Source: Jeffrey Birnbaum, Washington Post ( Free Registration )

A key provision of the housing bill now awaiting action in the Senate—and widely touted as offering a lifeline to distressed homeowners—was initially suggested to Congress by lobbyists for major banks facing their own huge losses from the subprime mortgage crisis, according to congressional staff members and bank officials.

Credit Suisse, a large investment bank heavily invested in mortgage-backed securities, proposed allowing hundreds of thousands of homeowners to refinance their mortgages with lower-cost government-insured loans, relieving financial institutions of the troubled debt.

After the bank proposed this to Congress in January, it became known as the “Credit Suisse plan” among congressional staffers and lobbyists. It later formed the basis of housing provisions in both the House and Senate.

Bank of America, which is acquiring Countrywide Financial, the country’s largest mortgage lender, followed with a similar and more detailed proposal, principal negotiators on the legislation said. 

Read Full Article: Vital part of housing bill Is brainchild of banks