House Financial Services Chairman Barney Frank (D-Mass.) is clearly relishing the rift between House Republicans and the Bush administration over how to respond to the housing crisis.

In a Tuesday letter, Frank scolded Rep. Spencer BachusSpencer Thomas BachusManufacturing group leads coalition to urge Congress to reauthorize Ex-Im Bank Biz groups take victory lap on Ex-Im Bank On The Money: White House files notice of China tariff hikes | Dems cite NYT report in push for Trump tax returns | Trump hits Iran with new sanctions | Trump praises GM for selling shuttered Ohio factory | Ex-Im Bank back at full strength MORE (Ala.), the top Republican on the Financial Services panel, for sending him a letter Monday asking Frank to delay action on a giant housing package moving through Congress.

Instead, Bachus wrote that he favors enactment of just a portion of the legislation, a measure reforming oversight of troubled mortgage giants Fannie Mae and Freddie Mac.

Frank noted that adhering to Bachus
July 15, 2008

Dear Representative Bachus,

I was surprised to receive a letter from you today dated yesterday asking for an indefinite delay in enacting legislation that is not only important for the economy, and especially the housing sector of it, but also contains several very high priority items for the Bush administration.

I regret the fact that you chose simply to send me this letter and not speak to me about it. I wanted to answer the letter promptly since you have sent it and released it, but I will be trying to follow this up with a conversation because I do have some questions about what you intend. As I read the letter, you are asking that we act only on a basic GSE reform bill. If we were to act on this proposal, namely that we indefinitely postpone everything other than the GSE reform issue, we would in the first instance be denying the Bush administration the authority it wants for an improved capacity in the FHA to make loan guarantees going forward. Assistant Secretary Montgomery and others in the administration have set this as a high priority, and have criticized Congress for not moving on it more quickly. I should emphasize here that I am not talking about that part of the bill that would respond to the problem of mortgages already made that are now in a distressed situation, but rather to the part of the bill that we have called FHA modernization, which the House has already passed, which the Senate incorporated in its bill, and which I repeat the Bush administration has made a very high priority.

In addition to not giving the FHA this authority going forward, following your proposal would deny the President the authority his administration has asked for urgently to provide standby financial authority for Fannie Mae and Freddie Mac. I very much disagree with you that this problem is adequately addressedby the decision of the Federal Reserve to open the discount window to Fannie and Freddie. You say that it also appears this intervention by the Federal Reserve will be sufficient to provide adequate liquidity for these enterprises to meet any obligations for the near future. It is interesting for you to say that since a number of Members of the Republican side of the Committee have been critical of unilateral Federal Reserve action with regard to Bear Stearns. And while I thought that the Federal Reserves effort in that case was a response to necessity, and avoided further damage to the economy, I believe it would be very unwise for the elected Representatives of the country to simply leave to the Federal Reserve the indefinite duty of responding to situations such as this with no Congressional guidelines.

There are other aspects of the legislation that has passed both the House and the Senate that you are asking us to abandon or at least indefinitely delay. One of these is the provision that would provide some incentive for lenders to write down distressed mortgage loans so that those that could then be repaid could be insured by the FHA. As you know, the Congressional Budget Office has estimated that this provision would avoid hundreds of thousands of foreclosures at very little cost to the federal government. I know that you voted against it, but this provision has been through extensive legislative activity in both the House and the Senate, and I believe that your request that we simply abandon it now would be a grave mistake.

We are on track to respond quickly to what the Bush administration tells us is an urgent request for standby financial authority regarding Fannie Mae and Freddie Mac without a public hearing. But this bill will not be on the floor of the House for more than a week after the President made the request, and there are a good many discussions going on about it. I had been led to believe by the administrations representatives that you and your Republican colleagues were essentially supportive of this, so I was surprised to get your rejection of it in the letter that you sent to me. But we do have a week remaining before this goes to the floor, and while these proposals are important, they are not enormous in volume or in complexity. This means that Members will have, in my judgment, a great deal of time to think about them and I am available to discuss them with you if you decide to substitute conversation for letters sent to me and released to the press.