The rift between Democrats in Congress and the White House over how best to respond to the housing crisis opened up this week, following a short-lived period of bipartisan co-operation that had led to agreement on a fiscal stimulus plan reports the Financial Times.

Lawmakers and officials traded attacks over the effectiveness of the government’s response so far and the extent to which new legislation was needed to stem the wave of foreclosures. Democrats appear increasingly willing to advocate direct intervention in the housing market using public funds. But the Bush administration claims this would amount to a “bail-out”.

On Thursday, Harry Reid, Senate majority leader, tried to advance a bill that would that would allow bankruptcy judges to modify the terms of certain loans, increase funds for pre-foreclosure counselling and spend $4bn for refurbishing foreclosed properties. But the proposal was defeated in a procedural vote by Senate Republicans amid opposition from the White House and Treasury.

Read it here: Housing crisis ends US political truce