The stealth bailout in the works for homebuilders

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First developing news: The Republicans in the Senate, evidently fearing voter backlash, have agreed to work with Democrats on a big housing bailout. From The New York Times: ‘With both parties in Congress voicing a new urgency to help millions of homeowners at risk of foreclosure, the Senate voted overwhelmingly on Tuesday to move forward with a package of housing legislation.’

The L.A. Times: ‘The breakthrough came after lawmakers returned from a two-week spring recess during which the federal government stepped in to rescue investment bank Bear Stearns Cos. and the country’s economic troubles dominated the presidential campaign.’

Now part of the bailout you haven’t heard much about: tax breaks for homebuilders. ‘Corporate homebuilders -- including those responsible for the mortgage and housing crisis -- would receive billions of dollars in tax breaks under a provision of the Foreclosure Prevention Act currently pending in Congress,’ the Laborers’ International Union of North America argued in a news release today.

More from the union: ‘Under the bill’s little publicized ‘carry-back’ provisions, builders would get billions in tax breaks. The carry-back provision would allow homebuilders to apply losses from 2006 and 2007 as far back as five years against taxes paid on profits.’

Bloviation: When Congress is through with the omnibus foreclosure prevention legislation, it says here it will resemble the world’s largest Christmas tree, with boxes of bailouts, goodies and giveaways for every Who down in Whoville and every interest group and corporate lobby remotely connected to the business of building, buying or financing houses. Don’t be surprised if the homebuilders find two piles of goodies under the tree: carry-back provisions to reduce taxes, and new tax incentives to encourage buyers to purchase new homes.

The tipping point in this debate was when the Fed backed the bad assets of Bear Stearns. Whether that event is most accurately described as a bailout, a liquidation or a burial is irrelevant. It opened the floodgates. ‘If we can bail out Bear Stearns, we can certainly provide aid to... (fill in the blank).’

Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com.
Photo: Los Angeles Times