Friday, October 3, 2008

Financial Rescue Bill Prepares for House Vote

On the eve of one of the biggest Congressional votes in years, U.S. lawmakers who helped defeat a financial-market rescue package on Monday are reconsidering their votes. At least eight lawmakers, including Republican Zach Wamp (TN) and Democrat Emanuel Cleaver (MO), now say they would support the measure. Four others say they may switch their ballots before the House votes on Friday around 12:30 EDT.

The legislation allows the government to buy troubled assets from financial institutions. It contains provisions favored by House Republicans, including $149 billion in tax breaks, a higher limit on federal bank deposit insurance (FDIC) and securities law changes.

It also reiterates securities regulators' authority to suspend asset-valuing rules (mark to market) that most corporate executives blame for fueling the crisis. The Senate on Wednesday night approved the $700 billion bill, 74-25.

"I feel very comfortable about where we stand," House Majority Whip James Clyburn, the Democrats' top vote-counter, told reporters.

Swaying Lawmakers

The add-ons helped sway lawmakers such as Jim Gerlach (R-PA) as did phone calls from his suburban Philadelphia constituents. Many of his supporters shifted from opposing the bailout to supporting it following the record 778-point drop in the Dow after the House's 228-205 defeat of the bill on Monday.

Lawmakers switching their votes to yes from no also include Democrats Shelley Berkley (NV) and Gabrielle Giffords (AZ) and Republicans Ileana Ros-Lehtinen (FL), John Shadegg (AZ) and Jim Ramstad (MN). At least three other Republicans, Gerlach and Tim Murphy (PA) and Patrick Tiberi (OH), and Democrat Bill Pascrell (NJ) may also vote yes on the measure.

At a meeting of Democrats on Thursday night, Representative John Lewis (GA), who serves under Clyburn as a party whip, announced to the caucus that he would switch his vote from no to yes and gave a speech urging others to do the same to help boost the flagging economy, a Democratic aide who spoke on condition of anonymity said.

"Action Is Necessary"

House Majority Leader Steny Hoyer spoke by phone tonight with Republican Whip Roy Blunt to see if there were enough votes to pass the measure. Both agreed to go ahead with the vote. Clyburn, Blunt's Democratic counterpart, said Democrats have more votes for the bill than the 140 they garnered on Sept. 29.

"There is a broad feeling that the economy is at risk and that average Americans will be badly hurt if the economy continues to go downhill, and that action is necessary," Hoyer said.

Minority Leader John Boehner said the rescue plan won't come up for a vote until leaders are confident it will pass. "We're getting there, one (vote) at a time," said Boehner.

Republicans also cited the economy as the main reason they were switching their vote.

Credit Issues

Shadegg, who opposed the measure earlier this week, said on Bloomberg Television that he'll now support it, citing a "breakdown" in credit markets that makes it difficult for small businesses to pay employees. Ros-Lehtinen said in a statement that she will back the bailout because it boosts FDIC limits and adds tax breaks for families.

Republican leaders suggested the market reaction may spur some in their ranks to change their minds on the bill. "The big drop really had a chilling effect on a lot of our members and a lot of their constituents," Boehner said on Fox.

Also, the market for commercial paper, short-term borrowing by businesses, suffered the biggest one-week drop on record, the Federal Reserve said today. The amount of commercial paper outstanding fell by $94.9 billion, or 5.6%, during the week ended Oct. 1.

Senate Tax Break Amendments

The Democratic-controlled Rules Committee said no amendments would be allowed.

The tax provisions are anchored by a $62 billion measure that stops the alternative minimum tax from taking effect for about 24 million American households this year. The levy, designed to target millionaires, now affects households with incomes as low as $50,000 and would cost each household about $2,000 this year if Congress fails to act.

A second clause would renew dozens of expired tax breaks relied on by businesses, including a research tax credit worth billions to thousands of companies. Other provisions include a tax break for companies that finance equipment sales overseas such as General Electric.

The third prong would renew about $17 billion worth of incentives for companies that produce energy from renewable sources such as solar and wind.

Sources: Bloomberg, Reuters, Yahoo

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