President Bush's plan to rescue U.S. financial markets is headed for a Senate vote Wednesday night after leaders there agreed to add tax breaks for businesses and the middle class and increase deposit insurance in an attempt to revive the legislation rejected by the House.
The surprise move by Majority Leader Harry Reid, D-Nev., and Minority Leader Mitch McConnell, R-Ky., appeared likely to win a big vote in the Senate that would put pressure on the House to go along and send the measure to the White House.
Democratic presidential nominee Barack Obama and his GOP rival, John McCain, planned to fly to Washington for the Senate vote, as did Democratic vice presidential nominee Joe Biden.
Adding a set of popular business tax breaks and legislation to prevent more than 20 million middle-class taxpayers from feeling the bite of the alternative minimum tax promised to win House GOP votes for the plan even as it angered moderate "Blue Dog" Democrats concerned about the tax cuts adding to the deficit.
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House Speaker Nancy Pelosi, D-Calif., issued a statement that suggested she does not like the move but did not reveal her plans. Another House vote on the rescue plan could come by week's end.
"The Senate will vote tomorrow night and the Congress will work its will," Pelosi said Tuesday. The expected support of both Obama and McCain, however, makes it difficult for Pelosi to ship the measure back to the Senate with a different set of vote-getting add-ons.
The Senate legislation also will contain an increase in the government's $100,000 cap on insured bank deposits, part of a move by lawmakers, Bush and the two presidential candidates to try to reassure markets that the plan will pass this week.
The measure failed in the House on Monday in a stunning vote that shook the stock and credit markets. Though the Dow Jones industrials rebounded Tuesday, supporters of the administration's plan said passage by week's end still was a must.
The House vote was a stinging setback to leaders of both parties. The administration's proposal, still the heart of the legislation under consideration, would allow the government to buy bad mortgages and other deficient assets held by troubled financial institutions. If successful, advocates of the plan believe, that would help lift a major weight off the already sputtering national economy.
Bush renewed his efforts Tuesday, speaking with McCain and Obama and making another statement from the White House. "Congress must act," he declared.
The tax plan passed the Senate last week on a 93-2 vote. It included AMT relief, $8 billion in tax relief for those hit by natural disasters in the Midwest, Texas and Louisiana, and some $78 billion in renewable energy incentives and extensions of expiring tax breaks. All told, it would cost about $112 billion over five years.
In a compromise worked out with Republicans, the bill does not pay for the AMT and disaster provisions, but does have revenue offsets for part of the energy and extension measures.
Earlier Tuesday, House Democratic leaders discussed adding an extension of unemployment benefits, while Republicans pressed to make it easier for financial institutions to hold questionable long-term assets. House Democratic Whip James Clyburn, D-S.C., floated the idea of boosting a recently passed property tax deduction for homeowners who don't itemize on their returns.
The Capitol was mostly quiet because of the Jewish new year, but there were plenty of behind-the-scenes talking and telephone conference calls on the bailout.
Senate Banking Committee Chairman Christopher Dodd, D-Conn., emerged from one meeting to tell told reporters, "I'm told a number of people who voted 'no' yesterday are having serious second thoughts about it."
Reid and McConnell appeared in the early evening to enter into the Senate agreement on the floor. The idea took House Democratic leadership offices by surprise but it was unclear whether Pelosi was truly sandbagged. Aides to Reid and Pelosi clammed up when asked whether they were in synch on the Senate power play.
The move to temporarily raise the federal deposit insurance limit, now $100,000 per account, to $250,000 won bipartisan support. McCain and Obama both endorsed the change, as did the agency that runs the program.
Federal Deposit Insurance Corp. Chairwoman Sheila Bair said the move could help ease a crisis of confidence in the banking system.