An overwhelming Senate vote Wednesday night to pass the financial sector rescue bill set the stage for likely House passage of the measure on Friday.
"We need 100 Republican votes to pass this,” House Majority Leader Steny Hoyer told reporters at a Wednesday afternoon briefing. Tax cut and other provisions added to the rescue bill are likely to gain more House Republican support for it.
The Senate voted, 74-25, to pass the $700 billion bill, with both presidential candidates, Sen. Barack Obama and Sen. John McCain, on the Senate floor to cast “yes” votes.
Of the senators in competitive re-election races, only three voted “no.”
One of the “yes” votes, Sen. Gordon Smith, R- Ore., said as he walked on to the Senate floor shortly before the vote that he’d support the bill “not with a smile, but because our country needs this right now. I just got off the phone with our state treasurer, a Democrat, who was telling me what havoc it’s wreaking on many Oregon projects.”
The state was having increasing difficulty selling bonds for its construction projects, Smith said.
He added, “I’m hearing from small business, I’m hearing from retirees, and views on this are changing. Businesses in Oregon are being notified that their loans will not be renewed — and these are creditworthy businesses. And if we stand by and watch the obliteration of our financial system, shame on us.”
Smith said that his Democratic opponent in the Senate race, Jeff Merkely, “has been running ads against me for it,” but “I just think this is one of those moments when politics has to take a back seat to the needs of our country.”
He added, “Whether people recognize the emergency or not, they will soon, if we don’t act.”
'Politics be damned'“This bill is not perfect, but this bill is what’s possible. This bill is something we have to do and the politics be damned,” the Oregon Republican said.
Sen. Saxby Chambliss, R- Ga., in a re-election battle with Democrat Jim Martin, was asked after his “yes” vote whether the bailout bill had become an issue in his campaign.
“I certainly hope so, because it's absolutely the right thing to do. We’ve got Georgia banks who are crimped from a credit standpoint and aren’t even able to make automobile loans today," Chambliss said. "We have major employers who are having their lines of credit cut or in some cases cancelled. And it's going to start costing us jobs.”
He added, “If my opponent wants to make an issue of it, we’ll look forward to it.”
He said people in his state “don’t have the full understanding” of the looming credit crisis, “but we’re going to be educating them.”
Another GOP senator in a competitive race, Minnesota Sen. Norm Coleman said after his “yes” vote, “It was the right thing to do. I think people put the interests of the American people above party politics. The calls were 100 to one against this. But it is the right thing.”
Coleman is running for a second term against Democrat Al Franken.
Coleman said the signs in Minnesota are worrisome. “The head of the state private college system in Minnesota was told today they may not be able to make payroll because they had their money in a money market fund that has been impacted by the Lehman Brothers situation. I talked to some small business people that are beginning to express concerns.”
He added, “my concern was that failure to act would have a series of repercussions internationally but all ultimately on people back on Paine Avenue in St. Paul. This is all about folks back home. They’re the ones who are going to be impacted by the inability to get credit.”
'I don't think the sky is falling'But Sen. Roger Wicker, R- Miss., in a toss-up race with Democrat Ronnie Musgrove, said he voted ‘no” because “I don’t think the sky is falling.”
He asked reporters, “What was the rush? Why didn’t we have hearings? Why didn’t we use regular order? We were told two weeks ago that unless we acted immediately, within hours the sky was going to fall. Well, the sky didn’t fall. Even so, we have rushed this through. $700 billion, potentially, in liabilities to the taxpayer without hearings, without the opportunity for amendments in committee… on something of this magnitude, I think, is ill-advised.”
When the House votes again on the rescue plan Friday, it may be an anti-climax. Congressional leaders need just 12 more votes than they had at the beginning of the week for passage.
The first version of the bailout bill was rejected Monday on a 228-205 House vote. Sixty percent of the "no" votes came from Republicans.
Republican conservatives were strong enough to defeat Monday’s bill only because they had enough left-of-center, anti-Wall Street Democrats vote with them.
The House Republicans who voted “no” are a majority of their own caucus (133 out of 199 total) but aren’t numerous enough to defeat, or pass, anything by themselves.
Can House Speaker Nancy Pelosi and her GOP counterpart John Boehner find the dozen votes necessary to pass a “tweaked” bill?
