Congress clears hotly contested bailout bil
Posted October 3, 2008 1:35 p.m. EDT
Updated October 3, 2008 1:42 p.m. EDT
WASHINGTON — Congress has passed complex and highly criticized legislation authorizing $700 billion in government money to shore up the nation's stressed financial industry.
The 263-171 vote by the House sends the Senate-passed version to the White House for President Bush's signature. Among many features, the measure would allow the Treasury Department to buy up bad debt from various lending institutions.
Twenty-six more Republicans voted for the bill on Friday than did on Monday.
Many members of the House voted for the bill even though said it was very attractive to them and to their constituents back home. The measure had been defeated in the same chamber on Monday, sending stocks on Wall Street into a record slide.
Announcement of the vote was greeted by applause.
North Carolina Republican Rep. Howard Coble and Sue Myrick was among those who changed their minds and voted for the package.
Coble said on the House floor Friday that feedback from his constituents over the week heavily influenced his decision. After he and the House voted down the proposal Monday, he said he received calls and e-mails from constituents voicing support for the measure.
Myrick said the legislation is still "full of things" she doesn't believe in, but that voted for it because the country is on "the cusp of a complete catastrophic credit meltdown."
Democratic Reps. Melvin Watt, 12th district, and Bob Etheridge, 2nd district, voted for the measure.
Prior to the vote, Rep. Virginia Foxx, R-5th district, told WRAL News that she would oppose it. WRAL News was seeking comment from other N.C. representatives.
The Senate passed the measure earlier in the week on a bipartisan vote of 74-25.
"No matter what we do or what we pass, there are still tough times out there. People are mad - I'm mad," said Republican Rep. J. Gresham Barrett of South Carolina, who opposed the measure the first time it came to a vote. Now, he said, "We have to act. We have to act now."
Rep. John Lewis, D-Ga., another convert, said, "I have decided that the cost of doing nothing is greater than the cost of doing something."
Critics were unrelenting.
"How can we have capitalism on the way up and socialism on the way down," said Rep. Jeb Hensarling of Texas, a leader among conservative Republicans who oppose the central thrust of the legislation - an unprecedented federal intervention into the private capital markets.
If anything, the economic news added to the sense of urgency.
The Labor Department said initial claims for jobless benefits had increased last week to the highest level since the gloomy days after the 2001 terror attacks. Employers slashed 159,000 jobs from their payrolls, the most in five years. That came on top of Thursday's Commerce Department report that factory orders in August plunged by 4 percent.
The stock market opened higher on anticipation that the bill would pass, and the financial industry shakeout rolled on unpredictably.
Wachovia announced it had agreed to be acquired by San Francisco-based Wells Fargo & Co rather than by Citigroup. Executives said the new arrangement would keep the Federal Deposit Insurance Corp., on the sidelines, thus preventing any depletion of the government's fund that backs bank deposits.
The FDIC said it was sticking behind the Citigroup plan, leaving the fate of the bank in limbo.
It was little more than two weeks ago that Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke concluded that the economy was in such danger that a massive government intervention in the private markets was essential.
The core of the plan remains little changed from its conception - the Treasury Department would have $700 billion at its disposal to purchase bad mortage-related securities that are weighing down the balance sheets of institutions that hold them. The flow of credit has slowed, in some cases drying up, threatening the ability of businesses to conduct routine operations or expand.
At the same time, lawmakers have dramatically changed the measure, insisting on greater congressional supervision over the $700 billion, taking measures to protect taxpayers, and insisting on steps to crack down on so-called "golden parachutes" that go to corporate executives whose companies fail.
Earlier in the week, the legislation was altered to expand the federal insurance program for individual bank deposits, and the Securities and Exchange Commission took steps to ease the impact of the questionable mortgage-backed securities on financial institutions.
The legislation had the support of the leadership in both parties - as was the case in the Senate, where it passed on Wednesday on a bipartisan vote of 74-25.
President Bush has been lobbying aggressively for its passage, and the White House issued the latest in a series of grim warnings of the risks of defeat. "If the financial markets fail to function, American families will face great difficulty in getting loans to purchase a home, buy a family car or finance a child's education," it said in a written statement.
The two major party presidential candidates, Barack Obama, the Democrat, and John McCain, the Republican also supported the bill and worked to assure its passage.
The vote on Monday staggered the congressional leadership and contributed to the largest one-day stock market drop in history, 778 points as measured by the Dow Jones Industrial Average.
Across the Capitol, party leaders decided to add legislation extending a series of popular tax breaks, as well as spending on rural schools and disaster aid. They also grafted on a bill to expand mental health coverage under private insurance plans.
At the same time, the change in federal deposit insurance and the action by the SEC on an obscure accounting rule helped produce a trickle of converts.
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," Ros-Lehtinen told The Associated Press. "Now we have an economic rescue package."
Republican Rep. Jim Ramstad of Minnesota also switched to "yes," partly because the Senate attached the mental health measure.
Democratic Rep. Emanuel Cleaver of Missouri was switching, too, said spokesman Danny Rotert, declaring, "America feels differently today than it did on Monday about this bill."
And Democratic Rep. Shelley Berkley of Nevada said she would back the bill after business leaders in her Las Vegas-area district made it clear how much it was needed. She said, "There isn't a segment of the population that hasn't been slammed and is not asking for some relief."