Posted on Fri, Oct. 03, 2008
last updated: November 24, 2010 01:49:34 PM
WASHINGTON — A $700 billion bailout package designed to ease the nation's worsening economic crisis cleared Congress and was signed into law Friday after the House of Representatives approved a revised version of the bill that it had rejected days earlier.
Some 32 Democrats and 26 Republicans switched positions to vote for the Senate-passed bill, pushing it through the House by 263-171. President Bush quickly signed the measure, praising Congress for rallying behind the rescue package.
``By coming together on this legislation, we have acted boldly to help prevent the crisis on Wall Street from becoming a crisis in communities across our country,'' Bush said during a five-minute statement in the White House Rose Garden. Later, he walked next door to the Treasury Department, where he thanked Secretary Henry Paulson and the building's employees for their hard work during the financial crisis.
Stock prices slid on Wall Street despite the bill's passage as new data from around the world made it clear that the economic outlook is darkening rapidly. U.S. employers shed 159,000 jobs in September, the highest monthly number in five years, for example. The Dow Jones Industrial Average dropped another 157.47 points to close at 10,325.38.
Friday's vote reversed the House's rejection of the bill Monday on a 228-205 vote, and came two days after the Senate passed a revised version of the original plan by 74-25, including $110 billion in unrelated tax breaks and other incentives aimed at converting House members into backing the bill.
Over the past two days, Bush, top administration officials and corporate executives joined forces with thousands of struggling wage earners to besiege House members with calls on behalf of the bill. Presidential candidates Sens. John McCain, R-Ariz., and Barack Obama, D-Ill., both of whom voted for the measure in the Senate, also made calls to members in their respective parties urging support for the measure.
Congressional leaders in both parties said the legislation would help unfreeze distressed credit markets, and they called for further changes to correct abuses in the financial system that helped cause the crisis.
``We've just performed emergency surgery, but unless the patient starts eating right and exercising, the problem's coming right back,'' said House Majority Leader Steny Hoyer, D-Md.
``The passage of this flawed but necessary bill is not cause for celebration,'' said House Minority Leader John Boehner, R-Ohio.
House members who changed their votes to yes said they were torn by the choice of accepting an imperfect solution or facing a deepening financial crisis if they failed to act.
Rep. Jim McGovern, D-Mass., summed up the feelings of many of his colleagues when he described the legislation as ``far from perfect'' but acknowledged:�``The way I see it, we don't have much choice.''
Coming on the final day of the 110th Congress and just weeks before the Nov. 4 elections, the multifaceted rescue package is intended to ease distress across the economic spectrum.
Public opinion initially ran strongly against the measure — widely perceived as a bailout for Wall Street — but sentiment shifted after the first House vote, when the stock market plunged and hammered millions of stock-backed 401(k) retirement plans. �
Even as Congress approved the measure, there were strong signs that the public remains pessimistic about the nation's economic future. Nearly two-thirds of the public doubts the government's ability to restore consumer and investor confidence, according to a new Ipsos/McClatchy poll, and 76 percent think that the economy will continue to get worse.
Obama reached out to Democrats through conference calls and individually, persuading more than a half-dozen members to change their votes. Similarly, McCain worked the Republican side of the aisle, at one point calling Minority Whip Roy Blunt of Missouri three times in a single day for guidance on whom to call.
Rep. Michael Conaway, R-Texas, said he had several conservations with Bush, a former resident of Conaway's hometown of Midland. Conaway, who originally voted against the bill, said he began changing his mind after town hall meetings in his district.
The bill essentially would create a $700 billion federal program to buy bad assets from banks and other financial firms at a steep discount. The hope is that the government would recoup much or all of that money by selling the assets later, once stability returns to the financial world.
The measure includes strong terms to ensure legislative oversight of the Treasury-run bailout, and it gives the government an ownership stake in the firms that it aids. That will give taxpayers a share of any profits once the companies return to profitability.
It also limits the pay of executives in firms that benefit from the bailout.
The Senate version made one significant change to the earlier financial-rescue package: It more than doubled the insurance that the Federal Deposit Insurance Corp. provides on customer deposits to $250,000 from $100,000. The higher amount will apply for one year.
The FDIC also was granted temporary powers to borrow without limit from the Treasury to keep the banking system solvent. Economists think that the FDIC measures will boost confidence in small community banks.
The extra tax breaks the Senate added range from a one-year fix to prevent the alternative-minimum tax from hitting more taxpayers to extending the research credit for business to allowing rural utilities to issue tax-exempt bonds for use of renewable energy.
Also included were terms extending tax breaks for motor-sports racing tracks, makers of wooden arrows for children and the rum excise tax for Puerto Rico and the Virgin Islands.
The breaks will cost the Treasury an estimated $110 billion over 10 years, according to Congress' Joint Committee on Taxation.
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