House plans second vote on bailout
Posted: Friday, October 3, 2008 10:12 pm
By JULIE H. DAVIS
Associated Press Writer
WASHINGTON (AP) — After a week of tumult on Wall Street and Washington, the House moved toward a final vote today on a $700 billion bailout of the financial industry, an unprecedented government intervention designed to steady an economy on the brink.
Congressional leaders ex-pressed quiet confidence they would have the votes to send the measure to President Bush for his signature by day’s end, four days after an earlier version was rejected.
“Our economy is not stable. Working families are suffering. Unemployment is over 10 percent in my district,” said Rep Hilda Solis. The California Democrat voted against the measure that failed on Monday, but this time, she said she was considering a switch.
The bill’s critics said it was a step in the wrong direction.
Rep. Joe Barton, R-Texas, who voted “no” earlier in the week, said that since the first vote, Senate leaders had tacked on billions of dollars in tax breaks and spending. Derisively, he called them “sweeteners to try and bribe enough” lawmakers to swing behind the bill.
If anything, the economic news added impetus 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. That came on top of Thursday’s Commerce Department report that factory orders in August plunged by four percent. And the government reported today that employers slashed 159,000 jobs from payrolls in September, the most in five years.
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 debate on the House floor came at the end of an unprecedented time of turmoil.
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 care or finance a child’s education,” it said in a written statement.