Some House 'no' votes turning to 'yes' on bailout
Posted October 2, 2008 3:00 p.m. EDT
Updated October 2, 2008 5:48 p.m. EDT
WASHINGTON — Desperate to avoid another market-crushing defeat, House leaders won key converts Thursday to the $700 billion financial industry bailout on the eve of a make-or-break second vote.
President Bush and congressional leaders lobbied furiously for the dozen or so supporters they'd need to reverse Monday's stunning setback and approve a massive rescue plan designed to stave off national economic disaster.
Anything but reassured, investors sent the Dow Jones industrials plunging another 348 points, suggesting Wall Street is expecting tough economic times ahead even if the measure is rushed into law. The Federal Reserve reported record emergency lending to banks and investment firms, fresh evidence of the credit troubles squeezing the country.
"A lot of people are watching," Bush pointed out - as if lawmakers needed reminding - and he argued from the White House that the huge rescue measure was the best chance to calm unnerved financial markets and ease the credit crunch.
Democratic and Republican leaders worked over wayward colleagues wherever they could find them.
Rep. Steny Hoyer, the second-ranking House Democrat, said there was a "good prospect" of approving the measure but stopped short of predicting passage - or even promising a vote. Nonetheless, the vote was expected on Friday. "I'm going to be pretty confident that we have sufficient votes to pass this before we put it on the floor," Hoyer said.
The top Republican vote-counter, Rep. Roy Blunt of Missouri, did predict the measure would be approved.
Minds were changing in both parties in favor of the much-maligned measure, which would let the government spend billions of dollars to buy bad mortgage-related securities and other devalued assets from troubled financial institutions. If the plan works, advocates say, that would allow frozen credit to begin flowing again and prevent a serious recession.
GOP Rep. Ileana Ros-Lehtinen of Florida, said she was switching her "no" vote to a "yes" after the Senate added some $110 million in tax breaks and other sweeteners before approving the measure Wednesday night.
"Monday what we had was a bailout for Wall Street firms and not much relief for taxpayers and hard-hit families. Now we have an economic rescue package," Ros-Lehtinen told The Associated Press.
Rep. Zach Wamp of Tennessee, another of the 133 House Republicans who joined 95 Democrats Monday to reject the measure, also announced he was now on board. Democratic Rep. Emanuel Cleaver of Missouri was switching, too, said spokesman Danny Rotert, declaring, "America feels differently today than it did on Friday about this bill."
Emboldened by the feverish bidding for votes, other members of both parties were demanding substantial changes to the legislation before they would vote for it. A group of Republican opponents indicated they'd back it if the price tag were slashed to $250 billion and several special tax breaks added by the Senate were removed. Democrats wanted to add a way to pay for the bailout and more help for homeowners staring at foreclosure.
Speaker Nancy Pelosi, D-Calif., said no, such revisions were impossible because they would slow the measure's enactment and further shake markets.
"I don't think that any changes here will do what we need to do, which is right now to send a message of confidence to the markets that Congress will act," she said.
The Senate breathed new life into the measure Wednesday after the stinging House defeat, voting 74-25 to approve the bailout, with additions designed to appeal to key constituencies.
The changes helped satisfy some Republican critics, but angered conservative "Blue Dog" Democrats who are concerned about swelling the deficit. Still, Hoyer predicted the number of Democratic defectors "is going to be minimal."
In efforts to appease GOP opponents, the Senate added a provision to raise, from $100,000 to $250,000, the limit on federal deposit insurance.
House Republicans were also cheered by a decision by the Securities and Exchange Commission this week to ease rules that force companies to devalue assets on their balance sheets to reflect the price they can get on the market.
The developments Wednesday prompted one Republican, Rep. John Shadegg of Arizona, to say he was likely to support the new bill, and another, Steve LaTourette of Ohio, to say he was "getting there."
Rep. Earl Blumenauer, D-Ore., a liberal opponent, was also reconsidering his vote, said spokeswoman Lucia Graves, but "he's not on board yet."
Unconvinced, Peter DeFazio, D-Ore., said he still opposed the bill despite Senate inclusion of a program that pays rural counties hurt by federal logging cutbacks.
Rep. Gabrielle Giffords, D-Ariz., praised the increased deposit insurance caps and tax breaks, calling the package "a step in the right direction," but did not commit to supporting it.
Beyond the Capitol, the drumbeat of bad economic news rattled on.
One government report said orders to factories plunged by the largest amount in nearly two years. Another said claims for jobless benefits hit a seven-year high. Investors appeared to be pulling money out of Wall Street and bracing for lengthy economic hard times.
Bush, meeting with business executives at the White House, said increasingly tight credit markets are not just hitting big banks in New York City but threatening the existence of small businesses across the country.
The modified Senate bill would extend several tax breaks popular with businesses, provisions that are favorites for most Republicans. It would keep the alternative minimum tax from hitting 20 million middle-income Americans, which appeals to lawmakers in both parties. And it would provide $8 billion in tax relief for those hit by natural disasters in the Midwest, Texas and Louisiana.
Help for rural schools was aimed mainly at lawmakers in the West.
Another addition, to extend the deductibility of state and local taxes for people in states without income taxes, helps Florida and Texas, among others. Ros-Lehtinen singled it out as one reason she changed her mind.
Democratic leaders circulated data showing which states benefit most from an extension of a tax break for homeowners who do not itemize their tax returns. Texas, Florida, California and Pennsylvania ranked among the highest. The leaders hope the measure will bring support from black lawmakers, many of whom voted "no" earlier this week, among others.