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Approval of bailout comes amid signs that a steep recession is just beginning

Despite anger at 'pigs on Wall Street,' many in House change their votes to yes

October 04, 2008|Richard Simon and Nicole Gaouette | Times Staff Writers

WASHINGTON — The House of Representatives approved the $700-billion Wall Street bailout Friday, setting in motion the biggest government intervention in the financial system since the Great Depression.

President Bush quickly signed the bill, and Treasury Department officials vowed to move swiftly to use sweeping new powers to try to stabilize financial markets and ease deepening fears about the economy.

The vote took place amid anxiety that the turmoil was paralyzing sources of credit vital to businesses, consumers and government. Underscoring that concern, California Gov. Arnold Schwarzenegger warned this week that the state might need an emergency federal loan because of the crisis.

The House's 263-171 vote was a sharp reversal from Monday, when the chamber rejected a similar bill and the Dow Jones industrial average plunged 777 points in reaction. Lawmakers from both parties described Friday's vote, coming a month before they face reelection, as among the most gut-wrenching of their careers.

"I may lose this race over this," said Rep. Sue Myrick (R-N.C.), who voted for the bill Friday after opposing it earlier in the week. "But that's OK because I believe in my heart I'm doing the right thing."

Proponents sought to portray the measure as important to ordinary Americans even as some made clear their contempt for Wall Street's recklessness.

"Those greedy pigs on Wall Street don't deserve help from hardworking Americans," said Rep. Lee Terry (R-Neb.), another vote convert. "But allowing them to fail will cause so many other businesses . . . to lose access to credit, lose business."

Before Monday's vote, Congress had been deluged with calls and e-mails from constituents opposed to the bailout plan, but Monday's brutal market drop was met with public outrage and led to four days of heavy lobbying for the proposal. Senate leaders added tax breaks and other sweeteners to the measure and it passed there Wednesday. On Friday, the bill won 58 new "yes" votes in the House, clinching approval.

"We have acted boldly to help prevent the crisis on Wall Street from becoming a crisis in communities across our country," Bush said.

Nonetheless, markets declined Friday, reflecting broader economic uncertainty and worries about a government report showing that unemployment rose sharply in September.

The 451-page Emergency Economic Stabilization Act grants the Treasury secretary unprecedented authority to buy up to $700 billion of troubled assets from ailing financial institutions in an effort to stave off more bankruptcies and provide cash for new loans to ease the credit market freeze-up.


New and improved

Lawmakers demanded numerous changes to the Treasury Department's original, three-page proposal, including limits on how much executives may be paid if their firms sell assets to the government. Congress also added an oversight board to supervise the program, raised the cap on Federal Deposit Insurance Corp. account coverage from $100,000 to $250,000, and required steps to help homeowners avoid foreclosure.

Sweeteners added an estimated $150 billion in costs, including a provision that shields 24 million taxpayers from the alternative minimum tax. The new law also has tax relief provisions for disaster victims; research and development tax credits; a hybrid car tax credit; and tax breaks for teachers who spend their own money on school supplies.

Many House members said they were reluctant to help an unpopular industry and approve new federal spending but felt they had no choice.

"Nobody in east Tennessee hates the fact more than me that I'm going to vote 'yes,' " said Rep. Zach Wamp, a Republican who came to favor the bill after helping defeat it in Monday's 228-205 vote. "Things are really bad, and we don't have any choice."

"I am just as angry and frustrated as many of those who have called my office," said Rep. Jerry McNerney (D-Pleasanton), who voted "yes" both times. "But I voted for it because my constituents' 401(k)s, their life savings, and the ability to take out car, home and student loans hang in the balance."

Preparing for the political fallout, Rep. Jim Marshall (D-Ga.) has already begun airing a TV ad in his district in which he declares: "I don't like this rescue plan any more than you do. . . . But I'm not going to stand by and let this crisis undermine our economy and damage the financial future of everyone in America."

Within the California delegation, Democrats voted 26-8 in favor of the bill, while Republicans voted 10-9 in favor. Seven Californians, all Democrats, supported the measure after opposing the earlier version.

Overall, Democrats in the House favored the bill 172-63 in Friday's vote; Republicans voted 108-91 against it.

In Monday's vote, Democrats voted 140-95 in favor while Republicans voted 133-65 against. Between the two votes, 33 Democrats switched their votes to "yes," while one Democrat changed his vote from "yes" to "no."

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