The business stories that matter, by Fortune's Colin Barr
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December 7, 2007, 7:02 am

Bush housing plan draws more fire

The administration’s subprime bailout plan continues to draw critics. The New York Times reports that two housing-advocacy groups say the plan will reach just a fraction of the troubled borrowers who are supposed to be helped by the plan. Officials say some 500,000  homeowners face the risk of foreclosure over the next year and a half, the Timesreports, but people at the Greenlining Institute and the Center for Responsible Lending see the arrangement helping as few as 145,000 borrowers.

Meanwhile, Bloomberg reports that some investors are worried that the plan will lead to higher U.S. interest rates - an outcome that, contrary to the plan’s intent, could accelerate the decline in home prices. S&P said the decision to freeze interest rates on some mortgages will cut the income on mortgage bonds, resulting in possible downgrades. Others say the decision to change terms of the bonds risks scaring investors away from U.S. debt in the future. It doesn’t seem like the dissent is likely to be short-lived, either: A fixed-income executive at RBS Greenwich Capital Markets tells Bloomberg his clients are “pounding the tables and beating the drums.”

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Colin Barr covers business and finance for Fortune.com. Previously he was an editor at TheStreet.com and author of the weekly Five Dumbest Things on Wall Street column, and an editor at Dow Jones Newswires.
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