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New Tax Cuts, Fear Of Financial Chaos Sway Lawmakers

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The New York Times

Published: October 4, 2008

WASHINGTON - After the House reversed course and gave final approval to the $700 billion economic bailout package, President Bush quickly signed it into law Friday, authorizing the Treasury to undertake what could become the most expensive government intervention in history.

Even as Bush said the measure would "help prevent the crisis on Wall Street from becoming a crisis in communities across our country," congressional Democrats said it was only a first step and pledged to carry out a sweeping overhaul of the nation's financial regulatory system.

The final tally in the House was 263-171, with 91 Republicans joining 172 Democrats in favor. That was a wider bipartisan majority than vote-counters in both parties had expected, completing a remarkable turnabout from Monday, when the House defeated an earlier version of the bill 228-205.

The financial markets, however, were not enthusiastic. Already weighed down by another round of bleak economic data, including a report showing that 159,000 jobs were lost in September, the Dow fell 157 points to close at 10,325, or nearly 818 points lower than when the week began, before the House's initial rejection of the bailout.

Some measures of the credit markets improved after the bill was approved, but only modestly. Analysts said it was too soon to tell whether borrowing rates - the interest rates banks charge each other for loans, and a key indicator of the flow of credit - would fall.

The change in course by the House was prompted by fears of a global economic meltdown, and by old-fashioned political inducements added by the Senate: a portfolio of $150 billion in popular tax provisions, including credits for the production of solar, wind and other renewable energy, and an adjustment to spare middle-class families from paying the alternative minimum tax.

In the end, 33 Democrats and 24 Republicans who had voted no Monday switched sides Friday to support the plan. Both Sen. Barack Obama and his Republican rival in the presidential election campaign, Sen. John McCain, voted for the measure when the Senate approved it Wednesday, and both hailed Friday's outcome.

Appearing in the Rose Garden, Bush praised Congress for acting just two weeks after Treasury Secretary Henry Paulson requested the emergency bailout legislation with a warning that the American economy was at risk of the worst economic collapse since the Depression.

"We have shown the world that the United States will stabilize our financial markets and maintain a leading role in the global economy," Bush said.

Opponents of the bailout called it a costly Band-Aid that did not address the core problems in the financial system.

Many said they agonized over the decision amid a torrent of calls from constituents. Several who switched to yes cited a provision added by the Senate increasing the amount of savings insured by the Federal government to $250,000 per account, from $100,000.

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