And now on to the House - again

A $700 billion plan moves back to the House. Here's what's in the bill.

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Jeanne Sahadi, senior writer

Should the House go along with the Senate version of the $700 billion bailout proposal?
  • Yes
  • No

NEW YORK ( -- Now get ready for Bailout Redux - the House vote.

The fate of the Bush administration's planned $700 billion financial system bailout rests in the House, which sparked a huge selloff on Wall Street on Monday with its surprise 228-to-205 rejection of the bill.

Late Wednesday night, the Senate voted 74 to 25 to approve the controversial proposal, but added sweeteners intended to attract House votes. The House - returning Thursday from a two-day recess - is likely to vote on the revised bill Friday.

The core of the Senate bill would give the Treasury Department authority to buy troubled assets from financial institutions. Those assets, mostly mortgage-related, have caused a crisis of confidence in the credit markets.

For the past two weeks, lending between banks and between banks and businesses has gotten considerably more expensive and in the case of small businesses, exceptionally difficult to get. As of midday Thursday, one key measure showed that banks were hoarding cash rather than loaning it. Meanwhile, an indicator showing how willing banks are to lend each other hit an intraday high.

The new legislation also includes a number of provisions aimed at Main Street. House leaders are cautiously optimistic they can win this time.

"We believe we'll have a better chance to pass this bill than the one that failed [Monday]," said a spokesman to the lead House Republican, Rep. John Boehner, R-Ohio.

The main House negotiator on the bailout, Rep. Barney Frank, D-Mass., said that lawmakers have seen "the reality" of the economy's problems. "It's not possible now to scoff at the predictions of doom if we don't do anything," he said.

That reality came home to House members by way of calls from small business owners, who lobbied lawmakers after Monday's vote urging them to pass the bailout on the next go-round, said Brian Gardner, the Washington analyst for investment firm KBW.

House Speaker Nancy Pelosi, D-Calif., said in a press conference Thursday afternoon that House members are reviewing the Senate bill. She said House leaders will not bring the bill to the floor for a vote unless they've got the votes. "I'm optimistic we'll take the bill to the floor," she said.

Pelosi noted that she and other House members like a number of changes the Senate made. While many lawmakers would like to offer further amendments, she said, "I don't think any changes here will do what we need to do now, which is send a message of confidence to the markets that Congress will act."

President Bush, speaking Thursday after a meeting with business executives, urged the House to pass the bill.

"The bill that's before the House ... has got the best chance of providing liquidity, providing credit, providing money so small businesses and medium-sized businesses can function," Bush said.

Here's what's in the bill

Attacking credit crisis: The core is the Treasury's proposal to let financial institutions sell to the government their troubled assets, mostly mortgage-related. And as in the House bill, the Senate would only allow the Treasury access to the $700 billion in stages, with $250 billion being made available immediately.

Protecting taxpayers: The Senate bill is also similar to the original House bill in that it includes a number of provisions that supporters say would protect taxpayers. One would direct the president to propose a bill requiring the financial industry to reimburse taxpayers for any net losses from the program after five years. And the Treasury would be allowed to take ownership stakes in participating companies.

Like the House version, the Senate bill includes a stipulation that the Treasury set up an insurance program - to be funded with risk-based premiums paid by the industry - to guarantee companies' troubled assets, including mortgage-backed securities, purchased before March 14, 2008.

Curbing executive pay: The bill would place curbs on executive pay for companies selling assets or buying insurance from Uncle Sam. For example, any bonus or incentive paid to a senior executive officer for targets met would have to be repaid if it's later proven that earnings or profit statements were inaccurate.

Oversight: The bill would set up two oversight committees.

A Financial Stability Board would include the Federal Reserve chairman, the Securities and Exchange Commission chairman, the Federal Home Finance Agency director, the Housing and Urban Development secretary and the Treasury secretary.

A congressional oversight panel, to which the Financial Stability Board would report, would have five members appointed by House and Senate leadership from both parties.

Tax breaks: Added to the bill are three key tax elements designed to attract House Republican votes.

It would extend a number of renewable energy tax breaks for individuals and businesses, including a deduction for the purchase of solar panels.

The legislation would also continue a host of other expiring tax breaks. Among them: the research and development credit for businesses and the credit that allows individuals to deduct state and local sales taxes on their federal returns.

In addition, the bill includes relief for another year from the Alternative Minimum Tax, without which millions of Americans would have to pay the so-called "income tax for the wealthy."

New accounting rules: The bill underlines the Securities and Exchange Commission's power to change accounting rules on how banks and Wall Street firms value securities, and directs the agency to study the issue.

Some observers argue that tight accounting rules are a major reason for the credit crisis in the first place. Others contend that changing the so-called mark-to-market rules will just bury problems lurking beneath the surface and could further shake investor confidence in the already battered financial sector. (More about the rules.)

Shielding bank deposits: The bill temporarily raises the FDIC insurance cap to $250,000 from $100,000. The bill allows the FDIC to borrow from the Treasury to cover any losses that might occur as a result of the higher insurance limit.

Federal bank regulators, who first floated the idea to Congress late Tuesday, said that bumping up the insurance limits would help improve liquidity at banks across the country. It may also provide a much-needed dose of confidence for consumers who may be worried about the health of their bank. (More about FDIC rules.)

The bill will also temporarily increase the level of federal insurance for credit union savings to $250,000.

Cost: The tax provisions of the bill - the bulk of which come from the addition of tax breaks from other legislation - may reduce federal tax revenue by $110 billion over 10 years, according to estimates from the Joint Committee on Taxation. More than half of that is due to the 1-year extension of AMT relief.

The Congressional Budget Office said it cannot estimate the net budget effects of the troubled asset program because of the many unknowns about that piece of the bill. However, the agency noted in a letter to lawmakers on Wednesday, it expects the program "would entail some net budget cost" but that it would be "substantially smaller than $700 billion."

Overall, the CBO said, "the bill as a whole would increase the budget deficit over the next decade."

- staff writer David Goldman contributed to this article. To top of page

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