Though bailout package is approved, putting it into action may prove hard
WASHINGTON - Getting the financial rescue through Congress may have been the easy part. Getting it to work may prove the tougher task.
After two weeks of anguishing debate, Congress passed and President Bush signed the enormous plan to save the financial industry and prop up the economy in hopes of avoiding an unthinkable free fall with Election Day just a month away.
Treasury Secretary Henry M. Paulson Jr., at a meeting last month, shocked congressional leaders into action by warning of pending economic collapse without immediate federal intervention. After the climactic House vote on Friday, he said aides already were working out details and lining up advisers from outside the government so that the money could start flowing. The goal is to unfreeze credit markets.
The immediate response to the 263-to-171 vote was not promising. Wall Street, which plunged a record 778 points after the House initially rejected the bill last Monday, fell 157 points. More economic bad news - a jump in job losses - outweighed the good news from Capitol Hill.
"Congress took a big step in the direction of at least giving us the tools necessary to bring some stability into the marketplace," Bush said yesterday while visiting Midland, Texas.
Earlier, in his weekly radio address, the president spoke cautiously about the economy's future. "My administration will move as quickly as possible, but the benefits of this package will not all be felt immediately," he said. "The federal government will undertake this rescue plan at a careful and deliberate pace to ensure that your tax dollars are spent wisely."
Bush acknowledged that people are worried about their personal finances.
"I'm confident by getting our markets moving, we will help unleash the key to our continued economic success: the entrepreneurial spirit of the American people," he said.
House Republican leader John Boehner of Ohio said lawmakers knew that if they failed to act, a worsening crisis could "put us in a slump the likes of which most of us have never seen."
House Speaker Nancy Pelosi, Democrat of California, said the bailout is intended to help address "the real pain felt by Mr. and Mrs. Jones on Main Street."
The Bush administration gained broad authority to buy toxic mortgage-related investments and other distressed assets from shaky financial institutions. The hope is it will restore confidence in markets and thaw a near-freeze in credit availability that has begun to affect the ability of banks to lend, businesses to obtain money for payrolls and investments, and individuals to gain credit for a home or a car.
In a bid to aid smaller banks with liquidity problems, the plan raises the ceiling on federally insured deposits from $100,000 to $250,000. It also increases federal oversight over Wall Street transactions and assures that chief executives whose companies benefit from the bailout do not leave with huge payoffs.
Last Monday, despite pleas from Bush and his advisers and the support of congressional leaders, the House voted 228 to 205 to reject the plan. Stock markets around the world plunged, then recovered somewhat as economists warned the United States was facing its gravest economic threat since the Depression.
But the 95 Democrats and 133 Republicans who voted against the bill were responding to calls and messages from constituents demanding defeat of the plan. Many saw it as a $700 billion giveaway to Wall Street with average people getting no help.
Shortly before recessing for the election, senators approved legislation Wednesday that linked the rescue to extension of popular tax breaks for research and development, renewable energy, and victims of natural disasters. The $110 billion in additions included benefits parity for people with mental health problems. The Senate added the boost in the ceiling for bank deposits.
Those extras swayed some House members. Others were swamped by calls warning of the consequences of inaction.