WASHINGTON (AP) - Congressional leaders scrambled Tuesday to
come up with changes to help them sell the failed $700 billion
financial bailout to rank-and-file members. One idea gathering
support: raise the federal deposit insurance limit to reassure
nervous savers and help small businesses.
Presidential rivals John McCain and Barack Obama announced
separately that they support a plan that some House Republicans had
pushed earlier: raising the limit from $100,000 to $250,000. Within
hours, the Federal Deposit Insurance Corp. chairman asked Congress
for temporary authority to raise the limit by an unspecified
That could help ease a crisis of confidence in the banking
system, said chairman Sheila Bair.
President Bush spoke with both nominees during the day and made
another statement in the White House. "Congress must act," he
demanded in front of the cameras.
As the pace of legislative jockeying quickened, the atmosphere
on Wall Street seemed to be improving. The Dow Jones industrials
rose nearly 500 points on the day after it had plunged 788. But
more attention was on credit markets as a key rate that banks
charge each other shot higher, further evidence of a tightening of
"I recognize this is a difficult vote for members of Congress," Bush said. "But the reality is we are in an urgent situation and the consequences will grow worse each day if we do not act."
Republican House aides said the FDIC proposal might attract some
conservatives who want to help small business owners and avert runs
on banks by customers fearful of losing their savings.
House Republican leader John Boehner welcomed McCain's and
Obama's embrace of a higher insurance cap, saying congressional
Democrats had rejected it Saturday.
Another possible change to the bill would modify "mark to
market" accounting rules. Such rules require banks and other
financial institutions to adjust the value of their assets to
reflect current market prices, even if they plan to hold the assets
Some House Republicans say current rules forced banks to report
huge paper losses on mortgage-backed securities, which might have
Liberal Democrats who opposed the bill are suggesting other
changes. Their ideas include extending unemployment insurance and
banning some forms of "short selling," in which investors bet
that a stock's value will drop.
The White House signaled a willingness to accept some changes to
the bill. Spokesman Tony Fratto said there are plenty of good ideas
to help the financial markets and "we're going to look at all of
Senate Banking Committee Chairman Christopher Dodd, D-Conn.,
told reporters, "I'm told a number of people who voted 'no'
yesterday are having serious second thoughts about it." He added,
however, "There's no game plan that's been decided."
Senate Republican Leader Mitch McConnell of Kentucky said it was
time for all lawmakers to "act like grown-ups, if you will, and
get this done for all of the people." He predicted a bill would
pass this week, although the House, not the Senate, is the focus of
The House on Monday balked at approving the measure, pilloried
in many quarters as a handout to big business. The 228-205 vote
sparked the largest sell-off on Wall Street since shortly after the
Sept. 11, 2001, terror attacks.
Bush noted that the maximum $700 billion in the proposed bailout
was huge, but was dwarfed by the $1 trillion in lost wealth that
resulted from Monday's stock market plunge.
"Because the government would be purchasing troubled assets and
selling them once the market recovers," he said, "it is likely
that many of the assets would go up in value over time. Ultimately,
we expect that much - if not all - of the tax dollars we invest
will be paid back."
"The dramatic drop in the stock market that we saw yesterday
will have a direct impact on retirement accounts, pension funds and
personal savings of millions of our citizens," Bush said. "And if
our nation continues on this course, the economic damage will be
painful and lasting."
Some lawmakers reported a shift in constituent calls pouring
into their offices. Calls and e-mails were overwhelmingly opposed
to the rescue plan before Monday's vote, many offices said. But
Monday's stock market dive prompted calls Tuesday from Americans
furious about Congress' inaction, some said.
Rep. John Campbell, R-Calif., who voted for the legislation,
said, "The calls now are saying, 'I lost 10 percent of my
retirement yesterday,"' Campbell said. "The calls I'm getting are
thanking me now."
But Joseph Brettell, a spokesman for Rep. Marilyn Musgrave,
R-Colo., said calls to her office remain overwhelmingly supportive
of her "no" vote.
House Republicans, meanwhile, stopped blaming Monday's outcome
on criticisms of the GOP that Speaker Nancy Pelosi, D-Calif.,
included in her address to the chamber shortly before the vote. On
Monday, House GOP leaders said her partisan remarks caused a dozen
Republicans to vote against the bill instead of for it.
Democrats rebuked Republicans for basing a crucial vote on pique
instead of conviction, and Republicans dropped the claim Tuesday.
Rep. John Shadegg, R-Ariz., told MSNBC he did not base his "no"
vote on Pelosi's remarks, adding, "I don't know a single
Republican who did."
On Tuesday, Pelosi and Reid wrote to Bush, saying, "We welcome
your statement this morning and are committed to working with you
and our Republican colleagues to enact a bipartisan bill without
The rescue package was also Topic A on the presidential campaign
"The first thing I would do is say, 'Let's not call it a bailout. Let's call it a rescue,"' McCain told CNN. He said, "Americans are frightened right now" and political leaders must give them an immediate solution and a longer-term approach to the problem.
Obama issued a statement saying that significantly increasing
federal deposit insurance would help small businesses and make the
U.S. banking system more secure as well as restore public
Sen. Hillary Rodham Clinton, who narrowly lost the Democratic
nomination to Obama, said the Senate may have to lead the way in
passing a rescue package. But other senators seemed inclined to let
the House work out its problems first.
The bill's defeat came despite furious personal lobbying by Bush
and support from House leaders of both parties. But the legislation
was highly unpopular with the public; ideological groups on the
left and the right organized against it, and Bush no longer wielded
the influence to leverage tough votes. Even pressure in favor of
the bill from some of the biggest special interests in Washington,
including the U.S. Chamber of Commerce and the National Association
of Realtors, could not sway enough votes.
The legislation the administration promoted would have allowed
the government to buy bad mortgages and other deficient assets held
by troubled financial institutions. If successful, advocates of the
plan believed, it would have helped lift a major weight off the
already sputtering national economy.
Associated Press writers Tom Raum, Ben Feller, Andrew Taylor and
Julie Hirschfeld Davis contributed to this report.
(Copyright 2008 by The Associated Press. All Rights Reserved.)