Bank-bailout plan wins US House nod

The US Congress passed a $700-billion financial-market bailout plan designed to unlock credit markets, reversing a rejection that sent global stock markets plunging and threatened to worsen an economic slowdown.

The legislation, a bipartisan effort to restore confidence in the nation’s banking system, authorises the government to buy troubled assets from financial institutions reeling from record home foreclosures. The Bill contains $149 billion in tax breaks and affirms regulators’ power to suspend asset-valuing rules that companies blame for fueling the crisis.

The House approved the measure in a 263-171 vote, four days after rejecting an earlier version. The Bill’s defeat on September 29 caused a 778-point drop in the Dow Jones Industrial Average, prompting dozens of lawmakers to reverse their vote on the legislation, the government’s largest intervention in the markets since Franklin Roosevelt’s New Deal.

“The issue is stopping the panic,” said Adam Posen, deputy director of the Peterson Institute for International Economics in Washington. “The plan’s not perfect, but it’s better than doing nothing. Now Treasury has to be very aggressive about purchasing a wide range of assets very quickly.”

House Majority Leader Steny Hoyer, a Maryland Democrat, said the Bill was “critical to stabilising our economy.”

President George W Bush made more than a dozen phone calls to Republican lawmakers to lobby for the Bill. Only 65 Republicans had backed it on September 29, compared with 140 Democrats.

House leaders, who said they would not set a vote on the revised measure unless they were sure it would pass, decided to go forward with the debate after conferring last night.

A group of Republicans last night tried to offer an alternative that would spend only $250 billion until the end of the year.

Representative Spencer Bachus said that out of “prudence” Congress should appropriate only the $50 billion a month the Treasury could distribute this year.