WASHINGTON -- In a stunning reversal the House of Representatives Friday voted 263-171 to pass an historic $700 billion measure to rescue the financial sector, acting just days after initially defeating the plan. President Bush immediately signed the bill into law.
Fifty-eight lawmakers who opposed the bill — the biggest government market intervention since the Great Depression — when it was defeated Monday by a 228-205 vote reversed their position and voted "yea." The chamber burst into applause when the measure topped the 218-vote hurdle needed for passage.
The Senate approved the measure Wednesday 74-25.
"By coming together on this legislation we have acted boldly to help prevent the crisis on Wall Street from becoming a crisis in communities across our country," Bush said at the White House after the bill was approved.
But he warned that "it will take some time for this legislation to have full impact on our economy ... it will require a careful analysis and deliberation ... it cannot be accomplished overnight."
The president thanked lawmakers for their bipartisan effort.
"Our eye now is to the future, to shine the bright light of accountability on the financial markets so it doesn't happen again," said Speaker Nancy Pelosi, D-Calif. "Fortunately we had a strong bipartisan vote, but we knew we'd be strong enough to pass the bill today."
She promised to hold hearings into why the financial crisis happened.
"Nobody in east Tennessee hates more than me" the fact I'm changing my vote, said Rep. Zack Wamp, R-Tenn., explaining he had cast a blue collar vote against the bill Monday to protect his workers from bailing out Wall Street.
On Friday, Wamp said he would cast a "red, white and blue collar vote with my hand over my heart ... things are really bad, we don't have any choice."
The legislation will allow the Treasury Secretary to buy troubled mortgage-backed securities and other assets to help unlock credit markets.
The plan is designed to free up capital so financial firms can increase lending, improve confidence and help place a floor under asset prices, including home prices.
Congressional leaders in the past several days paved the way for the successful vote by adding a provision to the measure to temporarily increase to $250,000 from $100,000 the amount of personal savings accounts, certificates of deposit and other bank deposits covered by the Federal Deposit Insurance Corp.
The Senate also added a $107 billion package of tax breaks, including an effort to shield nearly 25 million Americans from the Alternative Minimum Tax — a parallel tax system that eliminates many popular deductions and credits.
The AMT was initially aimed at wealthy taxpayers, but is hitting more and more middle class workers.
The Bush administration said separately it would take another look at rules for accounting for troubled assets that business leaders say have contributed to market woes.
But the overriding factor turning the debate around appeared to be the increasing turmoil in international credit markets just since Monday — and rising evidence the U.S. economy is falling into a recession.
A downturn likely won't be avoided if the measure passes, but policymakers hope the plan will help to keep the economy from getting far worse.
Lawmakers said more and more businesses were calling them to report problems obtaining needed loans.
Phone calls and emails from voters that had initially been overwhelmingly opposed to the plan were turning into pleas for action.
The Labor Department Friday reported a larger-than-expected rise in joblessness, with firms shedding 159,000 workers in September. California lawmakers said state officials had called them to warn that the state is having trouble obtaining needed short-term credit to fill a $7 billion budget gap.
While saying the "boy geniuses on Wall Street" did not deserve to be rescued, Rep. David Obey, D-Wis., argued for action, saying that the pain of the financial system meltdown was spreading nationwide.
"Sometimes in life if we're responsible we have to clean up not just the messes that we've created, but the messes that others have created as well."
And some lawmakers attributed their changed vote to efforts by Democratic presidential candidate Barack Obama. Elijah Cummings, D-Md., one of those who ended up voting "yea" on Friday said he had talked at length with Obama.
Lawmakers during debate Friday implored the Treasury Department to go well beyond buying mortgage-backed securities and use its new authroity to aid firms making auto loans, student loans and other business assistance.
But not everyone was swayed. Rep. Jeb Hensarling, R-Tex., a leader of the House conservatives said despite his increasing fears about the economy, he was not convinced the measure would truly work, and feared it would fundamentally change the nature of government.
"How can we have capitalism on the way up, and socialism on the way down?" Hensarling said. "If we lose our ability to fail will we not soon lose our ability to succeed."
His statement caused Financial Services Committee Chairman Barney Frank, D-Mass., shepherding the plan through the House, to quip that he would be "ever mindful of the danger that President Bush will lead us down the road to socialism."
Supporters of the bill noted they had forced the Treasury Department, which initially sent a three-page document to Congress, to accept a number of significant changes.
As passed the bill will:
— Require the Treasury Department to work to restructure many of the mortgages it purchases to aid homeowners facing foreclosures. Negotiators dropped a provision sought by Democrats to allow judges to reduce mortgage debt in bankruptcy court.
— Curtail so-called "golden parachutes," huge compensation packages, to departing executives at firms that sell assets to the government.
— Allow the government to take an ownership share in companies that sell assets to the Treasury Department, to ensure that taxpayers share in any possible profits from the program.
— Set up a series of oversight boards to keep tabs on the Treasury Department's management of the program, and requiring electronic filing of asset sales and purchases.
The vote is just the beginning of heightened Congressional action.
House committees have already scheduled hearings to examine the causes of the historical turmoil in credit markets, to investigate whether oversight of sophisticated credit products is sufficient and to start to work out a plan to revamp the nation's financial regulatory system.