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Lawmakers scramble to revise bailout bill
Bush implores passage
Associated Press

President Bush makes a statement about the economic bailout bill and financial crisis Tuesday.

 

Associated Press

The Capitol Dome is seen near sunset in Washington Monday. In a stunning vote that shocked the capital and worldwide markets, the House on Monday defeated a $700 billion emergency rescue for the nation's financial system.

 

Associated Press

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Published: 9/30/2008 12:06 AM | Updated: 9/30/2008 3:41 PM

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WASHINGTON -- Congressional leaders scrambled Tuesday to come up with changes to help them sell the failed $700 billion U.S. financial bailout to rank-and-file members. One idea gathering support: raise the federal deposit insurance limit to reassure nervous savers and help small businesses.

Presidential rivals John McCain and Barack Obama announced separately that they support a plan that some House Republicans had pushed earlier: raising the limit from $100,000 to $250,000. Within hours, the Federal Deposit Insurance Corp. chairman asked Congress for temporary authority to raise the limit by an unspecified amount.

That could help ease a crisis of confidence in the banking system, said chairman Sheila Bair.

President George W. Bush spoke with both nominees during the day and made another statement in the White House. "Congress must act," he demanded in front of the cameras.

European and Asian leaders, whose economies face growing uncertainty after the defeat of the U.S. relief package, urged the United States to find a quick solution for the good of its economy and the global financial system.

As the pace of legislative jockeying quickened, the atmosphere on Wall Street seemed to be improving. The Dow Jones industrials rose nearly 500 points on the day after it had plunged 788. But more attention was on credit markets as a key rate that banks charge each other shot higher, further evidence of a tightening of credit availability.

"I recognize this is a difficult vote for members of Congress," Bush said. "But the reality is we are in an urgent situation and the consequences will grow worse each day if we do not act."

Republican House aides said the FDIC proposal might attract some conservatives who want to help small business owners and avert runs on banks by customers fearful of losing their savings.

House Republican leader John Boehner welcomed McCain's and Obama's embrace of a higher insurance cap, saying congressional Democrats had rejected it Saturday.

Another possible change to the bill would modify "mark to market" accounting rules. Such rules require banks and other financial institutions to adjust the value of their assets to reflect current market prices, even if they plan to hold the assets for years.

Some House Republicans say current rules forced banks to report huge paper losses on mortgage-backed securities, which might have been avoided.

Liberal Democrats who opposed the bill are suggesting other changes. Their ideas include extending unemployment insurance and banning some forms of "short selling," in which investors bet that a stock's value will drop.

The White House signaled a willingness to accept some changes to the bill. Spokesman Tony Fratto said there are plenty of good ideas to help the financial markets and "we're going to look at all of those."

Senate Banking Committee Chairman Christopher Dodd, a Democrat, told reporters, "I'm told a number of people who voted 'no' yesterday are having serious second thoughts about it." He added, however, "There's no game plan that's been decided."

Senate Republican Leader Mitch McConnell said it was time for all lawmakers to "act like grown-ups, if you will, and get this done for all of the people." He predicted a bill would pass this week, although the House, not the Senate, is the focus of the dispute.

The House on Monday balked at approving the measure, pilloried in many quarters as a handout to big business. The 228-205 vote sparked the largest sell-off on Wall Street since shortly after the Sept. 11, 2001, terror attacks.

Bush noted that the maximum $700 billion in the proposed bailout was huge, but was dwarfed by the $1 trillion in lost wealth that resulted from Monday's stock market plunge.

"Because the government would be purchasing troubled assets and selling them once the market recovers," he said, "it is likely that many of the assets would go up in value over time. Ultimately, we expect that much -- if not all -- of the tax dollars we invest will be paid back."

"The dramatic drop in the stock market that we saw yesterday will have a direct impact on retirement accounts, pension funds and personal savings of millions of our citizens," Bush said. "And if our nation continues on this course, the economic damage will be painful and lasting."

Some lawmakers reported a shift in constituent calls pouring into their offices. Calls and e-mails were overwhelmingly opposed to the rescue plan before Monday's vote, many offices said. But Monday's stock market dive prompted calls Tuesday from Americans furious about Congress' inaction, some said.