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Posted by: Theo Francis on October 01
By Theo Francis and Jane Sasseen
In the first anti-climax of the legislative drama that started 13 days ago with a market slide and rumblings of a rescue proposal from Treasury Secretary Henry Paulson, the Senate passed a much-embellished version of his $700 billion proposal by a wide margin, 74-25.
Senators Barack Obama and John McCain returned to Washington from the campaign trail to vote for the bill, while Joe Biden interrupted preparation for Thursday’s vice presidential debate. Both Obama and McCain had called on Congress to act quickly, echoing President Bush, who warned of grave danger to the economy if the bill wasn’t passed soon. Bush has said he will sign it. Both candidates left soon after the vote, skipping a press conference afterward at which Senate Majority Leader Harry Reid praised the chamber. “We worked together for the good of the country,” he said. “We will not let the economy fail.”
Sen. Mitch McConnell, the Senate minority leader, called the bipartisan vote particularly remarkable coming five weeks before the election, and called both Obama and McCain “constructive.” He added, “This has been the Senate at its finest.”
Few expected any drama in the vote; for days now, the Senate was believed to be more amenable to the measure. The market’s plunge after the House failed to pass a similar measure, plus heavy lobbying by business groups and others helped seal the deal. As expected, holdouts included Sen. Richard Shelby (R-Ala.), who has made known his distaste for government intervention on this scale from the start, as well as Senators Elizabeth Dole (R-N.C.), Jim DeMint (R-S.C.) and Jeff Sessions (R-Ala.). Some Democrats voted no as well, including Senators Mary Landrieu (D-La.), Jon Tester (D-Mont.) and Byron Dorgan (D-N.D.).
Now the show moves to the House, which is expected to take up the bill Friday. There, leaders have said they believe they have the votes to pass it. On Wednesday night, ABC News reported that Rep. John Shaddeg (R-Ariz.), previously an opponent of the measure, said he would vote for it.
But GOP leaders had been confident Monday, too, not long before the bill went down 205-228. “Let’s hope they’ve done a better job counting this time — otherwise, we’re right back to where we were on Monday,” says one lobbyist closely following the bill’s progress. And many lobbyists, lawmakers and staffers worry that the very measures added in the Senate to make the bill more palatable to Republicans could doom it in the House, where they may offend other factions — or spark demands for other, counterbalancing additions.
“Things in are going to get sticky in the House,” said a business lobbyist involved in the fight. Fiscally conservative “Blue Dog” Democrats don’t like the tax-break extensions the Senate added without paying for them, because they would increase the deficit. On the left, many say the new bill was larded up for business interests, while offering little aid to families and struggling homeowners; they could still refuse to go along with the bill unless it includes more aid to local and state government, or fiscal measures such as an extension of unemployment benefits. With the latter in particular, “they’ll have to be careful,” Brian Gardner, a Washington analyst with Keefe Bruyette & Woods, says of the Democratic leadership. “It may have legs with Democrats, but they run the risk of losing Republicans.”
Then there are those, chiefly the conservative Republicans who bolted on Monday, who are philosophically opposed to any significant market intervention. “That said, the market drop has scared people. So constituent views have started to shift,” the business lobbyist said. “That may help.”
At its core, the measure is still Paulson’s baby — albeit swollen from three pages to more than 400. It gives him authorization to take up to $700 billion of taxpayer money into the marketplace to buy up mortgage-related assets, in a bid to improve the balance sheets of financial companies and restore confidence. “This sends a positive signal that we stand ready to protect the U.S. economy by making sure that Americans have access to the credit that is needed to create jobs and keep businesses going,” Paulson said in a statement after the vote. “I urge the House to act promptly to pass this bill.”
But the bill is now wrapped in three layers of compromises brokered to try to ensure passage.
Most recently added are the business tax breaks -- many for green-energy initiatives -- an extension of a fix for the Alternative Minimum Tax, and most importantly, the increase of federal deposit insurance for individuals from $100,000 to $250,000. House leaders suggested Wednesday that they would prove sufficient to gain the support of the dozen Republicans needed to turn Monday's losing vote to a winner. The whole deal was attached, for procedural reasons, to a so-called mental-health parity bill that had already passed the House, which requires insurers to treat mental illness much as they do other health problems.
Under that new gloss, the bill includes most of the key elements added over the weekend -- the last round of compromises meant to win Republican support -- including an optional program for the government to insure troubled assets instead of buying them (a program Paulson has said he doesn't need). Most of the additions from the first week of talks remain as well, including congressional oversight, executive-compensation restrictions and a mandate for the government to take unspecified ownership stakes in companies selling assets to the Treasury, plus vaguely worded provisions requiring the Treasury to help homeowners facing foreclosure.
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.