House is Winning Converts to Bailout

By and Julie Hirschfeld Davis Associated Press

Desperate to avoid another market-crushing defeat, House leaders won key converts Thursday to the $700 billion financial industry bailout on the eve of today’s second vote.

But they didn’t convince Rep. Jim Matheson, D-Utah. He indicated he dislikes the revised proposal more than the original one and will vote against it today in the House.

However, despite his opposition, Matheson added he believes congressional leadership will ensure the Senate-passed bailout bill will also pass the House.

Rep. Rob Bishop, R-Utah, who, like Matheson, voted against the initial bailout bill earlier this week, said Thursday he’s undecided about the revised bill. Utah’s third House member, Rep. Chris Cannon, R-Utah, supports the bailout and voted for it earlier.

“The Senate version is even worse (than the original),” Matheson said Thursday. “It’s larded up with more debt and doesn’t include long-term reform language that would prevent this kind of crisis from happening again.”

He added, “I don’t believe this bill is the right medicine to cure the disease. Economists aren’t able to say that this bill is actually going to solve the credit freeze problem. … No one in Congress fully understands the implications of this proposal.”

Matheson said, “What really needs to happen is for Wall Street, Main Street and ordinary citizens to come together and deal with the fact that we cannot continue to live high off the hog on credit. It’s bad for our markets and it’s bad for our household budgets.”

Scott Parker, chief of staff to Bishop, said, “For now, it’s fair to say that Rob is undecided on this latest version. The legislation coming out of the Senate is better than what the House saw, and light years better than the original Bush/Paulson proposal (from President Bush and Treasury Secretary Henry Paulson).”

Parker added, “Rob has said before that something needs to be done, and he is committed to staying here in D.C. and working through this until we get the right solution, rather than a quick solution.” He added that “besides stabilizing the economy, a top priority has to be protecting the taxpayers.”

Both Bishop and Matheson face re-election next month. Their initial opposition came as they reported thousands of calls from upset Utahns, almost all of whom opposed the bailout. Cannon, R- Utah, was already defeated in the primary election.

In the Senate, both Sens. Bob Bennett and Orrin Hatch, R-Utah, voted for the Senate’s redesigned version of the rescue bill. Neither of them face re-election this year.

President Bush and congressional leaders lobbied furiously for the dozen or so supporters they’d need to reverse Monday’s House vote and approve the massive rescue plan designed to stave off national economic disaster.

Anything but reassured, investors on Thursday sent the Dow Jones industrials plunging another 348 points, suggesting Wall Street is expecting tougher economic times even if the measure is rushed into law. The Federal Reserve reported record emergency lending to banks and investment firms, fresh evidence of the credit troubles squeezing the country.

“A lot of people are watching,” Bush pointed out — as if lawmakers needed reminding — and he argued from the White House that the huge rescue measure was the best chance to calm unnerved financial markets and ease the credit crunch. He was calling dozens of lawmakers, a spokesman said.

Democratic and Republican leaders worked over wayward colleagues wherever they could find them.

Rep. Steny Hoyer, the second-ranking House Democrat, said there was a “good prospect” of approving the measure but stopped short of predicting passage — or even promising a vote. Nonetheless, the vote was expected today. “I’m going to be pretty confident that we have sufficient votes to pass this before we put it on the floor,” Hoyer said.

The top Republican vote-counter, Rep. Roy Blunt of Missouri, did predict the measure would be approved.

Minds were changing in both parties in favor of the much- maligned measure, which would let the government spend billions of dollars to buy bad mortgage-related securities and other devalued assets from troubled financial institutions. If the plan works, advocates say, that would allow frozen credit to begin flowing again and prevent a serious recession.

GOP Rep. Ileana Ros-Lehtinen of Florida, said she was switching her “no” vote to a “yes” after the Senate added some $110 million in tax breaks and other sweeteners before approving the measure Wednesday night.

“Monday what we had was a bailout for Wall Street firms and not much relief for taxpayers and hard-hit families. Now we have an economic rescue package,” Ros-Lehtinen told The Associated Press.

