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Congress leaders optimistic on revived bailout
By JULIE HIRSCHFELD DAVIS and ANDREW TAYLOR, Associated Press Writer
WASHINGTON - The Senate pushed toward passage Wednesday of a $700 billion financial industry bailout, and opposition to the package among House Republican conservatives appeared to be softening as well, thanks partly to a provision to increase insurance for people's deposits.
Congressional leaders from both parties said they were hopeful that a new version of the rescue plan could be cleared late this week despite its stunning House defeat on Monday that sparked a historic stock sell-off. House Democratic leaders tentatively planned a Friday vote.
One House Republican who joined two-thirds of GOP lawmakers Monday in voting "no" indicated he was reconsidering. Others were also said to be pondering a switch.
Rep. John Shadegg of Arizona, a leading conservative who voted no on Monday, told a Phoenix radio station Wednesday that he'd be "inclined to vote for the bill" if it raised the cap on federal deposit insurance and changed a rule that forces companies to devalue assets on their balance sheets to reflect the price they can get on the market.
Rep. Steve LaTourette, R-Ohio, when asked if was ready to switch from no to yes, said: "Not yet, but it's getting there."
The legislation essentially would allow the government to buy bad mortgages and other devalued assets held by troubled financial institutions. If successful, advocates of the plan say, that would help lift a major weight off the already sputtering national economy and benefit companies large and small as well as individual Americans.
The revised package to be voted on in the Senate also would add $100 billion in tax breaks for businesses and the middle class besides temporarily increasing the deposit insurance cap from the current $100,000 to $250,000. Meanwhile, the Securities and Exchange Commission has said it is easing the accounting rules in some cases.
In a statement Wednesday, Rep. John Boehner, R-Ohio, the minority leader, called both "a victory for House Republicans," although some Democrats have backed the FDIC move.
Congressional leaders said the changes should improve the package's chances — a message they hoped wouldn't get lost on a convulsive Wall Street. Stock prices were basically flat by late afternoon, as investors awaited news on the economic rescue legislation.
Some also saw heightened chances of passage based on a flood of e-mails, calls and letters from constituents chiding Congress for inaction on the financial crisis. The feedback indicated greater public acceptance of the measure — if not a collective embrace — by voters about five weeks before the elections.
House Minority Whip Roy Blunt, R-Mo., said calls and e-mails to congressional offices that were running about 90 percent against the measure earlier now are coming in about a "50-50" pace.
Democratic presidential nominee Barack Obama and his GOP rival, John McCain, planned to fly to Washington for the Senate vote, as did Democratic vice presidential nominee Joe Biden, and the White House continued to lobby hard, both publicly and privately.
At the daily briefing Wednesday, White House spokesman Tony Fratto took the unusual step of citing The New York Times, as well as other newspapers across the country that carried stories on the tightening credit squeeze on small businesses, municipal projects and jobs. "It is affecting real Americans out there," he said.
Officials in both parties predicted the measure would pass the Senate by a wide margin.
Behind the scenes, the president was conferring with Treasury chief Henry Paulson and Federal Reserve Chairman Ben Bernanke to get an update and to plot strategy.
Spokesman Fratto called the increased deposit insurance "an important improvement" to the bill, and also welcomed the added tax breaks, calling them "helpful" despite the White House's initial desire for a clean bill.
Scrambling to revive a package that met with bitter derision among constituents who viewed it as a giveaway to Wall Street, the Senate added sweeteners designed to please rural lawmakers, including disaster aid for hurricane-battered states and money for rural schools. The package was hitching a ride on a popular measure to require health plans for 51 or more employees to give equal treatment to mental health or addiction if they cover such illnesses.
House Democrats also asked senators to add a provision boosting the tax break for homeowners who do not itemize their tax returns. Another provision would extend the deductibility of state and local taxes for people in states without income taxes, which includes Florida and Texas.
House Democratic Leader Steny Hoyer of Maryland said, however, he was concerned that the tax additions could complicate the chances of final congressional passage when the legislation comes back to the House floor for a vote.
There are worries that fiscally conservative House Democrats known as "Blue Dogs" will be repulsed by the tax breaks because they believe cuts should be bankrolled with spending cuts or other tax increases.
The tax plan passed the Senate last week on a 93-2 vote. It included relief from the alternative minimum tax, $8 billion in tax relief for those hit by natural disasters in the Midwest, Texas and Louisiana, and some $78 billion in renewable energy incentives and extensions of expiring tax breaks. All told, it would cost about $112 billion over five years.
