Senate Approves Bailout
Thursday, October 2, 2008
The Senate last night easily approved a massive plan to shore up the U.S. financial system, but the measure faces a tougher test tomorrow in the House, where leaders will try to reverse the stunning defeat the legislation suffered earlier this week.
As the Bush administration issued fresh warnings that Congress's failure to act would have dire consequences for the economy, the Senate revived the package the House defeated Monday and voted to approve it, 74 to 25.
The proposal -- which calls for spending up to $700 billion to buy bad assets from faltering financial institutions -- was heavily revised to attract wider support. The bill passed last night would extend an array of tax breaks worth $108 billion to businesses and families next year. It would also temporarily increase the limit on federal insurance for bank deposits to $250,000 from $100,000.
Sen. Christopher J. Dodd (D-Conn.), chairman of the Senate Banking Committee, acknowledged last night that it was tempting to oppose a bailout and "stick a finger in the eye of the bankers and the tycoons whose greed brought us to this crisis."
"But after the rush of righteousness fades, what then?" said Dodd, an architect of the package. "We can take a cut at Wall Street, but Wall Street won't feel the brunt of the pain."
Nine Democrats, 15 Republicans, and one independent opposed the plan. Sen. Edward M. Kennedy (D-Mass.), who is ailing, was not present for the vote.
The provisions added to the original bill infuriated fiscally conservative Democrats in the House, who have argued for months that the tax breaks should not be extended at the expense of increasing the federal deficit. Yet some congressmen who opposed the bailout Monday were newly interested in it yesterday.
Rep. John Shadegg (R-Ariz.), an influential conservative, said the new bill was "materially better" than the one that failed in the House, sending the Dow Jones industrial average plummeting a record 778 points.
"Much as I would like to see much more dramatic changes, there comes a point in time where we've got to send the signal to the U.S. markets, U.S. consumers and world markets that we're dealing with this," Shadegg said. "I'm inclined to hold my nose and vote yes."
House Republicans said the new package could attract as many as 100 GOP votes -- enough to put it over the top if Democrats can garner as many votes as they did on Monday. House Majority Leader Steny H. Hoyer (D-Md.) said he and other fiscal conservatives are "angry" about the addition of the tax provisions but unlikely to abandon the package.
"Frankly, we really don't have much flexibility, and this is important to do," Hoyer said.
Across Washington yesterday, politicians and interest groups worked frantically to build support for the bailout, which seeks to prop up U.S. financial institutions and calm investors.