WASHINGTON --- After one spectacular failure, the $700 billion financial industry bailout found a second life Wednesday, winning lopsided passage in the Senate and gaining ground in the House, where Republicans' opposition softened.
Senators loaded the economic rescue bill with tax breaks and other sweeteners before passing it by a wide margin, 74-25, a month before the presidential and congressional elections.
In the House, leaders were working to convert enough opponents of the bill to push it through by Friday, just days after lawmakers stunningly rejected an earlier version and sent markets plunging around the world.
The measure didn't cause the same uproar in the Senate, where presidential candidates Republican John McCain and Democrat Barack Obama made appearances to cast "aye" votes.
In the final vote, 40 Democrats, 33 Republicans and independent Sen. Joe Lieberman of Connecticut voted "yes." Nine Democrats, 15 Republicans and independent Sen. Bernie Sanders of Vermont voted "no."
The rescue package lets the government spend billions of dollars to buy bad mortgage-related securities and other devalued assets held by troubled financial institutions. If successful, advocates say, that would allow frozen credit to begin flowing again and prevent a deep recession.
Even as the Senate voted, House leaders were hunting for the 12 votes they would need to turn around Monday's 228-205 defeat. They were especially targeting the 133 Republicans who voted "no."
Their opposition appeared to be easing after the Senate added $110 billion in tax breaks for businesses and the middle class, plus a provision to raise the cap on federal deposit insurance.
They were also cheering a decision Tuesday by the Securities and Exchange Commission to ease rules that force companies to devalue assets on their balance sheets to reflect the price they can get on the market.
There were worries, though, that the tax breaks would cause some conservative-leaning Democrats who voted for the rescue Monday to abandon it because it would swell the federal deficit.
As revised by the Senate, the package extends several tax breaks popular with businesses. It would keep the alternative minimum tax from hitting 20 million middle-income Americans and provide $8 billion in tax relief for those hit by natural disasters in the Midwest, Texas and Louisiana.
It doesn't designate a way to pay for many of the tax cuts, though, angering the House's band of conservative "Blue Dog" Democrats.
Leaders in both parties, and private economic chiefs everywhere, said Congress must quickly approve some version of the bailout measure to start loans flowing and stave off a potential economic disaster.
"This is what we need to do right now to prevent the possibility of a crisis turning into a catastrophe," Mr. Obama said on the Senate floor.
In Missouri, before flying to Washington to vote, Mr. McCain said, "If we fail to act, the gears of our economy will grind to a halt."
Critics on the right and left assailed the rescue plan, which has been panned by their constituents as a giveaway for Wall Street, and has little obvious direct benefit for ordinary Americans.
Sen. Jim DeMint, R-S.C., a leading conservative, said the step was "leading us into the pit of socialism."
Mr. Sanders of Vermont, an independent who's a self-described socialist, said the rescue was fundamentally unfair.
"The masters of the universe, those brilliant Wall Street insiders who have made more money than the average American can even dream of, have brought our financial system to the brink of collapse," Mr. Sanders said, and are demanding that the middle class "pick up the pieces that they broke."
Still, proponents argued that the financial sector's woes were already being felt by ordinary people in the form of unaffordable credit and underperforming retirement savings and without the bailout would soon translate into even more economic pain, including more job losses.
HOW THEY VOTED
40 Democrats, 33 Republicans and one independent voted "yes." Nine Democrats, 15 Republicans and one independent voted "no."
-- Associated Press
IN THE BILL
- Authorize $700 billion for the government to purchase troubled assets and buy equity in distressed financial firms.
- Require the Treasury Department to prevent excessive compensation for executives whose companies benefit from the rescue.
- Establish an oversight board for the program, a special investigator general to monitor it and regular government audits.
- Require that the president establish a plan to recoup the cost from the financial industry if, after five years, there are any losses.
- Phase in money for buying troubled assets, with $250 billion available, $100 billion to be released if the Treasury secretary certifies it is needed, and the last $350 billion available with certification, but subject to a congressional vote.
Among the provisions added to the Senate bill:
- Provide business tax breaks, including for production of, investment in, and use of renewable fuels.
- Require group health plans that include mental health or addiction treatment to provide coverage for those conditions that is equitable to other medical coverage.
- Increase personal credits against the AMT, shielding more than 20 million taxpayers from the tax.
- Grant tax relief to victims of natural disasters in the Midwest and elsewhere.
- Extend through 2011 a program that funds rural schools and local governments that have low property-tax bases because they lie within or are adjacent to federal lands.
- Extend until end of 2009 the deduction for state and local general sales taxes.
- Extend until end of 2009 individual tax breaks, including deductions for higher education costs and teachers' personal expenses.
- Increase, from $100,000 to $250,000, the limit on federal bank deposit insurance.
-- Associated Press
Two Saturdays ago, it totaled just three pages -- the White House's request for $700 billion to rescue tottering financial institutions by buying their devalued mortgage-related assets.
After an intense weekend of negotiations, the draft of the bailout legislation before Congress had swelled to 42 pages.
The next Friday, after almost a week of marathon talks between Treasury Secretary Henry Paulson and key lawmakers in both parties, the working version was up to 102 pages. It went down to defeat Monday in the House, mostly at the hands of Republicans.
Once the Senate was finished adding sweeteners Wednesday to entice reluctant House Republicans to change their minds and vote for the bailout, the bill heading for passage had grown to 451 pages.
It was unclear whether it would expand still more as House leaders hunted for the votes needed to clear the bill.