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From The Associated Press

Mortgage giant rescue could cost $25 billion

WASHINGTON, D.C.—A federal rescue of troubled mortgage giants Fannie Mae and Freddie Mac could cost taxpayers as much as $25 billion, Congress’ top budget analyst said Tuesday.

But Peter R. Orszag, director of the Congressional Budget Office, predicted in a letter to lawmakers that there’s a better than even chance the government will not have to step in to prop up the companies by lending them money or buying stock.

Congress is expected to vote this week on a housing measure that would give the Treasury Department authority to throw Fannie and Freddie a temporary lifeline.

Treasury Secretary Henry M. Paulson, who has been pressing for the power, says it’s intended as a backup plan to help calm investors and stabilize financial markets.

Orszag said it’s most likely that the companies will remain afloat and the government won’t have to put up any money, but there’s a very small possibility that Treasury will have to step in to help cover losses at Fannie and Freddie topping $100 billion. The $25 billion estimate reflects his office’s best guess of how big a federal infusion would be needed.

Paulson said in a New York speech Tuesday that Congress needs to quickly approve a support package for Fannie Mae and Freddie Mac, which guarantee or own almost half of the home mortgages in the country, to make sure they maintain their critically important role in housing finance. He said their continued operations were “central to the speed with which we emerge from this housing correction.”

Wachovia loses $8.9 billion cuts 6,350 workers

SCHARLOTTE, N.C.—Wachovia Corp. reported a surprisingly large second-quarter loss Tuesday, deflating Wall Street’s hopes that the nation’s big banks are weathering the credit crisis well. The bank said it lost $8.86 billion, is slashing its dividend and eliminating 10,750 positions after losses tied to mortgages soared.

Even excluding one-time items, the results substantially missed analysts’ estimates.

But by the afternoon its stock joined a modest Wall Street rally and rose as much as 13 percent — after its shares sank to mid-1991 levels in premarket trading, and after Wachovia’s new CEO Bob Steel said he plans to cut $2 billion of expenses by the end of next year and sell parts of the fourth-biggest U.S. bank.

Its shares rose $1.19, or 9 percent, to $14.37 in afternoon trading.

India’s government survives confidence vote

NEW DELHI—India’s government survived a bruising political battle to win a confidence vote Tuesday, reviving a landmark nuclear energy deal with the United States that is at the center of an emerging partnership between the world’s two largest democracies.

Prime Minister Manmohan Singh and his Congress party fought hard to secure victory, and appeared to cut back room deals when all else failed. An airport was named after one lawmaker’s father, another was promised a high-level job and — rival politicians allege — many others received millions of dollars in bribes.

The dealmaking dismayed many in India, and the political hostility it fostered was on display during Tuesday’s parliamentary debate, which repeatedly degenerated into an angry back-and-forth as opposition lawmakers heckled government supporters.

The ruckus forced a temporary adjournment of Parliament — but the stunt failed to stave off the opposition’s defeat. The government won with 275 votes for it and 256 against, a wider margin than many observers had predicted. Ten lawmakers abstained.

Obama: Iraq now needs political solution

AMMAN, Jordan—Democratic presidential contender Barack Obama declined to rate the Bush administration’s troop surge in Iraq a success on Tuesday despite a reduction in violence, and expressed understanding of Gen. David Petraeus’ opposition to a timetable for the withdrawal of U.S. combat troops.

“Not surprisingly he wants to retain as much flexibility as possible,” Obama said of the general, with whom he met in recent days while touring Iraq and Afghanistan. “I think he wants maximum flexibility to be able to — to do what he believes needs to be done inside of Iraq. But keep in mind, for example, one of General Petraeus’ responsibilities is not to think about how could we be using some of that $10 billion a month to shore up a U.S. economy that is really hurting right now,” Obama said.

“If I’m president of the United States, that is part of my responsibility.”

Obama made his remarks at a news conference shortly after arriving in Jordan. It was the first stop of an election-season trip to the Mideast and Europe paid for by campaign funds.

Jeffs, other sect members indicted in Texas

ELDORADO, Texas—A grand jury has indicted polygamist sect leader Warren Jeffs and five of his followers. Jeffs, who was indicted Tuesday, is accused of sexual assault. The charges and identities of the others were being withheld until authorities can arrest them, said Schleicher County clerk Peggy Williams. One indictment is misdemeanor; the others are felonies.

The criminal charges came during the panel’s second meeting on the case and followed the ill-fated child custody case in which more than 400 children were placed in foster care. The Texas Supreme Court ruled child welfare authorities had overstepped in taking all the children for their parents even though many were infants and toddlers.