Senate Democrats and Republicans are edging closer to a bipartisan housing bill after a surprise breakthrough Tuesday on the top issue facing Congress.

Under the deal, Senate Banking Committee Chairman Chris Dodd (D-Conn.) and ranking Republican Richard Shelby (Ala.) are to produce a product by noon Wednesday that can patch up the country’s tattered housing industry.

“This is important, and the picture that we have here says it all,” Reid said, calling it a “breakthrough in this very difficult political year.”

“We can both go and do our separate press availabilities and beat up on the other, [but] the time has come for us to legislate.”

Reid pointedly said the mid-day deadline was “simply artbitrary,” meaning that votes could be delayed until later in the week if Dodd and Shelby need more time to work through potential problems.

Senators from both sides agreed the linchpin for Tuesday’s breakthrough was the different environment caused by last month’s collapse of Bear Stearns, the unprecedented role the Federal Reserve played by stepping into it and Monday’s resignation of Alphonso Jackson, the Bush administration’s secretary of Housing and Urban Development.

“What happened two weeks ago, when the Fed intervened with Bear Stearns, then people said, ‘Gosh, the Fed has intervened. What’s Congress done?’” Shelby said.

Democratic Whip Dick Durbin of Illinois said, “Our Republican friends went home for Easter, looked around at all the ‘For Sale’ signs, and decided they needed to reconsider their position.”

McConnell, who started the day by leading a GOP press conference criticizing the Democratic-written bill, at the joint press conference with Reid said he shared his counterpart’s optimism.