WASHINGTON — After one spectacular failure, the $700 billion financial industry bailout found a second life Wednesday, winning lopsided passage in the Senate and apparently gaining ground in the House, where Republicans opposition softened.
Senators loaded the economic rescue bill with tax breaks and other sweeteners before passing it by a wide margin, 74-25, a month before the presidential and congressional elections.
Sens. Olympia Snowe and Susan Collins, both Maine Republicans, voted in favor of the bill.
In the House, leaders were working feverishly to convert enough opponents of the bill to push it through by Friday, just days after lawmakers there stunningly rejected an earlier version and sent markets plunging around the globe.
The rescue package lets the government spend billions of dollars to buy bad mortgage-related securities and other devalued assets held by troubled financial institutions. If successful, advocates say, that would allow frozen credit to begin flowing again and prevent a deep recession.
Even as the Senate voted, House leaders were hunting for the 12 votes they would need to turn around Monday’s 228-205 defeat. They were especially targeting the 133 Republicans who voted “no.”
Their opposition appeared to be easing after the Senate added $110 billion in tax breaks for businesses and the middle class, plus a provision to raise, from $100,000 to $250,000, the cap on federal deposit insurance.
They were also cheering a decision Tuesday by the Securities and Exchange Commission to ease rules that force companies to devalue assets on their balance sheets to reflect the price they can get on the market.
There were worries, though, that the tax breaks would cause some conservative-leaning Democrats who voted for the rescue Monday to abandon it because it would swell the federal deficit.
The measure didn’t cause the same uproar in the Senate, where both parties’ presidential candidates, Republican John McCain and Democrat Barack Obama, made rare appearances to cast “aye” votes. “This is what we need to do right now to prevent the possibility of a crisis turning into a catastrophe,” Obama said on the Senate floor.
In Missouri, before flying to Washington, McCain said, “If we fail to act, the gears of our economy will grind to a halt.”
At the White House, President Bush said, “It’s very important for members to take this bill very seriously.”
The heart of the bill, and the opposition to it, remained the same. It would enable the government to spend billions of dollars to buy bad mortgage-related securities and other devalued assets held by troubled financial institutions. If successful, advocates say, that would allow frozen credit to begin flowing again and keep the economy from a deep recession.
Proponents say the government eventually could sell the devalued assets at a better price, reducing the program’s final cost.
Increasing the deposit insurance cap was a bid to reassure individuals and small businesses that their money would be safe in the event their banks collapsed. It was particularly geared toward small banks that fear customers will pull their money and park it in larger institutions seen as less likely to fold.
The FDIC would be allowed to borrow unlimited money from the Treasury Department through the end of next year as a way to cover the increased insurance limit. If used, it would be the first time the agency has tapped Treasury for a loan since the early 1990s.
The Senate bill also would:
ä Keep the alternative minimum tax from hitting 20 million middle-income Americans.
ä Provide $8 billion in tax relief for those hit by natural disasters in the Midwest, Texas and Louisiana.
With constituent feedback changing dramatically since Monday’s shocking House defeat and the corresponding market plunge, lawmakers’ comfort level with the package increased markedly.
Rep. John Shadegg of Arizona, a leading conservative who voted no on Monday, told CNN Wednesday he’s “strongly leaning” toward voting for the plan.
Asked if he was ready to switch from no to yes, Rep. Steve LaTourette, R-Ohio, said, “Not yet, but it’s getting there.”
Sen. John Thune, R-S.D., said Republicans “can argue now that there have been some steps taken that they recommended.”
The aftermath of Monday’s vote, he said, has “changed the complexion, too, of what people’s constituents are now saying. … There’s more of a recognition that we have to do something.”
Meanwhile, the Senate passed other key bills Wednesday night.
ä It voted to overturn a three-decade ban on atomic trade with India, giving final congressional approval to a landmark U.S.-India nuclear cooperation accord and handing President Bush a rare foreign policy victory in his final months in office.
The accord, which passed 86-13, will allow American businesses to begin selling nuclear fuel, technology and reactors to India in exchange for safeguards and U.N. inspections at India’s civilian, but not military, nuclear plants. The pact, which the House approved Saturday, marks a major shift in U.S. policy toward nuclear-armed India after decades of mutual wariness.
It now goes to Bush for his signature.
ä It approved a sweeping rail safety reform bill that envisions billions of dollars for Amtrak easily cleared the Senate Wednesday, its passage helped by the Sept. 12 train collision in Los Angeles that killed 25 people.
The rail bill, which passed by a 74-24 vote, now goes to President Bush, who has not indicated whether he’ll sign it. The measure requires more rest for workers and technology that can stop a train in its tracks if it’s headed for collision.