Rescue package backers confident of Senate victory

Rescue package backers confident of Senate victory

Leading US politicians said they were confident that an amended $700bn (€482bn) rescue package for the nation’s troubled economy would be passed in the US Senate tonight.

The plan now includes tax breaks for businesses and the middle class and increases deposit insurance in an attempt to revive the legislation rejected by the House of Representatives on Monday.

But the package needs to be approved by both senators and the House before the president can sign it into law.

In the first step, senators – including both the presidential candidates – will vote after sundown today, at around 7.30pm ET (12.30am Irish Time tomorrow) to respect the break for Rosh Hashanah, the Jewish New Year.

The surprise move by Senate Majority Leader Harry Reid and Minority Leader Mitch McConnell appeared likely to win a big vote that would put pressure on the House to approve the bill and send the measure to the White House.

Steny Hoyer, leader of the House Democrats, said: “I think the Senate thinks it has the votes and I think it probably will pass.”

But he added he was concerned that the tax issues could complicate the chances of final congressional passage when the legislation comes back to the House floor for a vote – possibly as early as tomorrow.

“There’s no doubt the tax package is very controversial,” he told NBC’s Today Show.

“There’s no doubt in my mind that the Senate added this because they thought that’s the only way they could get it passed.”

But he said he was not pleased the tax provisions were attached to the bill.

Some conservative House Democrats, known as “Blue Dogs”, will be repulsed by the tax breaks, and could vote no because they have said they do not want to see the country’s deficit run up even further.

In Monday’s vote, it was the House Republicans who were seen as the biggest obstacle to getting the bill passed, with 133 Republicans and 95 Democrats refusing to back the rescue package.

House Republican Whip Roy Blunt, a key figure in the negotiations, said prospects for passage had improved, and added he was particularly heartened by indications the legislation has become more appealing to constituents back home.

He said that calls and emails to congressional offices which were running about 90% against the measure were now are at about “50-50”.

“It should be before the House as quickly as it can,” he told NBC.

“But we should not set any artificial time limit here.”

He said that was one of the factors that doomed the bill earlier this week, sending the Dow Jones Industrials Average into a record 777.68 point drop – more than on the first day of trading after the September 11 terror attacks.

Some considered the bill akin to political suicide as all members of the House face elections in November and the package committing up to $700bn (€482bn) of taxpayers’ money is unpopular with voters.

Only a third of the Senate seats are up for election.

The amended proposal would raise government deposit insurance limits to $250,000 (€178,000) from $100,000 (€71,000) per account.

US presidential rivals John McCain and Barack Obama both suggested the move to reassure nervous savers and help small businesses yesterday.

Both men now intend to fly to Washington for the vote, as does Delaware senator Joe Biden, the Democratic vice presidential nominee.

Before the vote was announced, Federal Deposit Insurance Corporation chairman Sheila Bair asked the US Congress for temporary authority to raise the limit by an unspecified amount.

Tonight’s vote comes after a day in which President George Bush was forced into making his fourth address to the nation in a week as the US financial crisis stumbled on.

He warned that quick decisive action was needed to avoid “painful and lasting” damage after the $700bn economic rescue package lay in tatters.

He said the US was at “a critical moment” for its economy and “we need legislation that decisively addresses the troubled assets now clogging the financial system”.

Mr Bush’s speech came as EU leaders urged the US to show “statesmanship” for the sake of the world economy.

Earlier, EU Commission spokesman Johannes Laitenberger said the EU was disappointed the House of Representatives rejected the rescue package and added Washington had a special responsibility towards the global economy.

British Prime Minister Gordon Brown pledged to do “whatever is necessary” to protect Britain’s financial system and German chancellor Angela Merkel called on the US to pass a financial bail-out package this week.

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