Rep. Zach Wamp of Tennessee, another of the 133 House Republicans who joined 95 Democrats Monday to reject the measure, also announced he was now onboard, even though “I hate it.” He told the AP, “Inaction to me is a greater danger to our country than this bill.”

Republican Rep. Jim Ramstad of Minnesota also switched to “yes,” partly because the Senate attached the bailout to legislation he spearheaded to give people with mental illnesses better health insurance coverage.

Democratic Rep. Emanuel Cleaver of Missouri was switching, too, said spokesman Danny Rotert, declaring, “America feels differently today than it did on Monday about this bill.”

And Democratic Rep. Shelley Berkley of Nevada said she would back the bill after business leaders in her Las Vegas-area district made it clear how much it was needed. She said, “There isn’t a segment of the population that hasn’t been slammed and is not asking for some relief.”

Emboldened by the feverish bidding for votes, other members of both parties were demanding substantial changes to the legislation before they would vote for it. A group of Republican opponents indicated they’d back it if the price tag were slashed to $250 billion and several special tax breaks added by the Senate — including for children’s archery bow makers, imported rum producers and racetrack owners — were removed. Democrats wanted to add a way to pay for the bailout and more help for homeowners staring at foreclosure.

Speaker Nancy Pelosi, D-Calif., said no such revisions were possible because they would slow the measure’s enactment and further shake markets.

“I don’t think that any changes here will do what we need to do, which is right now to send a message of confidence to the markets that Congress will act,” she said.

The Senate breathed new life into the measure Wednesday after the stinging House defeat, voting 74-25 to approve the bailout, with additions designed to appeal to key constituencies. Business lobbyists were also inundating Capitol Hill in a rush to win over wavering lawmakers in both parties.

The changes helped satisfy some Republican critics, but angered conservative “Blue Dog” Democrats — of whom Matheson is a member — who are concerned about swelling the deficit. Still, Hoyer predicted the number of Democratic defectors “is going to be minimal.”

A handful of Republicans who voted for the measure Monday appeared to be backing away from it.

“We can save ourselves from this rush to judgment,” said Rep. Spencer Bachus of Alabama, the top Republican on the Financial Services Committee. He argued Congress should approve just a fraction of the money requested and then “go home and answer the wrath of our constituents.”

In efforts to appease GOP opponents, the Senate added a provision to raise, from $100,000 to $250,000, the limit on federal deposit insurance.

House Republicans were also cheered by a decision by the Securities and Exchange Commission this week to ease rules that force companies to devalue assets on their balance sheets to reflect the price they can get on the market.

The developments on Wednesday prompted one Republican, Rep. John Shadegg of Arizona, to say he would support the new bill.

Peter DeFazio, D-Ore., said he still opposed the bill despite Senate inclusion of a program that pays rural counties hurt by federal logging cutbacks.

Beyond the Capitol, the drumbeat of bad economic news rattled on.

One government report said orders to factories plunged by the largest amount in nearly two years. Another said claims for jobless benefits hit a seven-year high. Investors appeared to be pulling money out of Wall Street and bracing for lengthy economic hard times.

Bush, meeting with business executives at the White House, said increasingly tight credit markets are not just hitting big banks in New York City but threatening the existence of small businesses across the country.

The modified Senate bill would extend several tax breaks popular with businesses, provisions that are favorites for most Republicans. It would keep the alternative minimum tax from hitting 20 million middle-income Americans, which appeals to lawmakers in both parties. And it would provide $8 billion in tax relief for those hit by natural disasters in the Midwest, Texas and Louisiana.

Help for rural schools was aimed mainly at lawmakers in the West.

Another addition, to extend the deductibility of state and local taxes for people in states without income taxes, helps Florida and Texas, among others. Ros-Lehtinen singled it out as one reason she changed her mind.

Democratic leaders circulated data showing which states benefit most from an extension of a tax break for homeowners who do not itemize their tax returns. Texas, Florida, California and Pennsylvania ranked among the highest. The leaders hope the measure will bring support from black lawmakers, many of whom voted “no” earlier this week, among others.

Contributing: Terence Hunt, Ben Feller, Matthew Daly, Sam Hananel, Kimberly Hefling, Andrew Taylor and Erica Werner, Associated Press

E-mail: lee@desnews.com

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