Washington: 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 sweeteners designed to make the legislation more palatable to voters 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 did not cause the same uproar in the Senate, where both parties’ presidential candidates, Republican John McCain and Democrat Barack Obama, made rare appearances to cast votes in favor of the legislation, as did Obama’s running mate, Sen. Joe Biden of Delaware.
President George W. 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.”
Frozen credit to flow again
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 the market.
Fears that it will swell federal deficit
There were worries, though, that the tax breaks would cause some conservative-leaning Democrats who voted for the rescue Monday to abandon it because it would swell the federal deficit.
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.
As revised by the Senate, the package extends several tax breaks popular with businesses. It 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.
Hope to stave off national economic disaster
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 Americans.
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, the Democrat who heads 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.”
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.