House Passes $700 Billion Financial Rescue; President Has Said He'll Sign

Posted by: Theo Francis on October 03

In an about-face after a week of market turmoil and legislative maneuvering, the House of Representatives gave the Bush Administration broad authority to invest as much as $700 billion in the troubled market for mortgages and related securities.

The bill passed 263 to 171 without amendment, meaning it will go to President George W. Bush, who has said he will sign it. Both Barack Obama and John McCain had urged the bill’s passage.

The bill received 91 votes from Republicans and 172 from Democrats, up from 65 Republicans and 140 Democrats in a failed vote Monday. Faced with substantial public disapprovsal — albeit less than it seemed earlier in the week — Democratic leaders had insisted throughout the process that they needed a bipartisan bill; otherwise, they feared, they would be seen as joining the administration in a Wall Street bailout.

Lawmakers supporting the bill cited a rapidly worsening credit market that had left constituents unable to get financing to buy cars or bank loans to expand small businesses. Some cited public opinion shifting since Monday, when the House’s rejection of an earlier version of the bill, by a 205-228 vote, sent the Dow Jones Industrial Average spinning down more than 778 points, or almost 7%. Several House members warned from the floor that the bill was no silver bullet, and that Congress and the administration — both this one and the next — will still have plenty of work to do.

Heading into the vote, business and some consumer lobbyists worked furiously to change votes in the House. There were some last-minute jitters about its outcome, in part thanks to the very provisions added to make it more palatable to Republicans. Some feared that liberal lawmakers would balk at tax breaks for businesses when they had complained the bill did too little for homeowners or families; or that fiscal conservatives worried about the deficit would object that many of the tax breaks weren’t offset by spending cuts or new revenue. Some consumer lobbies were pushing for additional amendments to aid homeowners and families, such as additional assistance for state and local governments or an extension of unemployment insurance.

Instead, the House is expected to consider separately a proposal to extend unemployment-insurance benefits. House leaders said there had been no deal cut to link the extension’s passage to the financial-crisis bill.

By the time the bill reached the House — after passing by a three-to-one margin in the Senate on Wednesday — it had long ceased to be the spartan, three-page document Treasury Secretary Henry Paulson sent to lawmakers two weeks ago, which gave him almost unfettered power to wade into the markets with $700 billion.

But the core of the measure remained a program to let the Treasury buy mortgages and related assets from financial institutions and, eventually, re-sell them to recoup costs. In the process, the Treasury hopes to restore activity in a market that had all but disappeared with the collapse of housing prices. That, in turn, Paulson and Federal Reserve Chairman Ben Bernanke have argued, will prevent further deterioration in the credit markets and what President George W. Bush has called a looming economic catastrophe.

Now more than 400 pages, the bill includes both elaboration on the original concept as well as dozens of essentially unrelated provisions. Soon after Paulson made his proposal, lawmakers added a series of oversight measures, requirements that the government take stakes in companies benefiting from the plan and executive-pay restrictions for the companies; those provisions and most others added at the time remain largely intact.

But two major rounds of negotiations since then, intended to make the bill more palatable to a wider range of lawmakers, layered on several other provisions, ranging from an alternative plan to insure assets instead of buying them — insisted upon by House Republicans but called unnecessary by Paulson — to a requirement that, if the buy-up program fails to break even in five years, Congress will come up with a plan to recoup losses from the financial industry.

The bill also includes a series of business tax breaks and extensions, many of them designed to encourage green-energy development, plus an extension of rules protecting millions of Americans from the Alternative Minimum Tax and expansion of federal deposit insurance from $100,000 per person per bank to $250,000. The whole thing is wrapped, partly for procedural reasons, in a bill that requires health insurers to treat mental-health care much as they do other medical problems, a long-sought Democratic priority.

Although much of the attention has centered on the $700 billion price-tag, that is the most Treasury could invest at any one time. The agency is to get access to $250 billion initially, and another $100 billion on the president’s certification that it’s needed; Congress could block the final $350 billion. However the amount functions much like a revolving credit line for the Treasury, letting it essentially reinvest proceeds gained from selling assets it had earlier acquired.

Reader Comments

madmilker

October 3, 2008 01:44 PM

Jose

October 3, 2008 02:12 PM

Thanks, God!!. We have, perhaps, the last opportunity to build a really new World, wherever we are. Beware fellows. Have a nice Wekend, Wochenedne, Fin de semana.

Chuck Gaffney

October 3, 2008 02:18 PM

Glad to see that Paulson and Bush's shame of an original plan didn't make it. Seems like this is a better choice but only time will tell.