Three crucial factors are working to Pelosi’s advantage:
- Time: House members are feeling even more restless about the economic uncertainty, the fast-approaching elections and their need to campaign back home.
- Some House Republicans are rethinking their “no” votes.
- Most of the 95 Democrats who voted “no” on Monday don't come from electorally competitive districts, so it's not risky for them to switch. And Pelosi needs to convince only a few of those safe Democrats to vote with her.
But the focus Wednesday was entirely on wooing House Republicans .
House leaders “are bringing in the small business lobby and the banking lobby to buy the 12 Republican votes they need,” said Bob Borosage, the co-director of the progressive group Campaign for America’s Future.
Additions to the rescue plan package are designed to attract House Republican votes.
These include a $100 billion package of tax “extenders” — provisions set to expire at the end of the year, including tax credits for research and development and one for producing windmill electricity.
“I’m personally disappointed that the Senate has chosen to add the so-called extenders bill to this recovery package," said Hoyer. “...We’ve been told on the extenders: 'take it or leave it. So in all likelihood, the House will take it."
The importance of the recovery package is exactly why the Senate did add the extenders bill to it.
This is old-fashioned stare-down politics: It was just two days ago that Hoyer told Senate leaders that the House would not accept the extenders, rebuffing what he described as the upper chamber’s attempt to legislate by “blunt force.”
Now it seems that the tax cut extenders package will pass, because it is grafted onto a bill many see as imperative to the banking and credit system.
Referring to his own Democratic members, Hoyer said, “Certainly there are people who are upset with the fact that we are making the deficit worse."
The tax cut extensions are not offset with revenue increases or spending cuts elsewhere in the budget.
What's $100 billion?
But in a package of $700 billion, another $100 billion may not seem particularly shocking to some House members.
Another provision could gain GOP support for the bailout bill: increasing bank account protection from the Federal Deposit Insurance Corporation from $100,000 to $250,000.
House Democratic Whip James Clyburn of South Carolina said on MSNBC Wednesday that a proposed loosening of the "mark to market" accounting rule that requires financial firms to value assets at their currently depressed market prices could also lure Republican votes.
“And I’m trying to make sure we don’t lose any Democrats and that’s why I want the property tax relief to be in there because that will get us more Democrats,” he said.
A housing bill that passed last month created a one-time $1,000 tax deduction for homeowners who do not itemize on their federal tax returns. The latest financial proposal would extend this tax break into 2009.
For now, sitting mostly on the sidelines are the progressive, or left-of-center, Democrats who either voted against Monday’s bill, or voted reluctantly for it.
End game scenario
One plausible end game scenario looks like this: The Senate passes the rescue plan Wednesday night and the House passes it on Friday, though not without misgivings and many loud complaints.
In any event, Pelosi would still be able to give her freshmen members who are in potentially tough races a pass to vote against the bailout proposal.
The Democrats voting “no” on Monday were trying to make a point. Most of them stand to the left of the political center in the House and they wanted a more anti-Wall Street, pro-public spending (on infrastructure) program.
Infrastructure spending next year
Billions of dollars on infrastructure spending can be passed next year, assuming that Obama is elected and there are bigger Democratic majorities in the House and Senate.
Dissenting from this “12 will switch” forecast is syndicated columnist and Democratic activist David Sirota.
He warns against “underestimating the difficulty of 12 lawmakers changing their vote. It certainly could happen, but those who change are going to be hammered at home, especially now that it would be such a high profile flip flop.”
If there are vote switchers when the House votes again, how do they defend themselves from the flip-flop charge? Answer: if they hold safe seats, a switch is not likely to matter since they face no credible opponent, or in several cases, are running unopposed.
As for a promise of more infrastructure spending next year, Sirota said, “Obama has already said that he's going to have to scale back his spending priorities if and when this passes. Promises later of massive infrastructure spending ring a bit hollow — especially to legislators who understand that the political capital to pass that kind of spending will far less without this Wall Street crisis.”
Sirota also predicts that the economy “will continue hurting for the next month, giving those who voted against the bailout, or challengers who oppose it, an easy way to say ‘Look, they gave away $700 billion, and the economy is still in the tank.’”