Things to Remember

WASHINGTON - After a week of tumult, an unprecedented government bailout of the financial industry gained ground in the House on Friday and leaders in both political parties expressed optimism the $700 billion measure would clear Congress by day's end for President Bush's signature.
ADVERTISEMENT

With the economy showing fresh signs of weakness, the measure advanced past a key hurdle on a 223-205 vote.

An Associated Press tally showed 22 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, 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.

The Senate passed the measure earlier in the week on a bipartisan vote of 74-25.

"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.

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.

The stock market opened higher on anticipation that the bill would pass, and the financial industry shakeout rolled on unpredictably.

Wachovia announced it had agreed to be acquired by San Francisco-based Wells Fargo & Co rather than by Citigroup. Executives said the new arrangement would keep the Federal Deposit Insurance Corp., on the sidelines, thus preventing any depletion of the government's fund that backs bank deposits.

The FDIC said it was sticking behind the Citigroup plan, leaving the fate of the bank in limbo.

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 conception — the Treasury Department would have $700 billion at its disposal to purchase bad mortage-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.

The legislation had the support of the leadership in both parties — as was the case in the Senate, where it passed on Wednesday on a bipartisan vote of 74-25.

President Bush has been lobbying aggressively for its passage, and 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 two major party presidential candidates, Barack Obama, the Democrat, and John McCain, the Republican also supported the bill and worked to assure its passage.

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, party leaders decided to add legislation extending 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 trickle of converts.

GOP Rep. Ileana Ros-Lehtinen of Florida, said she was switching her "no" vote to a "yes" after the Senate added some $110 million in tax breaks and other sweeteners before approving the measure Wednesday night.

"Monday what we had was a bailout for Wall Street firms and not much relief for taxpayers and hard-hit families," Ros-Lehtinen told The Associated Press. "Now we have an economic rescue package."

Republican Rep. Jim Ramstad of Minnesota also switched to "yes," partly because the Senate attached the mental health measure.

Democratic Rep. Emanuel Cleaver of Missouri was switching, too, said spokesman Danny Rotert, declaring, "America feels differently today than it did on Monday about this bill."

And Democratic Rep. Shelley Berkley of Nevada said she would back the bill after business leaders in her Las Vegas-area district made it clear how much it was needed. She said, "There isn't a segment of the population that hasn't been slammed and is not asking for some relief."