CQ TODAY ONLINE NEWS
– ECONOMIC AFFAIRS
Updated Oct. 1, 2008 – 2:21 p.m.
Senate Bailout Vote Will Put House on Spot Again
By Benton Ives, Richard Rubin and Joseph J. Schatz, CQ Staff
The Senate, in a high-stakes gamble, plans to vote Wednesday night on a massive financial rescue plan, after attaching a tax-break package and adding higher insurance limits for bank deposits.
With leaders of both parties pushing for passage and the rival presidential candidates returning to Washington to lend their support, the combined bill is expected to pass with a substantial majority in the Senate.
Whether the latest version will fare better in the House than the bill defeated two days ago remains to be seen. But it appeared that the Senate add-ons, coupled with a regulatory change easing corporate accounting rules for valuing frozen assests, could give some House Republicans a reason for switching their votes from “no” to “yes.”
A full-scale push was under way to pick up more votes in the House, especially from Republicans who had refused to support the original bailout bill by better than 2-to-1.
House Majority Whip James E. Clyburn , D-S.C., said the House would vote on the legislation Friday, assuming it passes the Senate. House Democrats will caucus Thursday evening at 6 p.m.
And House Majority Leader Steny H. Hoyer , D-Md., made clear Democrats expect Republicans to come up with the additional votes needed to pass the revised bll.
He noted that on Monday, Democratic leaders had delivered all the Democratic votes — 140, or 60 percent of their membership — that they had vowed to produce. Republican leaders, he said, failed to come up with 100 votes they had targeted. Only 65 Republicans voted for the bill on Sept. 29; 133 voted “no.”
Although Hoyer expressed disappointment that the Senate insisted that the House accept its tax extender package, he nonetheless said Democratic would press ahead.
“Members of the House leadership on both sides of the aisle are talking to our colleagues, and if there is bipartisan, majority support for the Senate package we will likely bring it to the floor on Friday,” he said.
Democratic leaders said two days ago that they had delivered all the Democratic votes — 140, or 60 percent of their membership — that they considered achievable. They said Republican leaders had failed to come up with votes they had promised. Only 65 Republicans voted for the bill on Sept. 29; 133 voted “no.”
Plenty of Democrats remain unhappy with the core bill, not to mention the tax add-ons. There was some discussion of trying to add foreclosure assistance provisions in the Senate but it was not clear how far that idea would get.
President Bush was making calls to senators, trying to line up votes for the plan, and planned to call House members later, according to deputy White House press secretary Tony Fratto.
The Senate will offer the bailout and tax-extenders language as a substitute amendment to a House-passed mental health parity bill (
Senate Bailout Vote Will Put House on Spot Again
The development triggered major new lobbying push from the nation’s business community, led by the U.S. Chamber of Commerce, which quickly announced it would treat votes on the combined package as key votes on its annual scorecard.
“Approving this legislation is vital to preventing catastrophic disruption in our financial markets and a steep and prolonged decline in the economy,” the Chamber said. “Failure to approve this legislation will wreak intolerable hardship on average Americans.”
The measure’s core provisions, which would authorize the Treasury to buy up to $700 billion in troubled assets now clogging the books of financial institutions, are essentially unchanged from the version (
The one difference is an expansion, through 2009, of Federal Deposit Insurance Corp. protection for bank accounts. The bill would temporarily increase insurance coverage to $250,000 per account from $100,000. That is designed to help small businesses and community banks in particular.
More controversial was the decision to attach the entire Senate tax extenders package (
Republicans prefer the Senate tax plan, which is only partially offset with revenue raisers, to the House Democrats’ approach, which would require full offsets for all but disaster tax relief and a patch to keep the alternative minimum tax from hitting millions more Americans.
Meanwhile, the chairmen of the Senate and House committees who helped draft the bailout measure, Sen. Christopher J. Dodd , D-Conn., and Barney Frank , D-Mass., were discussing the possibility of adding provisions before the Senate vote to make the measure more palatable to House Democrats, including more foreclosure assistance.
But Sen. Kent Conrad , D-N.D., chairman of the Senate Budget Committee, said, “I think it is too late. We have spent a lot of time on the refinement of this package. Could a change be made? I think it’s too far along now to add anything.”
Mark-to-Market Rule Relaxed
One development that might help pick up House Republican votes for the bailout package was a move late Tuesday by the Securities Exchange Commission and the Financial Accounting Standards Board to “clarify” so-called mark-to-market rules that companies said were making their financial condition appear worse than it actually is.
Businesses and GOP members had urged a major overhaul of the rule, which requires companies to list the market value of assets on their books — a figure that has become almost impossible to discern for some mortgage-backed securities and other assets that can be sold only at fire sale prices, if at all.
The new SEC guidance would, among other things, allow companies to use their internal assumptions about the value of illiquid securities in their public accounting.
“When an active market for a security does not exist, the use of management estimates that incorporate current market participant expectations of future cash flows, and include appropriate risk premiums, is acceptable,” the SEC statement said.
Senate Bailout Vote Will Put House on Spot Again
House Minority Leader John A. Boehner , R-Ohio, on Wednesday called the relaxation of the accounting rule “an important step forward in reforming our financial markets and stopping a financial collapse.”
Boehner called the change “another victory for House Republicans in the bipartisan economic rescue discussions between Congress and the administration.”
Rep. John Shadegg , R-Ariz., an influential member of the conservative Repubican Study Committee who voted against the original bill, praised the inclusion of the FDIC insurance increase and the accounting rule change.
“If they make both of those changes, I’d be inclined to vote for the bill, assuming there have not been any bad things added to it,” he said on KTAR.com.
Not every Republican was ready to reconsider.
Rep. Shelley Moore Capito , R-W.V., who also voted against the original bailout bill, said she was pleased by both the FDIC coverage increase and the change in the mark-to-market accounting rule.
However, she said, she remained “concerned about the amount of tax dollars such a proposal would involve and believe we must have more substantial oversight of this sort of program.”
Sen. Roger Wicker , R-Miss., said the new package, while “an improvement,” was still at its core “the same plan that calls on taxpayers to go $700 billion further into debt in an attempt to fix this problem, while doing absolutely nothing to prevent it from happening again. I have strong philosophical differences with this approach, and I will not vote to support it.
Senate Minority Leader Mitch McConnell , R-Ky., said the decision to combine the tax package and the FDIC increase with the original bailout bill offered “a way to go forward, and to get us back on track.”
He said the bailout bill, however unpalatable to voters and most lawmakers, “is designed to shield millions of Americans from the shock waves of a problem they didn’t create.”
He said it was essential to get credit flowing through the financial system again.
Fratto, at the daily White House briefing for reporters, stressed the damage to credit markets of failing to act.
“I think what members of Congress and senators are seeing in recent days is more news in terms of how the credit squeeze is affecting everyday Americans, and I think they’re also starting to hear from other public officials and business groups to express more clearly just the strains that they are dealing with in this current environment and the urgency for addressing it,” he said.
Senate Bailout Vote Will Put House on Spot Again
Bart Jansen, Jonathan Allen and Edward Epstein contributed to this story.
First posted Oct. 1, 2008 11:17 a.m.
Comments
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