Bailout Bill Sent Back to House After Senate Passage (Update2)
By James Rowley and Nicholas Johnston
Oct. 2 (Bloomberg) -- The U.S. Senate passed a $700 billion financial-market rescue package loaded with inducements for the House of Representatives to approve the measure following its rejection of an earlier version.
The legislation, approved last night on a 74-25 vote, authorizes the government to buy troubled assets from financial institutions rocked by record home foreclosures. It contains two provisions favored by House Republicans: One raises the limit on federal bank-deposit insurance; the other reiterates the authority of securities regulators to suspend asset-valuing rules that corporate executives blame for fueling the crisis.
The bill's proponents cited the record 778-point drop in the Dow Jones Industrial Average after the House's 228-205 defeat of the legislation Sept. 29 as evidence of the urgency to stabilize the banking system. They suggested that the market reaction may spur some House Republicans to change their minds when the bill comes to a vote, likely tomorrow afternoon.
``The big drop'' in the Dow Index ``really had a chilling effect on a lot of our members and a lot of their constituents,'' House Republican Leader John Boehner said on Fox News. With changes made by the Senate, the legislation ``has a much better chance'' of passage this time, he said.
`Signal to Markets'
Senate Banking Committee Chairman Christopher Dodd, a Connecticut Democrat, said he hoped the vote ``will send a very strong signal even to the Asian markets and others.''
The dollar rose against the euro, approaching a one-year high, after the Senate approval, bolstering expectations the U.S. will act faster than Europe to address the seizure in credit markets. The dollar advanced to $1.3883 per euro at 12:46 p.m. in London, from $1.4009 late yesterday in New York.
Asian stocks and U.S. futures fell on concern the package won't be enough to avert a recession, with futures on the Standard & Poor's 500 Index falling 1.1 percent and the MSCI Asia Pacific Index lost 1.3 percent. Europe's Dow Jones Stoxx 600 Index added 1.2 percent to 260.75 as of 12:46 p.m. in London.
The extra measures may help sway some Republicans.
``They only need 12 votes,'' Kansas Representative Todd Tiahrt, who voted against the bailout, said in an interview with Bloomberg Television. ``If they put these few fundamental reforms in there,'' congressional leaders ``would easily get enough votes to pass the legislation'' he said before the Senate included those provisions in the package.
Targeting Lawmakers
Democratic supporters of the bill are targeting lawmakers such as Illinois Representative Bobby Rush, who twice changed his vote in the House roll call. Rush ended up being among the 21 members of the Congressional Black Caucus to oppose the legislation. The caucus scheduled a meeting today to discuss the changes made by the Senate. Rush wasn't available to comment on his vote.
Still, House passage is far from certain.
House Majority Leader Steny Hoyer told MSNBC News yesterday that no Democrats who opposed the measure earlier this week have pledged to back it. ``We don't have any more Democrats at this hour,'' he said.
Some Republicans said they also weren't budging.
``The bill that they are going to send back is the same bill that I voted against two days ago,'' Representative Joe Barton of Texas told Bloomberg Television. ``Why would I turn around and vote for it tomorrow evening or Friday?''
Bush Presses for Passage
President George W. Bush said in a written statement after the vote that ``the bill the Senate passed is essential to the financial security of every American.'' He said the House should follow suit in approving the proposal.
Bush is slated to meet with U.S. business representatives this morning, including members of the Chamber of Commerce and the National Association of Manufacturers, to urge their support in pushing for House passage, the White House press office said.
The bill was a bipartisan effort, with 40 Democrats, 33 Republicans and independent Joe Lieberman of Connecticut voting for it. The two presidential nominees, Democrat Barack Obama and Republican John McCain, returned from the campaign trail to vote for the plan.
The Senate also sweetened the measure for Republicans by authorizing the government's purchase of troubled assets with a $149 billion package of tax breaks. They would spare 24 million households from a $62 billion alternative minimum tax and extend $17 billion in benefits to companies that produce alternative energy.
Yet Hoyer warned there was a possibility that some additional Democrats may oppose the legislation because of the tax breaks, which aren't offset with spending cuts.
``There are people who are upset that we are making the deficit worse as we try to stabilize the economy,'' he told reporters. Hoyer said he was ``personally disappointed' by the Senate's decision to include the tax legislation in the package.
Blue Dogs
Twenty-four of the 44-member Blue Dog Coalition of fiscally conservative Democrats voted for the rescue package on Sept. 29. Four of them said yesterday they'll continue to back the bill, even though their caucus derided the Senate's tax measures as irresponsible as recently as Monday.
``I will vote for the package coming from the Senate,'' said Oklahoma Representative Dan Boren. Other members of the coalition who voiced support included Representative Jane Harman of California, Representative Jim Marshall of Georgia and Representative Jim Cooper of Tennessee.
Added to the rescue plan this week is a temporary increase in the limit on federal deposit insurance to $250,000 from $100,000 aimed at discouraging people from pulling their money out of banks.
The Senate bill also reiterates the U.S. Securities and Exchange Commission's authority to suspend an accounting rule that bankers and other corporate executives say exacerbates their troubles.
Ease the Rule
The so-called fair-value standard requires companies to review assets and report losses if their values decline. Lawmakers, the American Bankers Association and companies including American International Group Inc. have urged the SEC to suspend or ease the rule, saying it forces firms to report deeper losses than needed on assets such as subprime mortgages.
Representative Rahm Emanuel of Illinois, the No. 4 House Democrat, said it was likely the Democratic vote total in the House will change.
``At the end of the day, I doubt we lose Democratic votes in total,'' Emanuel said. ``We lose some and will pick up others. The question now will be how many Republicans come to the table to help solve this crisis.''
To contact the reporters on this story: James Rowley in Washington at
jarowley@bloomberg.net and Nicholas Johnston at
njohnston3@bloomberg.net
