Senate leaders agreed on a compromise housing-relief plan in non-senatorial fashion—fairly quickly.

The $15 billion to $20 billion plan (depending on who’s counting) would give couples who don’t itemize a thousand bucks in property-tax deductions, hand housing agencies $10 billion in tax-free bonds to help subprime borrowers refinance and first-time borrowers get loans, create $4 billion in block grants for local governments to buy foreclosures, and give $100 million to counsel homeowners at risk of foreclosure, says The New York Times on C1.

The Wall Street Journal notes that the plan is no done deal, and wins our Captain Obvious Quote of the Day for this bit of insight on A3:

Election years often tempt lawmakers to score political points. This year, voters could see pre-election fights over Iraq and fiscal policy, especially whether to renew President Bush’s income-tax cuts.

The business of America…

The Washington Post on A1 and the WSJ on A3 report that one of the biggest benefits of the plan goes to—you guessed it—business. A tax provision aimed at home builders and banks would cost $6.1 billion, and the Los Angeles Times says that number could be “much higher.” Here’s how the WaPo puts it:

Families who cannot afford to repay their home loans —the group at the heart of the mortgage meltdown—would benefit mainly from $100 million to expand foreclosure counseling services and greater latitude for local housing authorities to use tax-exempt bonds in refinancing subprime loans.

Home builders and other businesses suffering losses in the flagging economy, meanwhile, would get the lion’s share of federal spending in the bill: $6 billion in tax rebates.

The Journal notes that in February the home-builders trade association cut off the money spigot to Congress because it was ticked that it didn’t get this tax benefit included in the economic stimulus plan that’s about to dump $1,000 checks all over America.

We assume the home builders with the prospect of new-found billions will now go back to their regularly scheduled Congress-bribing.

Countrywide’s good luck continues

In other housing news, the Justice Department won a ruling in federal court to go deep into Countrywide’s mortgage-processing systems to see just how bad the lender abused its borrowers. The judge may have been inclined to let the government peek because, as the WSJ reports on A3, he’s got some 300 cases alleging Countrywide wrong-doing before him.

Let the games begin!

More mission, less mammon

The WSJ says in a good story on A4 that Fannie Mae and Freddie Mac are being torn between their fiduciary duty to shareholders to make them money and their “public mission of propping up the housing market in times of distress.”

But the latest sniping underscores the possibility that Congress eventually will impose a much-tighter regulatory grip on the companies in an effort to make them focus more on mission and less on mammon…

Chartered by Congress to ensure a steady flow of money into housing finance, they can borrow cheaply because investors believe the government probably would rescue them in a crisis. But they are owned by private shareholders who want profit growth and dividends.

The FT notes that Fannie, Freddie, and the Federal Home Loan Banks are now responsible for virtually all home loans in the U.S. as “purely private sources of finance have all but dried up.” The two enable lending by buying up other lenders’ mortgages.

Going (im)mobile

The New York Times has a good front-page story on an interesting bit of fallout from the housing bust, one that could further choke the economy—people aren’t quite as mobile as they used to be because they can’t sell their homes:

The rapid decline in housing prices is distorting the normal workings of the American labor market. Mobility opens up job opportunities, allowing workers to go where they are most needed. When housing is not an obstacle, more than five million men and women, nearly 4 percent of the nation’s work force, move annually from one place to another—to a new job after a layoff, or to higher-paying work, or to the next rung in a career, often the goal of a corporate transfer. Or people seek… an escape from harsh northern winters.

Now that mobility is increasingly restricted. Unable to sell their homes easily and move on, tens of thousands of people… are making the labor force less flexible just as a weakening economy puts pressure on workers to move to wherever companies are still hiring.

The Times reports that moves across state lines fell a “startling” twenty-seven percent in 2007 after rising nearly that much in previous years.

Junking the junk

The FT reports that Wall Street is—again—trying to move its junk assets off its balance sheets to “restore investors’ confidence in the financial sector.”

The pink(ish) paper says the investment banks are looking to follow the lead of Swiss giant UBS in “ring-fencing” assets into subsidiaries and selling big stakes to investors.

The planned creation of “bad banks” comes as US and European lenders are also discussing the creation of a common fund to buy devalued assets.

According to people familiar with the matter, banks are discussing a joint proposal to regulators to set up a fund, which would absorb US subprime assets and other troubled securities, as a way of restoring confidence in the banking system and ending the pressure to recognise mark-to-market losses.

Wall Street tried something similar in the fall with the so-called super-SIV. That went a whole lotta nowhere.

Ben got up on the wrong side of the bed

Federal Reserve Chairman Ben Bernanke stated the obvious yesterday, that “a recession is possible”, and the papers go wild this morning. The WSJ leads its Business & Finance column with the news and puts its story above the fold on A1. The Financial Times spreads it across five columns on its first page, and the NYT puts it on C1.

