BOSTON - Leading U.S. lawmakers and the cabinet of Pres. George W. Bush met behind closed doors Tuesday to strategise a way to win more votes for their 700-billion-dollar plan to bail out Wall Street, a plan that met with stunning defeat in the U.S. House on Monday.
The leaders announced late Tuesday that they had arranged a vote on Wednesday in the Senate, even though Congress is officially on break. The Senate is considered more likely to approve the plan, and if it does, this will add pressure on the House to get on board.
"I am disappointed by the outcome, but I assure our citizens and citizens around the world that this is not the end of the legislative process," Bush said Tuesday morning.
Only 12 additional House votes are needed to pass the bill.
"The 12 people who switch will be the most powerful people in America over the next few days. They will shape the compromise bill," West said.
Grassroots protests are planned throughout cities in the U.S. on Wednesday, calling for no bailout of Wall Street.
Meanwhile, economists continued to warn against the Bush plan, saying an entirely new approach is needed to truly free up the credit markets, the loans between big banks that are key to a fully functioning global economy.
"At this point I cannot identify a single good reason to do the [Bush] bailout," said Dean Baker, co-director of the Centre for Economic and Policy Research.
"Much of the country's political and economic leadership has been running around raising the prospect of the Great Depression and a breakdown in the banking system," Baker said. "These stories are absolutely not true," he added.
In the days before the vote, 400 economists signed onto a letter to lawmakers, urging them not to approve the Bush plan, said Rep. Peter DeFazio, who received the letter and voted against Bush's bill.
"If we don't get this right were going to be back looking for more money and our credit will be exhausted," DeFazio said.
"They warned that it's a risky bet. It's a bet that shouldn't be placed by taxpayers," DeFazio said.
Bush's multi-billion dollar plan went down in flames Monday in a narrow defeat of 205 to 228 against, made possible by the defection of a majority of members of his own party, the Republicans, along with one-third of the Democrats.
"The problem was this legislation was very poor. The idea of bailing out rich Wall Street institutions wins no friends," Darrell West, vice president and director of government studies at the Brookings Institution, a Washington think tank, told IPS.
The Bush plan, crafted by Treasury Secretary Henry Paulson with input from Republican and Democratic leaders, would give Paulson wide latitude in spending700 billion dollars with little oversight. The bill does not curb excessive CEO compensation or assist the million people dealing with foreclosure of their homes.
Presidential candidates John McCain and Barack Obama called on their colleagues to pass the bill. Many lawmakers, however, stood firm.
"Why is it that we can find a way to bail out Wall Street, but we cannot help the people struggling on Main Street? People are losing their jobs, their homes, and struggling without health care. No one has come to their rescue, but yet overnight we are pressed to come to the aid of Wall Street," Rep. John Lewis said before voting against the bill.
U.S. citizens from coast to coast cried foul and flooded Congress with phone calls and emails telling them to vote against the bailout. Hundreds of lawmakers heard them.
"When I tell my constituents that a fellow named Paulson came and asked for 700 billion dollars for the financial industry, they say, 'What about me? We understand the urgency of the moment, we also want fairness," said Rep. Elijah Cummings of Baltimore, who voted against the bill.
Adding to Monday's drama, the Dow Jones industrial average plunged 777 points, the largest single-day drop in history, and governments around the world moved to stabilise their financial sectors. Regulators in Belgium, the Netherlands and Luxembourg came to the aid of Fortis, a Banking and insurance enterprise. Brazil's stock market dropped 9 percent after the U.S. House vote.
The U.S. Federal Reserve made hundreds of billions more available to the world's central banks, the large banks that loan currency to each other, trying to ease the credit crunch. U.S. markets rebounded Tuesday.
The prospect of a hasty Senate vote on Wednesday did not go over well with Rep. Peter DeFazio, who is opposed to Bush's plan.
"We have to make sure the Senate doesn't ram this through," DeFazio told reporters. He and other progressive Democrats will introduce their own bill to aid the economy, they said.
DeFazio and a group of progressive Democrats want no part of the Bush plan, and Tuesday announced that they had drafted their own bill aimed at assisting stalled credit markets, boosting the troubled U.S. housing market and helping homeowners.
"It shouldn't bee too hard to come to an agreement to deal with the problem of lending between banks," DeFazio said.
"We need to start with a clean slate. I come from a district facing the highest rates of foreclosure in [Maryland]. People are losing their homes. We need to have a mechanism in this legislation for helping those homeowners," said Rep. Donna Edwards.