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Senate Passes Massive $810 Billion Bailout

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Realtors praise senate action to provide financial stability

RISMEDIA, Oct. 2, 2008-(MCT/RISMedia)-In an historic vote, the Senate approved a massive $700 billion rescue plan for the nation’s finance system Wednesday night, but only after tacking on another $110 billion in tax breaks to lure votes from both parties.

A strong bipartisan majority rallied behind the controversial Wall Street bailout package, passing it by 74-25.

The vote sends the measure to an uncertain fate in the House of Representatives, where lawmakers rejected the original version on Monday, 228-205. A new House vote is expected on Friday, and many lawmakers in both parties there remain opposed to it.

President Bush, Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke have warned repeatedly that failure to pass the legislation would lead vital credit markets to seize up, forcing employers to lay off employees, plunging the economy into recession and perhaps even another Great Depression.

Senators of both parties, including Democratic presidential nominee Barack Obama of Illinois and Republican presidential nominee John McCain of Arizona, said that threat made it imperative for Congress to pass the financial-rescue package.

“Inaction is not an option,” said Senate Majority Leader Harry Reid of Nevada. “This is-I repeat-a crisis…We’ve got to get this done.”

Senate Republican Leader Mitch McConnell of Kentucky agreed.

“The question is not how we got here, but how we get out,” McConnell said.
Not all senators went along.

“Action is clearly needed to return stability to our financial markets, but most importantly, effective, sound action is needed. To fix the markets, we must deliver a market-based solution, not a government bailout,” said Sen. Elizabeth Dole, R-N.C.

Many lawmakers voiced disdain for the extra tax breaks the Senate added to the financial-rescue package. They ranged from a one-year fix to prevent the alternative-minimum tax from hitting more taxpayers to extending the research credit for business to allowing rural utilities to issue tax-exempt bonds for use of renewable energy.

Also included were more obscure terms extending tax breaks for motor-sports racing tracks, makers of wooden arrows for children, and the rum excise tax for Puerto Rico and the Virgin Islands.

The tax breaks added to the Senate bill would cost the Treasury an estimated $110 billion over 10 years, according to Congress’ Joint Committee on Taxation.

“It’s garbage,” said Rep. Devin Nunes, R-Calif. “They’re trying to put more decorations on the Christmas tree, but the problem is the Christmas tree.”

“The bailout legislation that the Senate is sending back to the House is a fraternal twin to the one I voted against on Monday _ meet the new bill, same as the old bill,” said Rep. Joe Barton, R-Texas, who led efforts to kill the House bill. “I’m kind of an old- fashioned guy, and I think we ought to pay for what we do as a government, but instead we’re talking about adding $1.5 trillion to our national debt and forcing our children to pay the cost.”

And some Senate Democrats also felt the bill didn’t do enough to help struggling homeowners stay in their homes.

“Until we stabilize the housing markets and until we stem the record number of foreclosures, our market is simply not going to improve,” said Sen. Bill Nelson, D-Fla.

Some top House Democrats were also upset that the Senate’s tax breaks were mostly for business.

“If they’re looking to make the rescue package better for families on Main Street, there are many House-passed provisions that would provide immediate relief, such as an extension of unemployment benefits, money for food stamps and help for families struggling to afford heating oil with winter around the corner,” said Rep. Charles Rangel, D-N.Y., chairman of the tax-writing House Ways and Means Committee, in an angry statement.

Rangel didn’t say whether he’d vote for the revised measure.

The National Association of Realtors commended the Senate for passing the bill, saying that the Senate’s bold action will help the country emerge from the current credit crisis and put the economy back on its way to improved financial and housing stability.

“This far-reaching and meaningful legislation would go a long way in helping restore confidence in the nation’s financial system,” said NAR President Richard F. Gaylord. “Provisions in the bill would directly benefit Main Street by making financing more available. The legislation would not only help make home mortgages more available, which would help stabilize home sales and prices, but also help families who are trying to secure a car loan or borrow money to send their children to college. It would help protect Americans’ retirement savings and small businesses across the country.”

The act would require financial institutions to work with lenders and mortgage servicers to find ways to avoid foreclosures. It would also create a Troubled Asset Relief Program to purchase and guarantee the troubled assets from financial institutions that hold mortgages or mortgage-backed securities.

“If done right, the cost of such a plan will possibly be below the figures that have been widely reported,” said NAR Chief Economist Lawrence Yun. “In fact there is a very good chance that taxpayers will reap a positive return on this investment over the long term.”

Like the legislation the House rejected Monday, the Senate bill essentially would create a $700 billion federal program to buy bad assets from banks and other financial firms at a steep discount. The hope is that the government would recoup much or all of that money by selling the assets later, once stability returns to the financial world.

The measure also includes strong terms to ensure legislative oversight of the Treasury-run bailout and would give the government an ownership stake in firms that get bailed out. That would give taxpayers a share of any profits once the firms return to profitability.

“By unclogging the financial pipeline, liquidity will be greatly improved and mortgages will become more accessible and affordable, allowing families who dream of owning a home to do so and at the same time help current owners keep the home they have,” Gaylord said.

“There will not be an economic recovery without a housing recovery, and this ambitious legislation is what our economy needs. We will work hard with the House of Representatives and the administration to ensure a quick and smooth enactment and implementation,” said Gaylord.

The Senate version would make one significant change to the earlier financial-rescue package. It would more than double the insurance that the Federal Deposit Insurance Corp. provides on customer deposits to $250,000 from the current $100,000. The higher amount would apply for one year.

The FDIC would also be granted unlimited temporary powers to borrow without limit from the Treasury to keep the banking system solvent. Economists think that the FDIC measures, if also approved by the House, would provide a boost of confidence for small community banks.

“I think many small banks feel like they’re losing the competition in keeping deposits . . . and are fearful they won’t have the deposits to (allow them to) make the much-needed loans in their communities to businesses,” said Mark Zandi, chief economist for Moody’s Economy.com. “It will give them a more level playing field with the mutual funds and bigger banks, because people won’t be nervous about putting their money into smaller banks.”

© 2008, McClatchy-Tribune Information Services.

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