Friday’s action capped an extraordinary two-week dénouement to the 110th Congress. Lawmakers, eager to get home for the fall campaign season, had intended to wrap up by adopting a budget bill to finance government operations through early March.
Instead, they found themselves still in Washington just five weeks before Election Day, facing the most important vote of the year – the most important vote of their lives, many lawmakers said – and under extreme pressure by the White House, the presidential nominees and Congressional leaders of both parties to make a quick decision.
On Monday, they balked, defeating the bailout package by 228 to 205 and sending the Dow into a 777-point decline.
Supporters said the bailout was needed to prevent economic collapse; opponents said it was hasty, ill-conceived and risked too much taxpayer money to help Wall Street tycoons, while providing no guarantees of success. In the Senate, lawmakers who opposed the plan on Wednesday warned that it still did not address the root problems in the American financial system, including lax regulation.
The rescue plan allows the Treasury to buy troubled debt from financial firms in an effort to ease a deepening credit crisis that is choking off business and consumer loans, the lifeblood of the global economy, and contributing to a string of bank failures in the United States and Europe. The hope is that clearing the balance sheets of bad debt will keep credit flowing and prevent normal economic activity from stalling.
Whether it succeeds or fails, elected officials and business leaders alike said it stands to fundamentally alter the relationship between government and the private markets perhaps in ways that are not immediately clear.
At the White House, President Bush hailed the vote.
But it was a hollow victory for the administration. After long favoring a hands-off approach and relentlessly pursuing deregulation, the administration found itself interceding repeatedly in the private market this year to avert one calamity after another. And finally after it proposed perhaps the biggest intervention in history, Mr. Bush found himself abandoned by fellow Republicans in the House.
After the House rejected the plan, the Senate stepped in, and attached a $150.5 billion package of popular provisions, including tax breaks for the production and use of renewable energy, and protection for millions of American families from paying the alternative minimum tax, which was initially aimed at the wealthy.
The Senate and the House had been fighting all year over the energy tax provisions, called “extenders” because they perpetuate current law. The energy package provided a ready bundle of goodies that the Senate had been dangling to win over fiscal conservatives who had opposed the Senate version because it did not fully offset the tax breaks with spending cuts or other tax increases.