Senate passes $700B rescue; House votes lured
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 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, 39 Democrats, 34 Republicans and independent Sen. Joe Lieberman of Connecticut voted "yes." Nine Democrats, 15 Republicans and independent Sen. Bernie Sanders of Vermont voted "no."
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 the market.
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 majority leader.
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 Americans.
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 fundamentally unfair.
"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 experience."
"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.
(This version corrects vote breakdown of yes votes to 39 Democrats, 34 Republicans and one Independent.)
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JULIE HIRSCHFELD DAVIS and CHARLES BABINGTON | October 1, 2008 11:52 PM EST |
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