High hopes for new bailout vote

High hopes for new bailout vote

1.10.2008

THE US Senate will vote today on a revised $US700 billion ($882.7 billion) Wall Street bailout after the House of Representatives rejected the original package, sending shockwaves through global markets.

The surprise vote, following pleas from President George W Bush for quick action before the US economy slumps into a deep recession, is expected after sundown today when the Jewish Rosh Hashanah holiday ends.

In a bid to build Republican backing for the bailout in the House, the Senate bill will include measures to extend tax cuts set to expire and an expansion of federal insurance for bank deposits to $US250,000 ($315,260).

"Senate Democrats and Republicans believe it is essential that we work quickly on this important legislation to restore confidence to our financial system and strengthen the economy," said Senate Majority leader Harry Reid.

"It is my hope that with the improvements we have made to the administration`s proposal the Senate will pass the legislation tomorrow and the House of Representatives will follow suit soon after," he said yesterday.

Senate Finance Committee chairman Max Baucus reframed the revised bill as a boost for ordinary Americans, trying to win over sceptical lawmakers and their constituents wary of funding a Wall Street rescue.

"A `yes` vote on the financial rescue plan is now a vote to rescue America`s working families from this financial crisis, with the right tax relief at just the right time," Mr Baucus said.

White House rivals Barack Obama and John McCain were adding to the sense of drama by rushing back from the campaign trail to cast their votes, just five weeks from election day as the economy dominates their bitter race.

Both candidates have said they support the bill, which incorporates their own suggestion that Federal Deposit Insurance Corporation (FDIC) protection be extended from $US100,000 ($126,100) dollars to $US250,000 ($315,260).

Senator Obama`s running mate Senator Joseph Biden was also bound for Washington, aides said.

The vote means the Senate will, unusually for a finance bill, consider the bailout before the lower house of the US Congress finalises the measure.

The revised package is expected to have a much easier path through the 100-member Senate than the first version had in the House, where representatives rejected it on Monday by 228 votes to 205.

The move sent stocks into free fall and sparked fears of an even deeper economic meltdown, but markets rebounded yesterday as expectations rose that a revised bailout could make it through Congress.

Democratic House Speaker Nancy Pelosi and Reid told Bush in a letter Tuesday they would not give up until a bill was passed to allow the government within days to buy up bad mortgage debts crippling the financial industry.

Senate Banking Committee chairman Chris Dodd also predicted the bailout would make it through Congress "in the next 24 or 48 hours".

However, rebel Democrats who joined in an unusual alliance with conservative Republicans to scupper the bailout bill in the House warned the Senate not to try to rush the bill through to put them under pressure.

Earlier, President Bush warned lawmakers, "The reality is that we are in an urgent situation, and the consequences will grow worse each day if we do not act."

Meanwhile, in Brussels the European Commission said the British government`s nationalisation of troubled mortgage lender Bradford & Bingley met EU state aid rules.

And in London the Bank of England on Wednesday offered a total of $US40bn ($50.44bn) in short-term loans to banking institutions hit by the global credit crunch.

The British central bank said that banks had snapped up $US13.44bn ($16.95bn) of an available $US30bn ($37.83bn) loan. Borrowers will have to repay the cash on October 7.

The European Central Bank for its part renewed one-day loans of $US50bn ($63.05bn) in an ongoing attempt to keep cash flowing on troubled interbank money markets.

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