House Approves Financial-System Bailout

WASHINGTON (MCT) - Besieged by pleas from its constituents, from corporate executives to struggling wage earners, the House of Representatives reversed itself Friday and approved the controversial $700 billion financial-system rescue plan, designed to keep the nation from falling into an economic abyss.

The 263-171 vote reversed the House's rejection of the bill Monday and came two days after the Senate passed a revised version of the plan, including $110 billion in unrelated tax breaks and other incentives aimed at converting House members to back the bill. In the end, 172 Democrats and 91 Republicans joined forces to pass the measure and send it to President Bush to sign into law.

House members who changed their votes from no to yes said they were torn by the choice of accepting an imperfect solution or facing a deepening financial crisis if they failed to act. Several Democrats said they responded to personal appeals from Democratic presidential nominee Barack Obama, who, along with his Republican opponent, John McCain, voted for the bill in the Senate.

Rep. Jim McGovern, D-Mass., summed up the feelings of many of his colleagues when he described the legislation as "far from perfect" but acknowledged: "The way I see it we don't have much choice."

Coming on the final day of the 110th Congress and just weeks before the elections Nov. 4, the multifaceted rescue package is intended to help unfreeze credit markets and ease financial distress across the economic spectrum. Lobbyists from banks and giant corporations joined ordinary citizens throughout the week in urging House members to support the bill.

Public opinion earlier ran strongly against the measure _ widely perceived as a bailout for Wall Street _ but sentiment shifted after the first House vote, when a stock market plunge hammered millions of stock-backed 401(k) retirement plans.

The bill essentially would create a $700 billion federal program to buy bad assets from banks and other financial firms at a steep discount. The hope is that the government would recoup much or all of that money by selling the assets later, once stability returns to the financial world.

The measure includes strong terms to ensure legislative oversight of the Treasury-run bailout and would give the government an ownership stake in the firms that it aids. That would give taxpayers a share of any profits once the companies return to profitability.

It also would limit the pay of executives in firms that benefit from the bailout.

The Senate version made one significant change to the earlier financial-rescue package: It more than doubled the insurance that the Federal Deposit Insurance Corp. provides on customer deposits to $250,000 from $100,000. The higher amount would apply for one year.

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The FDIC also was granted temporary powers to borrow without limit from the Treasury to keep the banking system solvent. Economists think that the FDIC measures will boost confidence in small community banks.

The extra tax breaks the Senate added range from a one-year fix to prevent the alternative-minimum tax from hitting more taxpayers to extending the research credit for business to allowing rural utilities to issue tax-exempt bonds for use of renewable energy.

Also included were terms extending tax breaks for motor-sports racing tracks, makers of wooden arrows for children and the rum excise tax for Puerto Rico and the Virgin Islands.

The breaks would cost the Treasury an estimated $110 billion over 10 years, according to Congress' Joint Committee on Taxation.

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