US Senate to vote on financial rescue plan

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(Agencies)
Updated: 2008-10-01 09:55

WASHINGTON -- In a surprise move to resurrect President George W. Bush's $700 billion Wall Street rescue plan, Senate leaders scheduled a vote on the measure for Wednesday but added a tax cut plan already rejected by the House of Representatives.

US Senator Kent Conrad(C) talks with reporters outside the Senate Chamber the day after the House defeated a 700 USD billion emergency rescue for the nation's financial system, ignoring urgent warnings from President Bush and congressional leaders of both parties that the economy could nosedive without it. [Agencies]

Sen. Harry Reid, leader of the Democratic majority, who sets the Senate agenda, and Republican leader Mitch McConnell disclosed the plan Tuesday. The Senate plan also would raise federal deposit insurance limits to $250,000 from $100,000 per account, as suggested by both presidential nominees a few hours earlier.

The move to add tax legislation, including a set of popular business tax breaks, risked a backlash from House Democrats insisting they be "paid for" with savings elsewhere.

By also adding legislation to prevent more than 20 million middle-class taxpayers from feeling the bite of the alternative minimum tax, the step could build momentum from House Republicans for the Wall Street bailout. The presidential candidates, Sens. John McCain, the Republican, and Democrat Barack Obama, intend to fly to Washington for the votes.

The alternative minimum tax was created in the 1970s to bring in money from very rich people who avoided heavy taxes through legal loopholes; inflation and escalation in salaries over the decades have put millions of middle-class wage-earners in range of the increased tax unless it is changed.

The surprise move to have a Senate vote on Wednesday capped a day in which supporters of the imperiled multibillion-dollar economic rescue fought to bring it back to life, courting reluctant lawmakers with a variety of other sweeteners including the plan to reassure Americans their bank deposits are safe.

Wall Street, at least, regained hope. The Dow Jones industrials average rose 485 points, one day after a record 778-point plunge after the US House rejected the plan worked out by congressional leaders and the Bush administration.

Before Reid and McConnell's move, lawmakers, Bush and the two rivals to succeed him all rummaged through ideas new and old, desperately seeking to change a dozen House members' votes and pass the $700 billion plan.

The tax plan passed the Senate last week, on a 93-2 vote. It included the alternative tax relief, $8 billion in tax relief for those hit by natural disasters in the Midwest, Texas and Louisiana, and some $78 billion in renewable energy incentives and extensions of expiring tax breaks.

That was not enough for the House, which insisted that compensation from other expenses be supplied to offset the energy and extension parts of the package.

The Senate move seems aimed at "jamming" the House into accepting the deficit-financed tax cuts. Conservative Democrats will not like the idea, but some Congress-watchers suspect most Democrats might be willing to go along.

Still, the House is where the problems are, and leaders there were scrounging for ideas that might appeal to a few of the 133 Republicans and 95 Democrats who rejected the proposal on Monday.

Senate Banking Committee Chairman Christopher Dodd, a Democrat, told reporters, "I'm told a number of people who voted 'no' yesterday are having serious second thoughts about it." He added, however, "There's no game plan that's been decided."

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