House set for fresh bail-out vote

Pedestrians outside the New York Stock Exchange on Wall St (02/10/2008)

President Bush has said the bill is the best chance of rescuing the economy

The US House of Representatives is debating a $700bn (£380bn) plan to rescue the US financial sector and is expected to vote within a few hours.

Party leaders are hoping the House, which stunned global markets by rejecting the initial plan, will follow the Senate and back a new version.

The Senate bill added about $100bn in new tax breaks in the hope of gaining more support from House Republicans.

The package is aimed at buying up the bad debts of failing institutions.

The New York stock exchange opened shortly after the debate began and the Dow Jones Industrial Average jumped more than 200 points in morning trading.

Bush plea

As the House debate opened, many of the legislators told stories of the hardship being suffered by constituents but were divided on whether the bill would help ordinary Americans.

Democrat Rahm Emanuel said addressing the balance sheets of banks was “only the first step”.

Increased protection for saving deposits
Increased child tax credits
More aid for hurricane victims
Tax breaks for renewable energy
Higher starting limits to alternative minimum tax

“The next step must now address the chequebooks for middle class families and the struggles that they face.”

Fellow Democrat Peter DeFazio said he would continue to vote “No”.

“Do not [authorise] George Bush an unprecedented use of financial force under the threat of financial weapons of mass destruction.”

House Republican leader John Boehner said the bill might not be perfect but he was optimistic it would pass. “It’s time to act,” he said.

Republican Virginia Foxx and Democrat Steven Cohen speaking ahead of the vote

The lawmakers have passed a measure by 223-205 allowing a final vote on Friday.

President Bush has urged the House to back the revised bill following the rejection by 228 votes to 205 on Monday.

Both the Democratic and Republican parties are pressing their members in the House to swing behind the revised bill and party leaders expect it to pass.

Pressure will particularly be applied to the 133 House Republicans who went against party affiliation to reject the bill, correspondents say.

The bill successfully passed through the Senate on Wednesday after it was amended to raise the government’s guarantee on savings from $100,000 to $250,000.

I have decided that the cost of doing nothing is greater than the cost of doing something

John Lewis,
Democrat, Georgia

It also now includes tax breaks to help small businesses, expand the child tax credit and extend help to victims of recent hurricanes.

Most importantly, it extends the tax break aimed at boosting the provision of alternative energy such as wind farms.

The additional cost of these unrelated tax breaks – which could add $100bn to the bill – have worried some fiscally conservative Democrats in the House of Representatives.

The US witnessed more evidence of the financial volatility on Friday.

US bank Wells Fargo announced it would buy troubled rival Wachovia in a $15.1bn (£8.5bn) deal, while the US also reported its biggest monthly job loss in more than five years.

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