By Shailagh Murray and Paul Kane
Washington Post Staff Writers
Wednesday, October 1, 2008
Prodded by a wave of angry calls from constituents, congressional leaders dialed back partisan bickering over the $700 billion Wall Street rescue plan yesterday and advanced modest changes to the legislation in an effort to win over House Republican holdouts.
Leaders of the Senate, where most members have indicated support for the plan, said they would seek a vote on a revised rescue package tonight that would include a one-year increase in Federal Deposit Insurance Corp. caps for bank and credit union accounts, extensions of numerous business tax breaks that have expired and a fix to the alternative minimum tax for individual taxpayers.
The FDIC and tax provisions could make the bill more appealing to House Republicans, but they could also prove unpalatable to a coalition of conservative Democrats who have long opposed the tax changes. The Senate banking committee's chairman, Christopher J. Dodd (D-Conn.), who helped negotiate the revised package, expressed confidence that the revisions would yield a majority of House votes.
Although U.S. financial markets swung sharply upward yesterday, with the Dow Jones industrial average gaining 485.21 points, Monday's record 778-point loss, which was fueled by the House's rejection of the rescue plan, led to angry calls to lawmakers from constituents from across the political spectrum.
There was a widespread sense on Capitol Hill that Monday's vote had snapped the public to attention about the potential repercussions of Congress's failure to act. Last week, House and Senate offices were bombarded with calls from opponents who viewed the bill as a Wall Street boondoggle. That call pattern shifted sharply after Monday's vote, aides to lawmakers in both parties said. "It's completely in the other direction now," said Michael Steel, a spokesman for House Minority Leader John A. Boehner (R-Ohio).
Senate Majority Leader Harry M. Reid (D-Nev.) called the Senate's revised legislation "the best thing to move forward." Reid was joined on the floor by Senate Minority Leader Mitch McConnell (R-Ky.), who said the plan was "one of the finer moments in the Senate."
A senior House Republican adviser, who spoke on the condition of anonymity to talk about private strategy, said the addition of the FDIC cap increase and the tax credits -- without any corresponding tax increases -- could have "substantial appeal" in that caucus. Boehner was consulted by Senate leaders and gave his approval, the aide said.
But the addition of the tax provisions may entail new risks in the House, which returns to action Thursday. Speaker Nancy Pelosi (D-Calif.) responded tepidly to the Senate announcement, and it remained unclear when the House would would consider the revised bill, though a vote is likely by week's end. "The Senate has made a decision about how to proceed and what can pass that body. The Senate will vote . . . and the Congress will work its will," Pelosi said.
Democratic and Republican aides warned that the "Blue Dogs" -- a bloc of 47 fiscally conservative Democrats -- might now oppose the market rescue plan. The Blue Dogs have opposed extending the tax credits unless there are other spending cuts or tax increases to pay for them.
In winning House Republican votes for the legislation, Democrats may lose some of their own supporters, such as centrist Reps. John Tanner (Tenn.), Allen Boyd (Fla.) and Bob Etheridge (N.C.), all of whom voted for the rescue plan Monday.
So, too, did President Bush, who warned lawmakers that the United States would face a "painful and lasting" economic downturn if they did not approve it.
"I am disappointed by the outcome" of the House vote, Bush said. Appearing drawn and frustrated, he noted that Monday's stock market dive cost more in market capitalization -- more than $1 trillion -- than his $700 billion rescue proposal.
"The reality is that we are in an urgent situation, and the consequences will grow worse each day if we do not act," Bush said. "Our economy is depending on decisive action from the government. . . . This is what elected leaders owe the American people," he added.
The effort at mending fences began Monday night when White House Chief of Staff Joshua B. Bolten held one-on-one meetings on Capitol Hill with key leaders, including House Majority Leader Steny H. Hoyer (D-Md.) and House Minority Whip Roy Blunt (R-Mo.).
Boehner spent all day yesterday contacting many of the 133 Republicans who voted against the package. Face-to-face negotiations are slated to resume today, with Hoyer and Blunt expected to sit down for an extensive meeting to discuss alterations to the bill. Official business was put on hold in both chambers yesterday in observation of the Jewish New Year.
The FDIC provision, which would raise the insurance cap for bank accounts to $250,000 from the current $100,000, was discussed during weekend negotiations in Pelosi's office but was not included in the final package. But in what negotiators from both parties considered a critical breakthrough, the largest banking lobby in Washington embraced the idea. "We now see this as a way to help the package pass," said Ed Yingling, president of the American Bankers Association.
While the move would result in banks paying higher fees on their insurance premiums, advocates say it would provide important assurances to small businesses that keep large sums of cash in bank accounts and are reeling from the credit crunch. "We are having an awful lot of people come into banks and ask questions," Yingling said.
McCain and Obama announced yesterday morning that they would support the insurance cap increase. Later in the day, FDIC Chairman Sheila C. Bair asked Congress for temporary authority to raise the limit by an unspecified amount.
Tensions boiled over after the House vote Monday, when Republican leaders blamed Pelosi for delivering a partisan speech before the roll was called. Democrats called the charge absurd, and Blunt and Boehner eventually backed away from it. While Blunt had expected about 75 Republicans to support the plan, Boehner said the number had plunged to the mid-60s before Pelosi's speech. Instead, Blunt said, maybe a "couple" of votes were affected by the speech, and the rest of the dissenters were just "looking for that final reason that they don't need to do what they intended to do."
The tone was far different yesterday. Pelosi and Reid issued a joint statement asserting confidence that a bipartisan effort will produce "a responsible bill in the very near future."
Some GOP supporters said Monday's market collapse served as a needed wake-up call. "We sort of have to get hit in the face with it," said Sen. Lamar Alexander (R-Tenn.).
But lawmakers also conceded that they hadn't effectively sold the plan, and senators sought to illustrate the severity of the crisis in a series of striking personal stories that they relayed on the chamber floor.
"I'm hearing from towns and municipalities throughout Kentucky that can't find the money to finance new schools and other civic projects, and from farmers and small-business owners who are suddenly being told by their banks that a long-term loan is due," McConnell said. "Others are being pressured to pay more, or well ahead of schedule. And these are people with good credit."
Sen. Judd Gregg (R-N.H.) tried a new analogy, describing the crisis as a car wreck. "So what we're going to do as a government is take that accident off the highway and let the commerce flow again, and then we're going to take the cars that were in the accident, those cars that are all mangled, we're going to repair them a little bit and we're going to resell them."
Staff writer Dan Eggen contributed to this report.