WASHINGTON -- The House today approved a $700-billion financial rescue plan -- sweetened by $110 billion in tax cuts -- on a 263-171 vote four days after rejecting it in a move that stunned both Wall Street and Washington.
"We've made this bill better," said House Republican leader John Boehner of Ohio. "Is it perfect? No. But it clearly is better than it was a week ago."
Republicans charging that Speaker Nancy Pelosi (D-San Francisco) had politicized the issue by blaming President Bush's policies for the financial mess on Wall Street that has brought the economic system to a tipping point.
President Bush, in a Rose Garden comment after the vote, doled out praise to Democratic and Republican leaders alike. "By coming together on this legislation we have acted boldly," he said. "We have shown the world that the United States of America will stabilize our financial markets and maintain a leading role in the global economy."
Within 90 minutes of the vote, Pelosi had enrolled the bill with her signature and Bush had signed the historic measure into law.
The rescue plan was proposed by Treasury Secretary Henry M. Paulson as a means of restoring liquidity to a financial system battered by losses on securities tied to troubled home loans. It would give the government the power to buy these securities and get them off the books of banks and other financial institutions.
With Monday's defeat, the stock market tumbled and credit got even tighter. On Wednesday, the Senate voted 74-25 to pass the bill, adding some amendments aimed at persuading some reluctant members of the House. The bill now raises the cap on assets insured by the Federal Deposit Insurance Corporation (from $100,000 to $250,000), lifts the alternative minimum tax on an estimated 24 million taxpayers and extends a popular tax break on research and development costs.
Public opinion has also shifted since Monday's vote. E-mails and calls to Congress had been overwhelmingly against what many voters perceived as a bailout of greedy Wall Street investors and incompetent business executives. And many voters are still calling with outrage, staffers said. But during a two-day recess for the Jewish holidays, many members of Congress went home to their districts and heard from small business owners that the credit crunch was making it harder for them to meet payroll, which could imperil jobs. The Labor Department reported today net loss of 159,000 jobs in September, the ninth straight month the U.S. economy has lost jobs.
"On Monday I cast a blue dog vote," said Rep. Zach Wamp (R-Tenn.), referring to "blue dog" fiscal conservatives. "Today I am casting a red, white and blue vote for this country." Praising the increase in FDIC protections, Wamp quoted investor Warren Buffet as giving his blessings to the package. "We don't have any choice," he said. "Small businesses can't meet their payrolls. Pension funds are upside down." He urged colleagues to "hold your vote over the heart and vote yes."
In the House, where all 435 members are up for election every two years, some said the vote could cost them their seats.
"I may lose my race over this," Rep. Sue Myrick (R-N.C.), who also voted for the bill after opposing it. "But that's OK. Because I believe in my heart I'm doing the right thing."
Preparing for the political fallout, Rep. Jim Marshall (D-Ga.) has already begun airing a TV ad in his district declaring, "I don't like this rescue plan any more than you do.... But I'm not going to stand by and let this crisis undermine our economy and damage the financial future of everyone in America."
Rep. Howard Coble (R-N.C.), who supported the bill after opposing it, said "the sky may fall tomorrow, but it will fall upon my head. It won't fall upon anyone else."
And California Gov. Arnold Schwarzenegger, in a letter read into the record by Rep. Zoe Lofgren (D-San Jose), warned that "the credit market has already frozen up to the point that it chills even the state of California's ability to meets its short-term cash flow needs." California's congressional delegation split 29-24 for the bill on Monday and the governor wrote that without remedy to the credit crunch, the state will be unable to sell voter-approved bonds for highway, school, housing and water construction projects.
Lofgren said that California, with the eighth largest economy in the world, might not be able to meet its payroll by the end of the month.
Critics were still dismissive of the need for a rescue. Rep. Devin Nunes (R-Visalia) argued against giving Paulson the power to buy toxic mortgages. "If the secretary wants to run a hedge fund, he should go back to Wall Street," he said. And some Democrats argued that the rescue plan is nothing more than a bailout for the wealthy on Wall Street. If the House passes the bill, said Rep. Dennis Kucinich (D-Ohio), "the markets may go up for a few days . . . but democracy is going down."
But many Republicans argued that the bill, though distasteful, was, as Rep. David Dreier (R-San Dimas) put it, "a necessary evil."
"This bill bans golden parachutes for those who seek assistance," he said. "But the problem with today's crisis is that responsible people who have followed the rules are suffering too, not just those behaved irresponsibly." Noting that small businesses are losing their lines of credit and parents are finding it difficult to get college loans for their college-bound children, Dreier said the bill does not rescue "the fact cats. The fat cats can take care of themselves. Today we want to rescue the working Americans whose livelihoods are threatened by our current economic situation."
House Democrats tried to show a bipartisan face to colleagues on the Republican side, with Ways and Means Committee Chairman Charles Rangel (D-N.Y.) thanking Republicans for their cooperation. But what seemed to sway reluctant members was the specter that without action the markets would fall again and small businesses and individual constituents in their districts would suffer.
"Do I still have concerns about how this will affect the free market system? Yes," said Rep. Gresham Barrett (R-S.C.) "But we have to act and we have to act now. . . . If we don't solve these problems . . . America will fail."
Pelosi, softening her rhetoric, praised members on both sides of the aisle, saying that thanks to efforts by both parties, the bill was now "much improved" than the three-page proposal sent to Congress by the administration a few weeks ago. Noting that the program will now have more protections and oversight, delighting in some of the amendments like insurance parity for mental illnesses, Pelosi said, "While the focus has been on Dow Jones and Wall Street, we are addressing the real pain felt by Mr. and Mrs. Jones on Main Street."
Vowing that in a new administration "no new deficit spending must be our mantra," she called it "an important vote, a difficult vote, a vote we must win for the American people."