Bailout passes Senate, House foes soften
(AP) - After one spectacular failure, the $700billion financial industry bailout found a second life Wednesday,winning lopsided passage in the Senate and gaining ground in theHouse, where Republicans opposition softened.
Senators loaded the economic rescue bill with tax breaks andother sweeteners before passing it by a wide margin, 74-25, a monthbefore the presidential and congressional elections.
In the House, leaders were working feverishly to convert enoughopponents of the bill to push it through by Friday, just days afterlawmakers there stunningly rejected an earlier version and sentmarkets plunging around the globe.
The measure didn't cause the same uproar in the Senate, whereboth parties' presidential candidates, Republican John McCain andDemocrat Barack Obama, made rare appearances to cast "aye" votes.
In the final vote, 40 Democrats, 33 Republicans and independentSen. Joe Lieberman of Connecticut voted "yes." Nine Democrats, 15Republicans and independent Sen. Bernie Sanders of Vermont voted"no."
The rescue package lets the government spend billions of dollarsto buy bad mortgage-related securities and other devalued assetsheld by troubled financial institutions. If successful, advocatessay, that would allow frozen credit to begin flowing again andprevent a deep recession.
Even as the Senate voted, House leaders were hunting for the 12votes they would need to turn around Monday's 228-205 defeat. Theywere 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 onfederal deposit insurance.
They were also cheering a decision Tuesday by the Securities andExchange Commission to ease rules that force companies to devalueassets on their balance sheets to reflect the price they can get onthe market.
There were worries, though, that the tax breaks would cause someconservative-leaning Democrats who voted for the rescue Monday toabandon it because it would swell the federal deficit.
"I'm concerned about that," said Rep. Steny Hoyer, D-Md., themajority leader.
As revised by the Senate, the package extends several tax breakspopular with businesses. It would keep the alternative minimum taxfrom hitting 20 million middle-income Americans and provide $8billion in tax relief for those hit by natural disasters in theMidwest, Texas and Louisiana.
It doesn't designate a way to pay for many of the tax cuts,though, angering the House's band of conservative "Blue Dog"Democrats.
Leaders in both parties, as well as private economic chiefseverywhere, said Congress must quickly approve some version of thebailout measure to start loans flowing and stave off a potentialnational economic disaster.
"This is what we need to do right now to prevent thepossibility of a crisis turning into a catastrophe," Obama said onthe Senate floor. In Missouri, before flying to Washington to vote,McCain said, "If we fail to act, the gears of our economy willgrind to a halt."
Critics on the right and left assailed the rescue plan, whichhas been panned by their constituents as a giveaway for WallStreet, and has little obvious direct benefit for ordinaryAmericans.
Sen. Jim DeMint, R-S.C., a leading conservative, said the stepwas "leading us into the pit of socialism."
Sen. Bernie Sanders of Vermont, an independent who's aself-described socialist, said the rescue was fundamentally unfair.
"The masters of the universe, those brilliant Wall Streetinsiders who have made more money than the average American caneven dream of, have brought our financial system to the brink ofcollapse," 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 werealready being felt by ordinary people in the form of unaffordablecredit and underperforming retirement savings and without thebailout would soon translate into even more economic pain forworking Americans, including more job losses.
"There will be no balloons or bunting or parades," when therescue becomes law, said Sen. Chris Dodd, D-Conn., the BankingCommittee chairman. But lawmakers will have "the knowledge that atone of our nation's moments of maximum economic peril, we acted -not for the benefit of a particular few, but for all Americans."
The Senate specializes in high-stakes legislating by enticement,and the long list of sweeteners it added was designed to attractvotes from various constituencies.
Tax cuts new and old are favorites for most House Republicans,the main target of intense lobbying to gain support for themeasure. Help for rural schools was aimed mainly at lawmakers inthe West, while disaster aid was a top priority for lawmakers fromacross the Midwest and South.
Another addition, to extend the deductibility of state and localtaxes for people in states without income taxes, helps Florida andTexas, among others.
Increasing the deposit insurance cap was a bid to reassureindividuals and small businesses that their money would be safe inthe event their banks collapsed. It was particularly geared towardsmall banks that fear customers will pull their money and park itin larger institutions seen as less likely to fold.
The FDIC would be allowed to borrow unlimited money from theTreasury Department through the end of next year as a way to coverthe increased insurance limit. If used, it would be the first timethe agency has tapped Treasury for a loan since the early 1990s.
Raising the limit - along with the SEC's decision to easeaccounting rules on valuing assets - helped House Republicans claimcredit for some substantive changes.
And with constituent feedback changing dramatically sinceMonday's shocking House defeat and the corresponding market plunge,lawmakers' comfort level with the package increased markedly.