Bailout bill faces crunch US House test

October 3, 2008
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, WASHINGTON, October  3 – Leading Democrats were optimistic that a 700-billion-dollar Wall Street bailout would pass the US House of Representatives on Friday, but uncertainty kept stock markets skittish.

Democratic Majority leader Steny Hoyer said the House would vote on the reworked bill, which sailed through the US Senate Wednesday, Friday morning, with debate starting at 9:00 am (1300 GMT).

"I am hopeful that there will be bipartisan majority support for this bill that is critical to stabilizing our nation\’s economy for all working Americans," he said in a statement.

But global stocks sank heavily with losses in the US and in Asia as some lawmakers continued to make known their opposition to using vast amounts of taxpayer money to bail out Wall Street firms.

The amended version of the plan was laced with 150 billion dollars in tax breaks to coax reluctant lawmakers from both the Democratic and the Republican parties to get on board.

The bill thrown out of the House on Monday was resoundingly passed 74-25 by the Senate, the upper chamber, spurring hopes the House of Representatives might now follow suit.

Just over a month from election day, presidential candidates Barack Obama and John McCain also backed the effort, piling on the pressure after rejection of the bill sent global markets into a spin, causing the largest one-day loss ever on the Dow Jones.

President George W. Bush Thursday joined the groundswell of pressure, urging the House to follow the Senate\’s lead and approve the massive rescue package, warning "people\’s jobs are in jeopardy."

"This issue has gone way beyond New York and Wall Street. This is an issue that is affecting hard-working people," Bush said in his 14th appeal in the past 15 days to lawmakers.

Tennessee Republican Zach Wamp acknowledged Americans were still angry that the taxpayer was picking up the tab for Wall Street\’s mistakes. "They are mad as heck. The average American now stands to lose," he told Fox News.

"But you have got to do what you think is right. I thought the right thing Monday was to vote no. And I think the right thing to do tomorrow is to vote yes."

John Shadegg of Arizona, a leader among conservative Republicans who voted against the bill Monday and called on Treasury Secretary Henry Paulson to resign, told a radio station in his home state that in its amended form he was likely to support it.

Another Republican who initially opposed the bailout, Jim Ramstad of Minnesota, indicated Thursday that he too had changed his mind.

Pelosi sought to explain the days of wrangling since Paulson brought a three-page proposal to lawmakers on September 18, which has now ballooned to more than 400 pages.

"Two weeks ago as many of you know, the administration came to see us, and they lifted a rock and under that rock we saw lots of vermin and we found the bill brought to us unacceptable in a bipartisan way and amended it and further amended in the Senate last night.

"This is only the beginning," Pelosi said, vowing Congress would be holding hearings into how Wall Street led the world\’s largest economy to the brink of disaster.

The administration has said the bailout legislation is direly needed to ease a deepening credit freeze and to ease volatility on global markets.

The rescue bill, like the earlier one rejected by the House, gives the US Treasury power to buy up toxic mortgage debt which has been choking the financial industry.
It would essentially create a 700-billion dollar federal program to buy bad assets from banks and other financial firms at a steep discount.

Backers of the legislation said they hope the federal government will eventually be able to recoup most or all of the money by selling the assets later.

To make the bill more attractive, the Senate raised the ceiling on federal insurance for bank deposits from 100,000 dollars to 250,000 dollars, and added up to 150 billion dollars in tax break extensions for middle class families and business.

They also retained the limits of "golden parachute" severance payments to disgraced Wall Street executives.

Many skeptics still remain however. Nobel Prize-winning economist Joseph Stiglitz warned the rescue package was unlikely to restore economic stability.

"It\’s like giving a massive blood transfusion to a person bleeding from an internal hemorrhage," he said during a speech in Austria.

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