House Passage Seen More LikelyBy Reuters - | Posted 2008-10-02 Print
The fate of the rescue plan, passed by the Senate 74-25, now lies with the House of Representatives, which rocked global markets this week by rejecting an earlier version. President George W. Bush has called the bailout "essential to the financial security of every American". But the crisis has spread well beyond U.S. shores and beyond the financial sector. Top automakers including General Motors Corp and Ford warned of tough times amid fears slowing demand could force production cuts and job losses.
HOUSE PASSAGE SEEN MORE LIKELY
Senate leaders hope that sweetening the plan with a tax cut and extended federal protection for bank deposits can turn "no" voters in the House into supporters. On Monday, the House rejected the previous version of the plan by a 228-205 vote.
"It's still uncertain. I think it is likelier to pass than before," House Financial Services Committee Chairman Barney Frank said in an interview on CNN.
"The main change is reality. I think that it's not possible now to scoff at the predictions of doom if we don't do anything," the Massachusetts Democrat added.
Many Americans resent the idea that Wall Street is being "bailed out" at taxpayer expense, and have made their views clear in emails and calls to Washington, putting pressure in particular on vulnerable members of the House.
The crisis has become the biggest issue in forthcoming U.S. elections. Both presidential candidates, Republican Sen. John McCain and Democratic Sen. Barack Obama, voted for the package. Obama, echoing Republican Bush's warnings, said the bailout was vital to 'prevent a crisis turning into a catastrophe'.
All 435 House seats will be contested in the election on November 4, as opposed to 35 seats up for grabs in the Senate.
Switzerland's UBS AG, which has written off more than any other European bank this year because of exposure to U.S. 'toxic' assets, offered some good news for markets, announcing it would make a small profit in the third quarter.
But Britain's Nationwide building society said house prices in August were 12.4 percent lower than a year earlier, their highest annual drop since records began in 1991. The country's biggest retail chain Marks and Spencer posted a 6 percent drop in second-quarter core sales and said it was cutting investment.
Treasury Secretary Henry Paulson, whose original three-page proposal grew to hundreds of pages when Congress got involved, urged the House to act swiftly to ratify it.
Should the House uphold the bill, it would go to the White House for signature into law by President Bush.
"This sends a positive signal that we stand ready to protect the U.S. economy by making sure that Americans have access to the credit that is needed to create jobs and keep businesses going," Paulson said.
Stocks in Tokyo dropped 1.9 percent on Thursday, while MSCI's share index for the rest of Asia lost 1.2 percent. Oil gained $1 a barrel.
"If the massive expansion of the Fed's balance sheet and other CB (central bank) liquidity injections cannot do the trick then coordinated global rate cuts becomes likely and necessary," Michael Hartnett, chief emerging markets equity strategist at Merrill Lynch, wrote in a note.
The tally for all the various rescue measures launched by U.S. authorities this year runs to about $1.8 trillion -- more than the total economic output of both Canada and Spain last year.
(Writing by Tony Munroe and Ralph Boulton; Editing by Alex Smith/Jean Yoon/Richard Hubbard)
© Thomson Reuters 2008 All rights reserved
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