WASHINGTON - The Senate is set to vote tonight on a revised financial industry rescue bill 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.
Two House leaders said Wednesday headway is being made toward getting the $700 billion financial industry rescue bill through Congress, thanks partly to a provision increasing insurance for people's deposits.
"I think the Senate thinks it has the votes and I think it probably will pass," House Majority Leader Steny Hoyer, D-Md., said. House Republican Whip Roy Blunt of Missouri agreed that prospects for passage have improved, and he said he was particularly heartened by indications the legislation has become more appealing to constituents back home.
Hoyer, though, said on NBC's "Today" show he was concerned that the tax issues could complicate the chances of final congressional passage when the legislation comes back to the House floor for a vote.
"There's no doubt the tax package is very controversial," he said, adding that "there's no doubt in my mind that the Senate added this because they thought that's the only way they could get it passed." He said he wasn't pleased the tax provisions were attached to the bill.
There are concerns that moderate House Democrats known as "Blue Dogs" will be repulsed by the tax breaks, and could vote no because they have saying they don't want to see the deficit run up even further.
Blunt said one of the reasons he is more optimistic is that lawmakers are hearing less vocal opposition from their districts. He said that calls and e-mails to congressional offices that were running about 90 percent against the measure earlier now are at about "50-50."
"It should be before the House as quickly as it can," Blunt said on NBC. "But we should not set any artificial time limit here." He said that is one of the factors that doomed the bill, which was defeated 228-205 Monday, sending Wall Street into a nosedive with the biggest sell-off since the post-9-11 trading period.
Both Blunt and Hoyer said they thought the atmosphere on the Hill was more conducive to passage now, saying they believe an emerging consensus on raising the federal deposit insurance to $250,000 has helped significantly and that a House vote could come later this week.
Blunt also said he believes there's a better chance of getting the legislation enacted in the wake of a move to ease Security and Exchange Commission accounting rules in a way that would give businesses more leeway in how they value their assets.
Senate Banking Committee Chairman Christopher Dodd, D-Conn., emerged from a meeting Tuesday to tell told reporters, "I'm told a number of people who voted 'no' yesterday are having serious second thoughts about it."
Said Hoyer: "We have all indicated this crisis is not going to go away." He said Congress needs to move now to "stabilize our markets."
That's the message that President Bush delivered to Congress and the nation Tuesday in a statement at the White House. Bush said the country couldn't afford not to pass the legislation.
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.
House Speaker Nancy Pelosi, D-Calif., issued a statement that suggested she does not like the move but did not reveal her plans. "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 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.
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, and Hoyer and Blunt said more talks were planned Wednesday.