After the House redeemed itself in the eyes of many critics Friday by passing a revised $800 billion-plus package to rescue the financial and credits markets and extend tax credits for renewable energy and energy efficiency, as well as other expiring or expired corporate and personal tax credits, the bill was quickly signed into law by President Bush.
In a rare display of unity, House Democrats and Republicans voted to send a $700 billion bailout measure to the White House, along with $107 billion of corporate and personal tax credit extensions, of which $17-18 billion was earmarked for extensions of tax breaks for renewable fuels and energy efficiency. The favorable vote by the House (263-171) came four days after it rejected the initial rescue plan by 228-205 last Monday, causing markets on Wall Street to plunge, and two days after the Senate passed the revised package by 74-25.
President Bush wasted little time signing the bill (HR 1424), approving the largest corporate bailout in history. The House vote came on the heels of discouraging news from the Labor Department that 159,000 jobs were lost in September -- the most in five years. "By coming together on this legislation, we have acted boldly to help prevent the crisis on Wall Street from becoming a crisis in communities across our country," Bush said.
Despite Washington's action, Wall Street finished out Friday in negative territory. While the Dow Jones Industrial was up 300 points as the House began to vote, the index closed the day with a loss of 157.55 points. The technology-laden Nasqaq lost 29.33 points, while the S&P 500 Index was down 15.05 points. For the week, the Dow was on track to be off 5.8%, the S&P 500 shed 7.9% and Nasdaq was 9.1% lighter. Energy and materials were the worst performing economic indicators of the week, both down nearly 10.7%.
House and Senate leaders made several changes to the bailout package after it initially failed in the House, including inserting the Senate version of the tax credit measure (HR 6409) in an attempt to win more support from House Republicans. The energy and other tax credits were a major coup, given that the two houses have been at a stand-off for most of the year over the issue of paying for the credits.
The bill would make immediately available $250 billion for Treasury Secretary Henry Paulson to buy stock and troubled assets from failed investment banks, to be followed by $100 billion at the discretion of the president and $350 billion later on. It also raises the Federal Deposit Insurance Corp. cap to $250,000 from $100,000 for banks.
The House rejected the Bush administration's original financial rescue plan last Monday because it had "few strings and no safeguards," said House Speaker Nancy Pelosi (D-CA).
A number of House Democrats and Republicans made it clear that they did not like the revised rescue measure, but nonetheless they said they would vote for it holding their noses. They also made clear that their intention was to help Main Street, not Wall Street. The final vote tally showed 172 Democrats and 91 Republicans supported the bill Friday, while 63 Democrats and 108 Republicans opposed it.
"In a sense we have a political gun at our heads," said Rep. Charles Rangel (D-NY), chairman of the House Ways and Means Committee. The House was being forced to "yield to the threat or [face] disaster."
Lawmakers said there had been a "sea change" in the public sentiment about the bailout plan since last Monday. Prior to then, the majority had opposed it, believing it was simply a give-away for big business. But small businesses and the public, after feeling the sting of the credit crunch and the loss of 401k savings, changed their tune.
"We're out of choices. Our backs are against the wall," said Rep. Zach Wamp (R-TN). He voted for the bailout package, although he noted "I hate it."
Rep.Paul Ryan (R-WI) echoed the sentiment, saying that "doing nothing is the worst thing we can do." He said the bailout plan wouldn't prevent what he believes is an inevitable recession, but it will make it short and shallow rather than long and deep.
To drive home the sense of urgency, Rep. Zoe Lofgren (D-CA) said that the state of California, the eighth largest economy in the world, would be unable to meet its payroll at the end of the month if Congress did not pass the rescue package.
But there were some holdouts. "Why do we need to give $700 billion to one man to play hedge fund god?" asked Rep. Devin Nunes (R-CA). "Taxpayers will still be picking up the tab for Wall Street's party...It's not the best bill. It's the quickest bill," said Rep. Marily MusGrave (R-CO), who voted against the package.
Rep. Brad Sherman (R-CA) urged colleagues to "vote 'no' now," and "stay in town and write a good bill."
Rep. Barney Frank (D-MA), chairman of the House Financial Services Committee and a chief negotiator of the package, assured critics that "we will be back next year to do some serious surgery" on the financial markets.
As for the $17-18 billion package of tax credits, it provides a one-year extension of the production tax credit (PTC) for wind and refined coal and a two-year extension of the PTC for biomass and geothermal facilities. It also extends the 30% investment tax credit for solar energy property and qualified fuel cell property through 2016, extends the credit for residential solar property for eight years through 2016 and removes the credit cap (currently $2,000) for solar electric investments. Moreover, it renews tax credits for energy-efficient upgrades of existing homes and extends a tax credit for energy-efficient new homes (up to $2,000).
To help pay for the energy tax credit extenders, the bill tightens the tax benefits for the oil and gas industries on income earned overseas. It also freezes (rather than repeals) the tax deduction that oil and gas companies receive for their domestic manufacturing operations and requires producers to make increased payments to the Oil Spill Liability Fund.
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