US emergency finance rescue plan clears final hurdle (Lead)

October 4th, 2008 - 2:16 am ICT by IANS  

Washington, Oct 4 (DPA) The US House of Representatives approved a revised financial rescue plan Friday that paved the way for the largest government intervention in capital markets in the history of the country.The bill allows the government to acquire up to $700 billion in soured mortgage assets that are at the heart of the credit crisis.

The House voted by a resounding 263-171 in favour after rejecting an earlier version of the bill by 228-205 Monday. The Senate approved the same package Wednesday and President George W. Bush was expected to sign the bill later Friday.

“By coming together in on this legislation we have acted boldly to help prevent the crisis on Wall Street from becoming a crisis in communities across our country,” Bush said in a statement at the White House.

The US markets reacted haltingly to the passage. The Dow Jones Industrial Average retreated from its early highs in the day as investors appeared to take a wait-and-see approach on whether the bail-out would really free up credit availability.

Bush warned that it would take some time for the new legislation to have its full impact on the economy.

The legislature approved the bill in a mood of resignation. Many members found themselves in a politically untenable position just one month before the Nov 4 general election.

Congress has received tens of thousands of phone calls from angry voters who oppose using tax money to rescue Wall Street from investments gone wrong.

Democratic Representative Charles Rangel of New York kicked off the debate with a complaint that Congress was acting on the plan “with a political gun at our heads”.

Government officials and congressional leaders from both parties had warned legislators of the dire consequences of another failed vote, and promised future measures to keep better tabs on financial institutions and keep the economy going.

“Now that we’ve dealt with the immediate emergency, it’s time to bring our economy back to full health,” said Democratic Majority Leader Steny Hoyer, who noted earlier that the world was watching the US legislature’s actions.

Members of the House let out a cheer as it became clear that the 218-vote threshold had been passed. But many warned there was no cause for celebration, and that a recession for the world’s largest economy was still likely.

“Let’s not kid ourselves. We’re in the midst of a recession. It’s gonna be a rough ride, but it will be a whole lot rougher ride if we don’t pass this bill,” Republican Minority Leader John Boehner said ahead of the vote.

The vote came as the US Labour Department reported that 159,000 jobs were lost in September, bringing the total for the year to nearly 800,000. The unemployment rate held steady at 6.1 percent.

Bush said the jobless report “underscores the urgency” of government intervention.

The Senate adopted the revised legislation Wednesday night in a 74-25 vote, after it was sweetened with a year-long increase in government-backed guarantees for bank deposits from $100,000-250,000, extensions of tax credits for renewable energy and small businesses and tax changes that will benefit the middle class.

But some House Republicans and Democrats objected to some of the sweeteners, which included non-related items such as requiring health insurers to provide parity of coverage for mental illness as well as physical ailments and removing an excise tax from a company in Oregon that makes wooden arrow shafts.

The original three-page bill submitted by the White House two weeks ago has grown to more than 400 pages.

It continued to face strong opposition from members who opposed a government bail-out of the free market purely on principle and others who accused the administration of fear-mongering in order to protect the balance sheets of a few financial institutions.

Representative Marcy Kaptur, a Democrat from Ohio, said Wall Street had orchestrated the “biggest heist of the century” in convincing Congress to invest $700 billion into mortgage securities.

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