The Senate voted reluctantly but solidly in favor of a modified $700-billion Wall Street rescue plan Wednesday, but it remained uncertain whether the legislation -- even with a carefully designed package of tax breaks -- would withstand the fierce crosswinds of liberal and conservative resistance in the House later this week.
The measure passed the Senate 74 to 25, with a majority of Democrats and Republicans voting in favor -- among them presidential nominees Sen. Barack Obama and Sen. John McCain. The centerpiece of the legislation gives the government the authority to buy up billions of dollars of the “toxic” assets, primarily mortgage-backed securities, that have poisoned financial markets and threaten to contaminate the rest of the economy.
“This rescue package . . . is not for the titans of Wall Street. It’s not for those whose greed got us here, who chose greed over prudence,” said Senate Majority Leader Harry Reid (D-Nev.). “It’s for families across Nevada and across America who are fighting to keep their jobs, save their homes and make one paycheck last until another one.”
The Senate action came two days after House members, facing reelection in a few weeks and confronted by calls and letters from angry constituents, rejected an earlier version of the plan and sent the stock market into a tailspin. The House will take up the new bill Friday morning.
House Minority Leader John A. Boehner (R-Ohio) said the package approved by the Senate had a “much better chance” of passing the House than the measure that was defeated Monday by a vote of 228 to 205. But he said he was “not taking anything for granted.”
“I do think that the big [stock market] drop on Monday really had a chilling effect on a lot of our members and a lot of their constituents,” Boehner said on Fox News.
The market reaction, compounded by opinion polls suggesting that the public was more confused by the plan than opposed to it, led the Senate to add provisions in hope of attracting enough votes to pass both chambers this week.
Some additions were meant to appeal to a broad range of Americans, such as a hike in the limit for federally insured bank deposits to $250,000 from the current $100,000 and the move to shield 24 million households from paying the alternative minimum tax.
Others were aimed at narrower interests to win the votes of specific lawmakers, such as a tax break to encourage Hollywood studios to do more filming in the United States.
The tax provisions added more than $100 billion to the cost of the plan. From the original three-page proposal by the Treasury Department, the bill has swelled to 451 pages.
Rep. Steny H. Hoyer of Maryland, the second-ranking Democrat in the House, said he expected many GOP lawmakers to find the tax and deposit insurance provisions appealing. “Clearly we have said all along that passing this bill sooner is better than passing this bill later,” Hoyer said.
The presence of both presidential candidates added pressure on senators to go along with the man from their party who might occupy the White House in a matter of months.
“To Democrats and Republicans who’ve opposed this plan, I say, step up to the plate. Let’s do what’s right for the country,” Obama said in a speech on the Senate floor.
McCain walked into the Senate chamber nine minutes after Obama had arrived and swept by the Illinois Democrat. A few minutes later, Obama crossed to the other side of the floor and the two shook hands and exchanged a brief greeting. The Arizona senator did not address the chamber.
Obama’s running mate, Sen. Joe Biden of Delaware, voted “aye,” as did California’s senators, Democrats Barbara Boxer and Dianne Feinstein.
Treasury Secretary Henry M. Paulson and President Bush lauded the Senate’s action and urged House members to follow suit.
Rep. Steve King (R-Iowa) said the new version of the bill contained a biodiesel tax credit he had championed, but he still planned to vote against the measure again. However, other lawmakers may be swayed, he said.
“I think that they probably put enough sweeteners in it that they will be able to get the votes,” King said in an interview.
Rep. Lloyd Doggett (D-Texas) was similarly unpersuaded. “The Senate measure has changed my position from ‘No’ to ‘Heck no,’ ” he said. “With the Senate amendment, the bailout has gone from bad to worse, $105 billion more in public debt worse.”
Some of the changes appeared aimed at enticing specific lawmakers to change their votes from no to yes.
For instance, the bill now includes a provision to boost insurance coverage of mental illness, a priority of Rep. Jim Ramstad (R-Minn.), who voted against the bailout bill Monday. It also includes a tax benefit for bicycle commuting sought by Rep. Earl Blumenauer (D-Ore.), also a no vote on Monday. And there’s an extension of the renewable energy tax credit, a priority of Rep. Gabrielle Giffords (D-Ariz.), who wants to make Arizona the “Silicon Valley of solar energy.”
The tax breaks and accounting rule changes for Hollywood were apparently aimed at two Southern California Democrats -- Rep. Adam B. Schiff of Burbank and Rep. Brad Sherman of Sherman Oaks -- who voted against the plan. Sherman, who led the defection of a group of Democratic skeptics, insisted that he would not be enticed to vote for the rescue plan.
“The one thing that’s been proven is the absolute fear mongering that’s being used to drive us is false,” Sherman complained. “I’ve seen members turn to each other and say, ‘If we don’t pass this bill, we’re going to have martial law in the United States.’ ”
Polls conducted in recent days show that although two-thirds of Americans are angry about the rescue plan, they tend to think the bill is “the right thing to do.” A poll conducted by the Pew Research Center showed 38% to 45% of the public favoring the plan.
On the Senate floor, it was clear that lawmakers, even those from the president’s party, were still of two minds.
“If we don’t get the credit markets working again, we will face a dramatic downturn of proportions which we have not seen in my lifetime in the United States of America and in our economy,” said Sen. Judd Gregg (R-N.H.), his party’s lead negotiator. “And it is something that we should not risk. We should not roll those dice.”
But others dug in their heels.
“Many around here are finding comfort in the notion that ‘something is better than nothing.’ I believe that is a false choice,” said Sen. Richard Shelby of Alabama, the top Republican on the Banking Committee. “The choice we faced was between pursuing an informed response or panic. . . . Unfortunately, we chose panic.”
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Tax breaks in the bailout
Here are some of the tax breaks added to the $700-billion Wall Street bailout bill and whom they help. The added cost to the legislation totals $110.4 billion.*
* Hollywood: Two breaks for domestic production of movies and TV shows would be expanded and extended. Estimated cost over the next decade: $478 million.
* Natural disaster victims: Tax credits and suspension of certain tax penalties for people affected by natural disasters in the Midwest and Gulf of Mexico regions. Estimated cost over the next decade: $8.8 billion.
* Energy companies and environmentalists: An extension and expansion of tax credits for production and use of clean coal and renewable energy, such as solar, wind and biomass, as well as for the use of alternative fuels and plug-in electric cars; measures to promote conservation and efficiency. Estimated cost over the next decade: $16.9 billion.
* Technology companies: A popular tax break on research and development costs, which expired on Dec. 31, would be expanded and extended. Estimated cost over the next decade: $19.1 billion.
* Taxpayers: The alternative minimum tax would be revised to spare about 24 million households from being hit with an additional bill of at least $2,000.
* Includes measures to increase revenue that offset some of the tax breaks
Sources: Congressional Budget Office, Joint Committee on Taxation
-- Jim Puzzanghera