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Financial-bailout bill sails through Senate
Tax breaks help odds it will pass in House
AP Photo
Heading to a news conference after the vote are (from left), Sens. Max Baucus, Judd Gregg, Harry Reid, Christopher Dodd and Mitch McConnell.
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Published: October 2, 2008
WASHINGTON
After one spectacular failure, the $700 billion financial-industry bailout found a second life last night, winning lopsided passage in the Senate and gaining ground in the House, where Republican opposition softened.
Senators loaded the economic rescue bill with tax breaks and other sweeteners before passing it by a 74-25 margin a month before the presidential and congressional elections.
Leaders in the House were working to convert enough opponents of the bill to push it through by Friday, just days after legislators there stunningly rejected an earlier version and sent markets plunging around the world.
The bill did not cause the same uproar in the Senate, where both parties' presidential candidates, Republican John McCain and Democrat Barack Obama, made rare appearances vote for it.
In the final vote, 40 Democrats, 33 Republicans and independent Sen. Joe Lieberman of Connecticut voted in favor. Nine Democrats, 15 Republicans and independent Sen. Bernie Sanders of Vermont voted against.
North Carolina's two Republican senators were split. Sen. Elizabeth Dole voted against the bailout, and Sen. Richard Burr voted for it.
Before the vote, Dole called the proposal "a government takeover of our economy with no protection for taxpayers."
Burr said: "As a fiscal conservative, I consider this vote a sad day in our nation's history. But as a public servant ... I do not believe I can sit by and let this country fall into the worst economic state that it has ever faced."
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 focusing on the 133 Republicans who voted against it.
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.
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 increase the federal deficit.
"I'm concerned about that," said Rep. Steny Hoyer, D-Md., the majority leader.
As revised by the Senate, the package extends several tax breaks popular with businesses. It would keep the alternative-minimum tax from ensnaring 20 million middle-income Americans and provide $8 billion in tax relief for those affected by natural disasters in the Midwest, Texas and Louisiana.
It does not designate a way to pay for many of the tax cuts, though, angering the House's conservative "Blue Dog" Democrats.
Leaders in both parties, as well as private economic chiefs everywhere, said that Congress must quickly approve some version of the bailout bill 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 criticized 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 that the bill was "leading us into the pit of socialism."
Sen. Bernie Sanders of Vermont, an independent who is a self-described socialist, said that 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," he said, and are demanding that the middle class "pick up the pieces that they broke."
Still, proponents said that the financial sector's woes are 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 chairman of the Senate Banking Committee. But legislators 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 Senate specializes in high-stakes legislating by enticement, and the long list of sweeteners it added was intended 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 bill. Help for rural schools was aimed mainly at legislators in the West, and disaster aid was a priority for legislators 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.
Highlights
Here are some key provisions of the $700 billion financial-industry bailout and the sweeteners added by the Senate to attract votes from constituencies.
The underlying legislation would:
• Authorize $700 billion for the government to purchase troubled assets and buy equity in distressed financial companies.
• Require the Treasury Department to make rules to prevent excessive compensation for executives whose companies benefit from the rescue, and cap deductibility of executives' pay packages at $500,000 for companies that get $300 million or more from the program.
• Establish an oversight board for the program, a special investigator general to monitor it and regular government audits.
• Require that the president establish a plan to recoup the cost from the financial industry if, after five years, there are any losses.
• Phase in the money for buying troubled assets, with $250 billion available immediately, $100 billion to be released if the Treasury secretary certifies that it is needed, and the last $350 billion available with another certification but subject to a congressional vote.
Among the sweeteners are those that would:
• Provide business tax breaks, including for production of, investment in and use of renewable fuels.
• Increase personal credits against the alternative-minimum tax, shielding more than 20 million taxpayers from the tax.
• Grant tax relief to victims of natural disasters in the Midwest and elsewhere.
• Extend through 2011, a program that funds rural schools and local governments that have low property-tax bases because they lie within or are adjacent to federal lands.
• Extend until end of 2009 the deduction for state and local general sales taxes.
• Extend until end of 2009 individual tax breaks, including deductions for higher-education costs and teachers' personal expenses.
• Increase from $100,000 to $250,000 the limit on federal bank-deposit insurance.
THE ASSOCIATED PRESS
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