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MELISSA BLOCK, host:

This is All Things Considered from NPR News. I'm Melissa Block.

ROBERT SIEGEL, host:

And I'm Robert Siegel. Today the Federal Deposit Insurance Corporation laid out details of a $25 billion plan aimed at preventing foreclosures. The problem is the $25 billion part. As NPR's Yuki Noguchi reports, the FDIC wants that money to come from the Treasury Department, and Treasury is not on board.

YUKI NOGUCHI: Sheila Bair heads the FDIC, and she has been outspoken about the need to clean up the mortgage mess. But doing so cannot be done with a toothbrush, you need a full-suction hoover. That is essentially Bair's point. The Treasury Department, Fannie Mae, Freddie Mac and some banks have programs to help homeowners negotiate lower mortgage payments with their lenders. But on NPR's Morning Edition today, Bair said those loan modification programs alone won't do the job.

Ms. SHEILA BAIR (Chairperson, Federal Deposit Insurance Corporation): Those are not impacting in a wide-scale way, loans that are in these private securitization trusts, and that's really where the troubled mortgages are.

NOGUCHI: Securitization trusts are where investors hold a complicated mix of high-risk, bad-credit home loans that are hard to untangle. To go after more of those home loans, Bair is proposing to put government funds on the line. The FDIC's proposal would set mortgage payments at a lower percentage of homeowner income. And if those home loans default a second time, the government would share the losses with the lender.

Ms. BAIR: We think we can get about 2.2 million loans modified using this protocol. It would be at a cost of about $25 billion. We propose the program last through 2009. We think it's a reasonable amount of money. The government is getting something in return for this.

NOGUCHI: Namely, she says, a stabler economy and more stability from people staying put. But there's a big problem. The Bush administration and the Treasury Department haven't backed Bair's plan, and more importantly, have suggested they won't fund it. Bair wants to tap the government's $700 billion rescue package. Spokesman from Treasury and the White House did not respond to calls requesting comment. But earlier this week, Treasury Secretary Henry Paulson, who controls the purse strings, seemed to draw them shut. He says the law restricts how the money from the Troubled Asset Relief Program or TARP can be used and that spending on an FDIC proposal might not be permitted.

Mr. HENRY PAULSON (Secretary, US Treasury): We must be careful to distinguish this type of assistance, which essentially involves direct spending, from the type of investments that are intended to promote financial stability, protect the taxpayer and be recovered under the TARP legislation.

NOGUCHI: But some lawmakers dispute Paulson's assertion. Republican Senator Mel Martinez sits on the Senate Banking Committee and is former Housing and Urban Development secretary.

Senator MEL MARTINEZ (Republican, Florida; Chairman, Senate Banking Committee): It wouldn't take but a very small percentage of the TARP funds to fund this kind of a program, and at the end of the day it's going to be more effective, I believe, in saving banks from continuing to go into further and deeper trouble.

NOGUCHI: In any event, the administration's days in the office are numbered. Ellen Seidman, is a fellow at the New America Foundation. She says Congress isn't likely to force Treasury to adopt the FDIC proposal before President-elect Barack Obama takes office. But that doesn't mean this proposal is dead.

Ms. ELLEN SEIDMAN (Fellow, New America Foundation): This is also out here so that in a different Congress and in a different administration, there's something ready to roll.

NOGUCHI: There are still two months between now and then. Given how much has changed in the last two months it seems likely than any plan could change. Yuki Noguchi, NPR News Washington.

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