House passes $700B Wall Street bailout
By JULIE HIRSCHFELD DAVIS AND DAVID ESPO
After a week of tumult, an unprecedented $700 billion government bailout of the financial industry passed the U.S. House of Representatives on Friday.
With the election-year economy showing fresh signs of weakness on several fronts, the measure advanced past a key hurdle on a 263-171 vote.
An Associated Press tally showed 29 lawmakers who sent an earlier bailout bill to unexpected defeat on Monday had changed their minds and would vote in favor of the revised legislation, far more than the dozen needed. Officials said changes made to the measure had sparked a far smaller number of defections among previous supporters.
"I'm optimistic about today. We're not going to take anything for granted but it's time to act," said House Republican Leader John Boehner of Ohio.
"I think it will pass," agreed Rep. Jim Clyburn, the chief Democratic vote-counter, as debate unfolded in the House chamber.
On Wall Street, stocks surged ahead of the vote as the Dow Jones industrial average rose nearly 150 points.
The Senate passed the measure earlier in the week on a bipartisan vote of 74-25, and Bush has repeatedly urged Congress to send the bailout to him swiftly to prevent even further economic deterioration.
"No matter what we do or what we pass, there are still tough times out there. People are mad -- I'm mad," said Republican Rep. J. Gresham Barrett of South Carolina, who opposed the measure the first time it came to a vote. Now, he said, "We have to act. We have to act now."
Rep. John Lewis, D-Ga., another convert, said, "I have decided that the cost of doing nothing is greater than the cost of doing something."
Critics were unrelenting.
"How can we have capitalism on the way up and socialism on the way down," said Rep. Jeb Hensarling of Texas, a leader among conservative Republicans who oppose the central thrust of the legislation -- an unprecedented federal intervention into the private capital markets.
It was little more than two weeks ago that Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke concluded that the economy was in such danger that a massive government intervention in the private markets was essential.
The core of the plan remains little changed from its inception -- the Treasury Department would have $700 billion at its disposal to purchase bad mortgage-related securities that are weighing down the balance sheets of institutions that hold them. The flow of credit has slowed, in some cases drying up, threatening the ability of businesses to conduct routine operations or expand.
At the same time, lawmakers have dramatically changed the measure, insisting on greater congressional supervision over the $700 billion, taking measures to protect taxpayers, and insisting on steps to crack down on so-called "golden parachutes" that go to corporate executives whose companies fail.
Earlier in the week, the legislation was altered to expand the federal insurance program for individual bank deposits, and the Securities and Exchange Commission took steps to ease the impact of the questionable mortgage-backed securities on financial institutions.
In the moments before the vote, Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee, pledged "serious surgery" next year to address the underlying causes of the crisis.
If anything, the economic news added to the sense of urgency.
The Labor Department said initial claims for jobless benefits had increased last week to the highest level since the gloomy days after the 2001 terror attacks. Employers slashed 159,000 jobs from their payrolls, the most in five years. That came on top of Thursday's Commerce Department report that factory orders in August plunged by 4 percent.
Typifying arguments the problem no longer is just a Wall Street issue but also one for Main Street, lawmakers from California and Florida said their state governments were beginning to experience trouble borrowing funds for their own operations.
One month before election day, the drama unfolded in an intensely political atmosphere.
Democratic presidential candidate Barack Obama, a supporter of the bill, made calls to members of the Congressional Black Caucus, who publicly credited him with changing their minds.
Rep. Elijah Cummings and Donna Edwards, both Maryland Democrats, were among them. They said Obama had pledged if he wins the White House that he would help homeowners facing foreclosure on their mortgages. He also pledged to support changes in the bankruptcy law to make it less burdensome on consumers.
"It's not too often you get the future president telling you that his priority matches your priority," said Cummings.
Obama's rival, Sen. John McCain, who announced a brief suspension in his campaign more than a week ago to try and help solve the financial crisis, made calls to Republicans. His impact was not immediately clear.
Republican Rep. Sue Myrick of North Carolina, who said she was switching her vote to favor the measure, said of McCain: "They told me he was going to call me. He didn't."
Looking ahead to election day, she added, "I may lose this race over this vote, but that's OK with me. This is the right vote for the country."
The White House issued the latest in a series of grim warnings of the risks of defeat. "If the financial markets fail to function, American families will face great difficulty in getting loans to purchase a home, buy a family car or finance a child's education," it said in a written statement.
The vote on Monday staggered the congressional leadership and contributed to the largest one-day stock market drop in history, 778 points as measured by the Dow Jones Industrial Average.
Across the Capitol, Senate leaders reacted quickly, deciding to sweeten the bill with a series of popular tax breaks as well as spending on rural schools and disaster aid. They also grafted on a bill to expand mental health coverage under private insurance plans.
At the same time, the change in federal deposit insurance and the action by the SEC on an obscure accounting rule helped produce a steady trickle of converts.