In a decisive vote, the Senate passed the $700 billion rescue package by a vote of 74 to 25, including a provision to raise FDIC coverage to $250,000, but a raft of tax cuts unrelated to the financial crisis could hamper chances in the House of Representatives. Persistent tightness in credit markets, nervousness over eventual passage of the bill, and worries about the economy are weighing on shares. Furthermore, losses accelerated after jobless claims unexpectedly rose. Still, House leaders are cautiously optimistic they can win passage of the package. [Schwab Alerts]
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In a 263-171 vote, Congress passed the Emergency Economic Stabilization Act of 2008in the hopes of unfreezing the credit markets. It will also hopefully reverse the panic that erupted after the plan failed to pass the House on Monday. As most of you know, the legislation authorizes the government to buy troubled assets from financial institutions.
The bill had $149 billion in tax breaks added to it since Monday’s no-vote, some of which were ridiculous earmarks as I touched on earlier this week. As unfortunate as this situation is – with the largest government intervention since FDR’s New Deal – passing this bill was absolutely the right thing in our opinion. We needed to stop the panic.
No, the plan’s not perfect. But the problem was that if we waited to act until a new, better version of the plan was constructed, a complete financial system breakdown was all-but inevitable. Anecdotal evidence of just how dire the situation had become probably swayed some votes into the yes camp. Even well-qualified borrowers being shut out of credit; small companies are finding they no longer have ANY access to their existing credit lines; and the market for commercial paper – short-term borrowing by businesses – suffered the biggest one-week drop on record. Businesses cannot function without access to credit, and the majority of the House finally came around to this realization.
Terrible “marketing” job
Part of the problem getting a majority of politicians and the public to rally around this plan was its poor “marketing” by the media and politicians themselves. The fact that the term “bail-out” has been used so ubiquitously is a frustration. No one is being bailed out and it’s not going to “cost” the taxpayer $700 billion. The U.S. government (taxpayers) is not handing the money to financial institutions … it is buying distressed assets with the money, and if structured properly the government (taxpayers) stands to ultimately benefit from the deal. That’s why Warren Buffett himself has said he’d like to get in on the deal with a 1% stake.
[Liz Ann Sonders, Charles Schwab & Co.]
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NEW YORK (CNNMoney.com) -- After two weeks of contentious and often emotional debate, the federal government's far-reaching and historic plan to bail out the nation's financial system was signed into law by President Bush on Friday afternoon.
"By coming together on this legislation, we have acted boldly to prevent the crisis on Wall Street from becoming a crisis in communities across our country," Bush said less than an hour after the House voted 263 to 171 to pass the bill.
The House vote followed a strong lobbying push by the White House and other supporters of the bill. The House rejected a similar measure on Monday - a defeat that shocked the markets and congressional leaders on both sides of the aisle.
The law, which allows the Treasury Secretary to purchase as much as $700 billion in troubled assets in a bid to kick-start lending, ushers in one of the most far-reaching interventions in the economy since the Great Depression.
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