WASHINGTON (AP) - After one spectacular failure, the $700
billion financial industry bailout found a second life Wednesday,
winning lopsided passage in the Senate and gaining ground in the
House, where Republicans opposition softened.
Senators loaded the economic rescue bill with tax breaks and
other sweeteners before passing it by a wide margin, 74-25, a month
before the presidential and congressional elections.
In the House, leaders were working feverishly to convert enough
opponents of the bill to push it through by Friday, just days after
lawmakers there stunningly rejected an earlier version and sent
markets plunging around the globe.
The measure didn't cause the same uproar in the Senate, where
both parties' presidential candidates, Republican John McCain and
Democrat Barack Obama, made rare appearances to cast "aye" votes,
as did Obama's running mate, Sen. Joe Biden of Delaware.
In the final vote, 40 Democrats, 33 Republicans and independent
Sen. Joe Lieberman of Connecticut voted "yes." Nine Democrats, 15
Republicans and independent Sen. Bernie Sanders of Vermont voted
President Bush issued a statement praising the Senate's move.
With the revisions, Bush said, "I believe members of both parties
in the House can support this legislation. The American people
expect and our economy demands that the House pass this good bill
this week and send it to my desk."
The rescue package lets the government spend billions of dollars
to buy bad mortgage-related securities and other devalued assets
held by troubled financial institutions. If successful, advocates
say, that would allow frozen credit to begin flowing again and
prevent a deep recession.
Even as the Senate voted, House leaders were hunting for the 12
votes they would need to turn around Monday's 228-205 defeat. They
were especially targeting the 133 Republicans who voted "no."
Their opposition appeared to be easing after the Senate added
$110 billion in tax breaks for businesses and the middle class,
plus a provision to raise, from $100,000 to $250,000, the cap on
federal deposit insurance.
They were also cheering a decision Tuesday by the Securities and
Exchange Commission to ease rules that force companies to devalue
assets on their balance sheets to reflect the price they can get on
There were worries, though, that the tax breaks would cause some
conservative-leaning "Blue Dog" Democrats who voted for the
rescue Monday to abandon it. The bill doesn't designate a way to
pay for many of the tax cuts, and Blue Dogs typically oppose any
measure that swells the deficit.
"I'm concerned about that," said Rep. Steny Hoyer, D-Md., the
Raising the deposit insurance limit - along with the SEC's
accounting change - helped House Republicans claim credit for some
substantive changes. And with constituent feedback changing
dramatically since Monday's shocking House defeat and the
corresponding market plunge, lawmakers' comfort level with the
package increased markedly.
Rep. John Shadegg, R-Ariz., who voted "no" on Monday, said he
was leaning toward switching, and Rep. Steve LaTourette,R-Ohio,
said he was "getting there." Several others were weighing a flip,
said Republican officials who spoke on condition of anonymity
because the lawmakers had not yet announced how they would vote.
Leaders in both parties, as well as private economic chiefs
everywhere, said Congress must quickly approve some version of the
bailout measure to start loans flowing and stave off a potential
national economic disaster.
"This is what we need to do right now to prevent the
possibility of a crisis turning into a catastrophe," Obama said on
the Senate floor. In Missouri, before flying to Washington to vote,
McCain said, "If we fail to act, the gears of our economy will
grind to a halt."
Critics on the right and left assailed the rescue plan, which
has been panned by their constituents as a giveaway for Wall
Street, and has little obvious direct benefit for ordinary
Sen. Jim DeMint, R-S.C., a leading conservative, said the step
was "leading us into the pit of socialism."
Sanders, a self-described socialist, said the rescue was
"The masters of the universe, those brilliant Wall Street
insiders who have made more money than the average American can
even dream of, have brought our financial system to the brink of
collapse," Sanders said, and are demanding that the middle class
"pick up the pieces that they broke."
Still, proponents argued that the financial sector's woes were
already being felt by ordinary people in the form of unaffordable
credit and underperforming retirement savings and without the
bailout would soon translate into even more economic pain for
working Americans, including more job losses.
"There will be no balloons or bunting or parades," when the
rescue becomes law, said Sen. Chris Dodd, D-Conn., the Banking
Committee chairman. But lawmakers will have "the knowledge that at
one of our nation's moments of maximum economic peril, we acted -
not for the benefit of a particular few, but for all Americans."
Sen. Judd Gregg, R-N.H., said the intense, at times contentious,
11-day round of bipartisan talks to craft the bailout - which
followed dire warnings of impending economic meltdown from Bush's
economic chiefs to congressional leaders - was an "extraordinary
"This is the way government's supposed to work, folks, and it
did," Gregg said.
The Senate specializes in high-stakes legislating by enticement,
and the long list of sweeteners it added was designed to attract
votes from various constituencies.
In addition to extending several tax breaks popular with
businesses, the bill would keep the alternative minimum tax from
hitting 20 million middle-income Americans and provide $8 billion
in tax relief for those hit by natural disasters in the Midwest,
Texas and Louisiana.
Tax cuts new and old are favorites for most House Republicans.
Help for rural schools was aimed mainly at lawmakers in the West,
while disaster aid was a top priority for lawmakers from across the
Midwest and South.
Another addition, to extend the deductibility of state and local
taxes for people in states without income taxes, helps Florida and
Texas, among others.
Increasing the deposit insurance cap was a bid to reassure
individuals and small businesses that their money would be safe if
their banks collapsed. It was particularly geared toward small
banks that fear customers will pull their money and park it in
larger institutions seen as less likely to fold.
The FDIC would be allowed to borrow unlimited money from the
Treasury Department through the end of next year as a way to cover
the increased insurance limit. If used, it would be the first time
the agency has tapped Treasury for a loan since the early 1990s.
The rescue bill hitched a ride on a popular measure that gives
people with mental illness better health insurance coverage. Before
passing it, senators voted by an identical 74-25 margin to attach
the massive bailout and the tax breaks.
(Copyright 2008 by The Associated Press. All Rights Reserved.)