The Journal warns that “his comments risk adding to economic gloom” as if people should be worried that the guy who runs the economy is actually not out of touch with reality.

Once again, we turn to Dana Milbank of The Washington Post, who gets it just right in mocking the kabuki Fed testimony.

But the Fed chairman’s willingness to invoke the R-word carries particular weight because of his consistent habit of understating the nation’s economic problems. Just six weeks ago, he was still forecasting “sluggish growth” for the first part of this year. Last July, he forecast that 2008 would be a time of “strengthening” above an already “moderate pace.”

His view of the subprime lending debacle has been equally cheerful. A year ago, he testified before Congress that the subprime mortgage problem “seems likely to be contained.” With characteristic optimism, he forecast: “We don’t see it as being a broad financial concern.”

With that history of prognostication, Bernanke’s warning yesterday of a “possible” recession meant it might be a good time for people to hide their valuables and get a shotgun. “He came as close as he possibly could, given his responsibility to be a bit of a cheerleader,” Schumer judged after the recession session.

Bush out of touch? That’s crazy talk

The NYT goes big with a page-one look at what a non-issue President Bush has been so far during the economic crisis.

For a man who came into office as the nation’s first M.B.A. president, Mr. Bush has sometimes seemed invisible during the housing and credit crunch. As the economy eclipses Iraq as the top issue on voters’ minds, even some Republican allies of the president say Mr. Bush is being eclipsed and is in danger of looking out of touch.

“He’s over there arguing about who should get into NATO, and the American people are focused on what’s in their pocketbooks,” said Kenneth M. Duberstein, who was chief of staff to President Ronald Reagan in his second term. “He has talked about the economy, but it is not viewed as being a satisfactory response. Unfortunately, the lasting image is of not knowing of $4-a-gallon gas.”

The Times quotes other Republicans saying that while Bush’s Treasury Secretary Henry Paulson has done a good job of being out front, Bush himself has not. The paper hints that Bush has tried to get traction with economic photo-ops and the like, but that the presidential race, for one, has blocked his message.
It may also not be transmitting because Americans just flat-out dislike the president and have tuned him out.

Auction-rate (in)securities

The Journal reports on the auction-rate securities crisis on C1. Wall Street convinced customers that these things were “safe and as liquid as cash” and now they’re not. These securities are long-term loans that act like short-term ones, with interest rates resetting at auction every week or month. They’re typically issued by governments or institutions and the market has been roiled because the companies who insure the debt are on shaky ground, to put it euphemistically.

Now investors can’t get their cash and in some cases, like at UBS, they find that the banks have marked down the value of their accounts.

Until recently, these securities could be bought at weekly or monthly auctions supervised by large Wall Street firms. The system had worked for years, but seized up when the big banks, concerned about other credit-market exposure, stopped committing their own money to make sure auctions ran smoothly.

Brokerage-firm clients buy auction-rate securities that are issued by mutual-fund companies, student-loan companies, nonprofit entities, schools, museums and municipalities to raise cash. In all, it is a $330 billion market.

Many in the industry say it will take months to fully fix the mess.

Idle offices

In economic news, the WSJ reports that for the first time since 2003, total office space in use declined in the first quarter. That’s recessionary news (and a negative indicator for employment) that the paper buries on B5 and doesn’t include in its A1 Business & Finance column for some reason. The office vacancy rate also increased 0.2 percentage points in the first quarter to 12.8 percent. The increase would have been greater, but developers have been more restrained at building new towers in recent years than they have in past upturns.

Factory orders dropped a worse-than-expected 1.3 percent in February after falling 2.3 percent the previous month. Consumers were hit a bit harder—consumer-goods order dropped 1.5 percent.

Best practices, Zwirn style

Here’s the through-the-looking-glass hedge-fund Story of the Day, on the WSJ’s C1:

Hedge-fund manager Daniel Zwirn is under investigation by the Securities and Exchange Commission. His investors have asked to pull $2 billion, which they aren’t likely to see this decade. And he is closing his biggest funds…

Mr. Zwirn spent much of last month explaining to clients of D.B. Zwirn & Co., why and how the six-year-old New York firm was freezing withdrawals on more than $4 billion in assets. The halt came after clients lined up at the exits late last year, frustrated by disclosures of improper accounting, continuing regulatory scrutiny and the long delay of a 2006 audit that had been expected last spring.

Now those investors will probably have to wait at least four years to get their cash back. Letting some investors out before others, the firm says, would have caused a fire sale of some assets, hurting investors across the board.

Among the most notable accounting issues at the firm, which peaked at $5.5 billion in assets, were improper transfers of capital between onshore and offshore funds, according to a March 2007 letter to investors. The firm said it also improperly billed expenses related to a Gulfstream jet used by Mr. Zwirn to investors rather than to the company, and refunded investors some $800,000 in fees after determining that it had unfairly valued a portfolio of high-yield bonds.

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Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu. Follow him on Twitter at @ryanchittum.