DONI

October 3, 2008 02:28 PM

Probably, later in history it will be recorded as a biggest scam and fraud. House intentionally killed the bill to plant a fear in people...whats gonna happen next??? Well, now they are passing it saying inaction is not an action or not an option//how is it gonna change the falling prices? what is it gonna do with the million houses, which were built and have to buyers? whats gonna happen with inflation, which will ultimately will put middle class in poverty?

Karl

October 3, 2008 02:31 PM

Thank goodness the bill passed!!!! Now I can go down to the Ferrari Dealership and buy a nice new Ferrari, or maybe a pre-owned Ferrari!!!! I hope they have financing available now! If I put $1,500 down, on a new Ferrari, or maybe a used one, I'll bet that they'll be able to keep my payments low, since the House passed this wonderful "bail-out" bill, huh? Should I get a red one, or a yellow one? There WILL be A.R.C.L.'s available, won't there? (Adjustable Rate Car Loans)

Zak

October 3, 2008 02:56 PM

Here's to selling out the American people by our 'supposed' representatives. Long live a democracy that can be bought by the highest bidder!

Grant

October 3, 2008 02:58 PM

Now we can get back to suing eachother, flipping burgers, and charging fees to move fake money around.
R.I.P. America

Henry

October 3, 2008 03:14 PM

Congress: congratulations! You have just committed one of the biggest, most blatent thefts in American history. My prediction: the passage of the Billionaire Bailout Legislation will not do one solitary thing to improve the American economy. In fact, what you just did will make it even worse. What would have been a short and mild recession is now going to turn into a long and very painful recession - maybe even a depression. American working poor and middle class get ready for skyrocketing price inflation while you watch your hard-earned dollars plunge in value. And, furthermore, you will certainly know who to blame.

Henry

October 3, 2008 03:15 PM

Congress: congratulations! You have just committed one of the biggest, most blatent thefts in American history. My prediction: the passage of the Billionaire Bailout Legislation will not do one solitary thing to improve the American economy. In fact, what you just did will make it even worse. What would have been a short and mild recession is now going to turn into a long and very painful recession - maybe even a depression. American working poor and middle class get ready for skyrocketing price inflation while you watch your hard-earned dollars plunge in value. And, furthermore, you will certainly know who to blame.

Henry

October 3, 2008 03:16 PM

Congress: congratulations! You have just committed one of the biggest, most blatent thefts in American history. My prediction: the passage of the Billionaire Bailout Legislation will not do one solitary thing to improve the American economy. In fact, what you just did will make it even worse. What would have been a short and mild recession is now going to turn into a long and very painful recession - maybe even a depression. American working poor and middle class get ready for skyrocketing price inflation while you watch your hard-earned dollars plunge in value. And, furthermore, you will certainly know who to blame.

Henry

October 3, 2008 03:22 PM

Karl, its all over now. Get ready for hyperinflation,i f you havnt already.

WILSON

October 3, 2008 03:36 PM

LOWER PROPERTY TAXES THAT WOULD HELP ALOT AND NOT LOWED BY 10% BUT FOR AT LEAST 25% IF YOU OWN A PROPERTY YOU WOULD UNDERSTAND ME PROPERTY TAXES ARE TO HIGH

Joe 6pack

October 3, 2008 03:51 PM

We will look back as a Country in the not so distant future and greatly regret this day.

Carol

October 3, 2008 05:20 PM

Only our grandchildren will know and understand the "politics" of the passing of this Bill. Like the Iraq War, it is only in retrospect after a few generations that these crisis decisions are examined by neutral parties who are free of the passionate pespective of the moment.

There was never really any choice for our politicians that we send to Washington. They were between a rock and a hard place and there was never any serious doubt that this Bill would pass and that both the majority and the minority positions would be recorded for posterity.

Life will continue and we hope that this works and that the Commissions who look into this matter will have the guts to put some people in jail.

Simone

October 10, 2008 11:51 AM

Congress past bill to support the financial bailout (700 billion dollers) and that the taxpayers are expected to foot the bill! Congress then leaves town letting all of the unemployed workers who have exhausted there benifit hang to dry! Then state that the President will vito this bill is deplorable! Shame on them! We voted these people into office and the only people they care about are themselves.

Thank you for your interest. This blog is no longer active.

 

Election 2008

Washington Bureau Chief Jane Sasseen and other BusinessWeek writers cover the run-up to the Nov. 4 presidential election, paying close attention to how the candidates will handle issues such as housing, the economy, unemployment, and immigration.

BW Mall - Sponsored Links

Buy a link now!