Senate to vote on bail-out, warn against fresh failure
The US Senate was to vote Wednesday evening on a new version of the 700-billion-dollar financial rescue plan as politicians warned that the US economy might not survive another legislative failure, dpa reported.
Democrats who control the Senate and minority Republicans hammered out a new deal, increasing guarantees on bank savings and adding tax provisions, after the original bail-out plan was surprisingly defeated in the lower House of Representatives on Monday.
"If the financial bill fails in Congress yet again, the present crisis will turn into a disaster," warned Republican presidential candidate and Arizona Senator John McCain.
McCain will return to Washington for Wednesday night's vote along with Democratic nominee Barack Obama and his running mate Joe Biden - both senators.
The defeat of the bill on Monday in the House in a 228-205 vote was followed by a one of the largest drops in Wall Street's history and stock markets worldwide. Markets rallied Tuesday and traded only slightly lower Wednesday.
All the world's eyes were on the Senate as the uncertainty on US markets spilled over internationally. Leaders of the four European members of the Group of Eight industrial nations said they would meet Saturday in Paris to consider their own response to the economic crisis.
The European Commission, the European Union's executive body, on Wednesday called for tighter rules on bank security and supervision as the global financial storm showed no signs of abating.
Government officials and Senate leaders on both sides of the aisle urged their colleagues to pass the newest version, insisting it contained enough guarantees to protect taxpayers and should not be viewed as a no-strings bail-out of Wall Street investors.
"The bill is different. It's been improved. And I'm confident it will pass," President George W Bush said at the White House. He said the bill was necessary to bring stability back to the financial markets and pointed to signs that credit availability was drying up across the United States.
The House bill failed as constituents flooded lawmakers with emails and phone calls demanding they not back legislation viewed as rewarding the greed of investment banks and bankers that caused the current crisis.
The House could vote on a revised version as early as Friday.
A Washington Post-ABC News poll Wednesday showed that most Americans believe there is a financial crisis, with about 90 per cent concerned that Monday's failure of the bill could prompt further decline. Still, just 45 per cent of 520 people surveyed supported the House version.
Supporters of the bill took pains Wednesday to frame what began on Wall Street as a threat to average Americans, endangering the availability of credit for everything from houses to cars to student loans and small businesses.
"This isn't for lower Manhattan ... this is for people to keep their jobs," said Majority Leader Harry Reid, the top Democrat in the chamber.
Obama called it an "outrage" that the financial sector had allowed such a crisis to strike the country, but he warned that the economy was facing a "very dangerous situation" that required congressional action.
The proposal for the federal government to buy up soured mortgage- backed securities and other "toxic" investments, as a mechanism to restart shattered credit markets vital to the US and global economies, was first put forward two weeks ago by US Treasury Secretary Henry Paulson.
Monday's failure in the House, with two thirds of Republicans and two fifths of Democrats voting no, was a humiliation for the congressional leadership of both parties, just one month before presidential and legislative elections.
It was also a repudiation of Paulson and his boss, President Bush, whose approval ratings with less than four months left in office are below 30 per cent.
Mitch McConnell, the top Republican in the Senate, said a successful vote Wednesday will demonstrate "to the American people that we can deal with a crisis in the most difficult times, just before an election."
Among the revisions added to the Senate legislation were an increase in government-backed guarantees for bank deposits from 100,000 dollars to 250,000 dollars. The increase will last one year.
Also included are extensions of tax credits for renewable energy and small businesses as well as changes to the Alternative Minimum Tax that hits the incomes of middle-class Americans. The additions are aimed mainly at placating House Republicans.
After Monday's drop of nearly 7 per cent in the Dow Jones Industrial Average, Wall Street rebounded Tuesday on renewed hopes for a deal, with the blue-chip index regaining 4.7 per cent. The Dow was trading down only about 0.2 per cent Wednesday.