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Senate Payout Plan for Builders Lobby

The opinions expressed by columnists are their own and do not necessarily represent the views of

Under the radar of high-profile foreign policy hearings, the Senate is close to giving an $11 billion cushion to the housing lobby that said it would hold their campaign contributions hostage for a bailout.


Unhappy with the economic stimulus package Congress passed earlier this year and faced with a lagging housing market Brian Catalde, president of the National Homebuilders Association, said his industry would quit contributing to federal races unless their friends in Congress gave homebuilders an economic stimulus package of their own.

This was a serious threat. According to the Center for Responsive Politics, NAHB poured millions into federal elections over the years, slightly favoring the party in power.

NAHB gave $2.2 million to federal elections in 2004. That year, Republicans received the lion’s share of those donations, 67 percent. In the 2006 cycle when Republicans retained control of Congress for most of the year until Democrats swept the mid-term elections in November, the group collectively donated $2.8 million--73 percent of that going to Republicans. In 2008, however, when the Democrats are in full control of the floor schedule, NAHB began donating more generously to Democratic races. So far, in the 2008 election cycle the NAHB has given almost a million dollars to federal candidates, 55 percent of that money to Republican causes, 45 percent to Democratic causes

In exchange for their continued financial support, the homebuilders want Congress to issue a “net operating loss deduction” to allow profit-losing builders to write off existing tax liability with anticipated future losses, tax credits for new homeowners to prevent homebuilders from having to further reduce prices on the houses they are selling and tax-exempt bonds to refinance subprime mortgages.


Catalde explained his quid-pro-quo in no uncertain terms. In a February 12 statement he said, “Today, the National Association of Home Builders’ Political Action Committee BUILD-PAC, and it’s 150-member board of trustees representing all 50 states, agreed to cease all approvals and disbursements of BUILD-PAC contributions to federal congressional candidates and their PACs until further notice….More needs to be done to jump-start housing and ensure the economy does not fall into recession. This action will remain in effect until further notice.”

A day later, Senate Majority Leader Harry Reid (D.-Nev.) introduced the “Foreclosure Prevention Act of 2008.” Over the years, NAHB have donated $40,000 to Reid’s re-election campaigns and Leadership PAC.

Reid’s bill contained the net operating loss deduction, a $10,000 tax deduction for new homeowners, tax-exempt bonds, and millions worth of community development block grants to help states and localities purchase foreclosed properties.

It also contained a controversial provision that would change bankruptcy code to allow bankruptcy courts to change the terms of mortgages on primary residences---something NAHB opposes because it could increase interest rates and discourage home purchases.

Joseph M. Stanton, chief lobbyist for NAHB wrote a letter to Reid on February 22, applauding his swift action on the bill, but insisting he retract the bankruptcy code change.


“Thank you for your support of housing and for including the Net Operating Losses and tax-exempt provision in S. 2636,” Stanton wrote. “Unfortunately, while NAHB strongly supports these tax provisions, NAHB must oppose the Foreclosure Prevention Act of 2008 as currently drafted due to changes to the bankruptcy code.”

Reid’s bill as written, however, failed to get the needed 60 votes to proceed. It was defeated 48-46. Senators Chris Dodd (D.-Conn.) and Sen. Richard Shelby (R.-Ala.) were then charged with working out a substitute bill.

The revamped bill as worked out by Dodd and Shelby will be voted on by the Senate Tuesday, the day two high-drama hearings will be held by the Senate Armed Services and Foreign Relations Committees to receive testimony from Army General David H. Petraeus and Ryan C. Crocker about progress in Iraq. If it gains the 60 votes needed for cloture, it will immediately proceed to a final vote.

Dodd-Shelby offers many of the same provisions as Reid’s original bill. Senate Finance Committee Chairman Max Baucus (D.-Mo.) and Ranking Member Charles Grassley (R.-Iowa) wrote the measures in the bill to give homebuilders the net operating loss deduction, a $7,000 tax credit to those who purchase a home in the next two years and tax-exempt bond fund to pay for subprime mortgages

The Congressional Budget Office and Joint Committee on Taxation estimates the Baucus-Grassley provisions will cost taxpayers nearly than $11 billion over the next 10 years.


“It’s appropriate to use the tax code to help people buy homes and to help the many business that are tied to the housing industry recover from losses,” Grassley said in a statement.

The overall cost of Dodd-Shelby will be much higher than the cost of the Baucus-Grassley provisions. The underlying bill also includes $4 billion in Community Development Block grants for states and localities to purchase foreclosed and vacant properties and up to $100 million to fund “foreclosure prevention counseling.”

Since 1998, Grassley has received at least $28,500 from NAHB’s PAC. Shelby has received at least $17,500, Baucus $15,000 and Dodd $1,000, according to information from the Center for Responsive Politics.

Dodd-Shelby does not contain the bankruptcy code change that NAHB found offensive, although Sen. Richard Durbin (D.-Ill.) has said he may offer it as an amendment.

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