guarantees to help refinance troubled mortgages, by a vote of 72-13, after the House of Representatives passed it on Wednesday.

President George Bush had dropped his earlier opposition and promised to sign the bill into law as soon as possible.

Before the vote, senators praised the bill as a product of rare bipartisan co-operation and said the legislation was vital to stem the fallout from a slumping housing sector.

"You're having the worst of all possible worlds. Wealth is declining, the source of wealth creation and costs are rising simultaneously," said Democrat Chris Dodd who chairs the Senate committee on banking, Housing and Urban Affairs.

"When we consider the role home equity has played in support of consumer spending, we see the danger of a vicious downturn."

The bill also provides for government credit and equity injections in Fannie Mae and Freddie Mac, the two mortgage lenders that underpin much of the housing market.

The bill also calls for $US3.9 billion to help local governments buy and rehabilitate foreclosed homes. Opponents, who tried to delay the vote and forced a rare weekend session, argued the plan would distort the market by rewarding "irresponsible" lenders and consumers and allow the Government too big a role in the housing market.

The aid package comes with the housing sector still weakening from a nearly two-year-old slide.

AFP