WASHINGTON (AP) – After one spectacular failure, the $700 billion financial industry bailout found a second life Wednesday, speeding toward passage in the Senate and gaining ground in the House where conservative opposition seemed to soften.
Senators loaded the economic rescue bill with tax breaks and other sweeteners for the right and left, hoping to secure approval in the House by Friday, just days after lawmakers there stunningly rejected an earlier version and sent markets plunging around the globe.
The measure has not caused the same uproar in the Senate, where both parties’ presidential candidates, Republican John McCain and Democrat Barack Obama, were making rare appearances to vote their support. That would send the package back to the House, where passage would require a turnaround of 12 votes from Monday’s 228-205 defeat.
Leaders in both parties, as well as private economic chiefs everywhere, said Congress must quickly approve some version of the measure to start loans flowing and stave off a potential national economic catastrophe.
“Inaction is not an option,” Senate Majority Leader Harry Reid of Nevada said a few hours before the Senate was to vote. “This is not a bailout for Wall Street. It’s a bailout for our country.”
President Bush said, “It’s very important for members to take this bill very seriously.”
Even as the Senate neared its vote, congressional leaders targeted the 133 House Republicans who voted against the bill Monday.
House GOP opposition appeared to be easing after the Senate added $100 billion in tax breaks for businesses and the middle class, plus a provision Republicans advocated 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.
The heart of the bill, and the opposition to it, remained the same. It would enable the government to 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 keep the economy from a deep recession.
Proponents say the government eventually could sell the devalued assets at a better price, reducing
the program’s final cost.
As for House passage, there were worries 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.
“I’m concerned about that,” said Rep. Steny H. Hoyer, D-Md., the majority leader.
As revised by the Senate, the package would extend 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.
The bill would not point to offsetting spending cuts to pay for the AMT and disaster provisions, but it would have revenue offsets for part of the energy and extension measures. The failure to offset many of the tax cuts angered the House’s band of “Blue Dog” Democrats.
The increase in the deposit insurance cap was a bid to reassure individuals and businesses with accounts in banks and similar institutions.
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.
Tax cuts new and old are favorites for most House Republicans, the main target of intense lobbying to gain support for the measure. 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.
And there were plenty of obscure tax breaks to go around, like one for certain wooden arrows used by children, and another benefiting litigants in the 1989 Exxon Valdez oil spill.
Senate leaders were expected to try adding another goodie before the final vote: extending a tax break for homeowners who do not itemize their tax returns.
Raising the federal deposit insurance limit – along with the SEC’s decision to ease accounting rules on valuing assets – helped House Republicans claim credit for some substantive changes.
And with constituent feedback changing dramatically since Monday’s spectacular House defeat and the corresponding market plunge, lawmakers’ comfort level with the package increased markedly.
Rep. John Shadegg of Arizona, a leading conservative who voted no on Monday, told CNN Wednesday he’s “strongly leaning” toward voting for the plan.
Asked if was ready to switch from no to yes, Rep. Steve LaTourette, R-Ohio, said: “Not yet, but it’s getting there.”
Sen. John Thune, R-S.D., said Republicans “can argue now that there have been some steps taken that they recommended.”
Monday’s stock market drop and other economic developments that followed the House vote, he said, have “changed the complexion, too, of what people’s constituents are now saying. … There’s more of a recognition that we have to do something.”
Besides Obama and McCain, Democratic vice presidential nominee Joe Biden was voting on the Senate bill.
Other provisions added by the Senate include a measure to require large companies’ health plans to give equal treatment to mental health or addiction if they cover such illnesses. The House and Senate have passed similar “mental health parity” measures, but none has gone to Bush for his signature.
And I suppose that everyone who’s name ends in “K” gets a free milkshake.