US Senate Backs $700 billion Bail-Out Plan

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The Guardian/UK

US Senate Backs $700 billion Bail-Out Plan

Emergency rescue plan passed after six-hour debate by 74 to 25 and will now go back to House of Representatives

Andrew Clark

U.S. Senate Majority Leader Harry Reid speaks at a news conference in Washington, DC on October 1. The US Senate has passed a new 700-billion-dollar bailout of the debt-stricken financial system but European leaders agonised over a proposed emergency fund for ailing banks and money markets. (AFP/Getty Images/Alex Wong)

The US Senate voted comfortably in favour of the Bush
administration's contentious $700bn bail-out of the banking industry
early this morning, bringing the package back to life after a bitter
week of political wrangling and wild gyrations in financial markets.

a six-hour debate, the emergency rescue plan was passed by 74 to 25.
The Senate majority leader, Harry Reid, said: "I'm very, very happy.
This is a good vote."

The bill is expected to go back to the
House of Representatives tomorrow, where Republican and Democratic
leaders hope to reverse Monday's shock vote against its progress.

The upper chamber's approval will come as a relief to George Bush
whose authority has been severely tested by Congress's rebellion. Global financial markets have been volatile throughout the week and financial institutions have been struggling to stay afloat on both sides of the Atlantic.

The two candidates vying for the US presidency, Barack Obama and John McCain, both broke off the campaign trail to cast their first votes in the chamber for months.

"This plan is not perfect. Democrats and Republicans
in Congress have legitimate concerns about it," Obama told his fellow
senators. "But it's clear from my perspective that this is what we have
to do right now to prevent the possibility of a crisis turning into a

Since it was rejected by the House earlier in the
week, the plan has been sweetened with measures to appease doubters.
The core proposal still authorises the treasury to spend billions of
dollars cleaning up the balance sheets of struggling banks by buying up
moribund mortgage-related securities. But it has grown from its
original three pages to 451 pages.

In its new form, the plan will
increase protection for US bank customers by raising the limit of a
federal guarantee on deposit accounts from $100,000 to $250,000.

amendment extends energy-related tax breaks for businesses - a measure
intended to win over Republican free-market critics but which has
rankled some on the left who see it as a nod to commerce rather than to
struggling homeowners.

There are still staunch hold-outs in both
parties. Bill Nelson, a Democratic senator from Florida, argued that it
hardly does anything to help those facing foreclosure on predatory
sub-prime mortgages.

"This bill sends a message to Wall Street
that if you play fast and loose in the name of short-term profits, the
government will make up your losses," said Nelson.

But Lindsay
Graham, a Republican, argued that the alternative was to allow credit
to become so expensive that "Americans are not going to be able to
borrow a dime". He said: "If you think this costs a lot now, just do
nothing and then see what it costs."

Many Congressional figures
say they have detected a change in the mood of constituents towards
grudging acceptance of the bailout, partly prompted by this week's
plunge in Wall Street stock prices. A long-time critic of the plan,
Republican senator Joe Barton of Texas, said the balance of calls to
his office from voters had shifted from 60-40 opposed to the package to
70-30 in favour of it.

A glut of dismal economic statistics has
given fresh impetus for action. New data yesterday showed a slump in
manufacturing activity, a dive in car sales and soaring job losses.

The world's richest man, Warren Buffett, has likened the situation to an "economic Pearl Harbour".
Some 14 high-street banks in the US have already gone bust this year
and investment houses Lehman Brothers and Bear Stearns have fallen
victim to the crisis.

But on the streets outside Congress, noisy protesters demonstrated against the bailout. Jobs With Justice,
a workers' rights group, held rallies outside Washington branches of
Bank of America and Citibank. Sarcastically dubbing themselves
"billionaires for the bailout", they chanted: "We broke it, you fix it."


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