House Minority Whip Rep. Roy Blunt, R-Mo., right, with Minority Leader Rep. John Boehner, R-Ohio, addresses the media on Capitol Hill Friday. | John Shinkle/POLITICO Historic bailout bill clears House

Treasury’s $700 billion rescue plan for the financial markets cleared Congress and was quickly signed into law by President Bush Friday, capping a remarkable 14 days in which lawmakers were thrust onto the world stage and asked to cope with an unprecedented government intervention just a month before the November elections.

Final passage came on a 263-171 vote in the House, which only four days before had rejected the proposal, sending Wall Street into a tailspin and impacting markets around the globe.


Republican support grew from 65 votes Monday to 91; Democrats grew their numbers from 140 to 172, with the party’s presidential nominee, Barack Obama, playing an important role with calls to individual members.

“The consequences of our not acting are overwhelming,” said House Minority Leader John Boehner (R-Ohio) in a final appeal to fellow conservatives who undercut passage Monday. “Let’s not kid ourselves. We’re in the middle of a recession. It’s going to be a rough ride, but it will be a whole lot rougher ride if we don’t pass this bill.”

It was precisely two weeks ago that Treasury Secy. Henry Paulson first outlined the administration’s plan to inject hundreds of billions into the markets by buying up troubled mortgage-related assets to relieve the credit crunch threatening the larger U.S. economy. Leading economists remain divided about the wisdom of the policy. The huge cost triggered a populist anti-Wall Street fury among many taxpayers. But with unemployment rising again and continued turmoil in equity and credit markets, even early critics concluded that the failure to act was more perilous to the American economy than following Paulson’s course.

The changed tone Friday morning was readily apparent. “On Monday I cast a blue collar vote for the American people, shook the foundations of Wall Street, demanding more accountability,” said Rep. Zach Wamp (R-Tenn.) in opening debate. “But today I’m going to cast a red-white-and-blue collar vote, with my hand over my heart for this country because things are really bad and we don’t have any choice.”

Rep. John Lewis (D-Ga.), a second “no” vote Monday, quickly followed in announcing his support, and after taking a sometimes “hands-off” approach Monday, Democrats showed a new determination to get the job done. “She’s not going home without a bill,” Rep. John Larson (D-Conn.) told Politico, pointing toward Speaker Nancy Pelosi’s office before the vote. And Obama is estimated to have called close to 20 members, like Rep. Elijah Cummings (D-Md.), one of an estimated 18 Democrats in the Black or Hispanic Caucuses who switched to vote for the bill.

Following Monday’s defeat in the House, the Senate stepped into the power vacuum and was pivotal to saving the bill. Unlike House Republican leaders, Senate Minority Leader Mitch McConnell (R-Ky.) was never tepid in his support of Paulson. And the Treasury secretary, a Dartmouth graduate, found a kindred soul in Sen. Judd Gregg (R-N.H.), who was the lead negotiator for Senate Republicans and enjoys a good personal relationship with Senate Majority Leader Harry Reid (D-Nev.).



When the bill came back before the Senate Wednesday, popular tax breaks and aid to rural schools had been added to broaden support. To reassure middle-class families scared by bank failures, a provision was included to temporarily expand federal insurance for savings deposits, raising the cap from $100,000 to $250,000.

McConnell’s stature as leader and Gregg’s as a fiscal conservative and former Senate Budget Committee chairman brought Republicans together behind the package. And the 74-25 Senate vote spilled over to the House Friday. Among the Republicans who switched to “ayes” were six from Oklahoma and Texas, two states where otherwise conservative Republican senators had chosen to support the Treasury plan.

“I felt it last night,” said House Majority Whip James Clyburn (D-S.C.) “I heard the president was on calls, and when the report went out that four of the no’s in Texas were switching, I knew certainly that we were OK.”

Going forward, Paulson will have immediate authority to $250 billion and little trouble getting a second installment of $100 billion. But Treasury will be subjected to much greater oversight than he first proposed and a future Congress could potentially deny any funding beyond the first $350 billion authorized in the legislation.

Taxpayers are promised a greater chance to gain some equity interest in the companies benefiting from the government aid. And new restrictions are imposed on executive pay and severance packages for those firms which sell more than $300 million in securities to the government.

Treasury officials admit that it will take several weeks before the first auctions and asset managers must be hired to put the program in effect.

Together with Federal Reserve Chairman Ben Bernanke, Paulson is exploring how best to use new auction mechanisms not only to guide the government’s investments but also shed new light on the real value of assets suppressed to “fire sale” prices after the collapse of the U.S. housing bubble.

“Americans should also expect that it will take some time for this legislation to have its full impact on our economy,” Bush said in a Rose Garden statement. “Exercising the authorities in this bill in a responsible way will require a careful analysis and deliberation. This will be done as expeditiously as possible, but it cannot be accomplished overnight. We'll take the time necessary to design an effective program that achieves its objectives -- and does not waste taxpayer dollars.”

As a practical matter, Treasury will also have to sell bonds to raise the money. In trying to tamp down concerns in Congress, officials have said Paulson’s early investments may be limited to just $50 billion a month. But given the crisis atmosphere—and pressure already for relief in other sectors such as the auto loan industry--others predict that the secretary may move faster and the $50 billion per month rate may be soon outdated.

Nonetheless, the real future of the initiative could rest on whoever succeeds Bush in January. This may explain part of Obama’s clout, and just as the crisis has helped him open up a lead over Republican John McCain, Obama was also able to speak to wavering Democrats as someone who could very well be running the program in four months.

By contrast, the crisis has been an unpleasant “October Surprise” for many Republicans. Having been burned Monday, Boehner and Minority Whip Roy Blunt (R., Mo.) were well skittish about their vote count well into Friday morning, fearful of backsliding. And try as he did, McCain was never a major player even after he agreed to support the bill.

In fact, the intense focus on the economy appears to have hurt him politically, and Boehner’s own admission Friday of the recession around him was more candid than he has been in the past.

Within hours of passing the Treasury bill, the House quickly approved a measure to extend jobless payments for workers who will soon be exhausting their payments. The bill would provide seven additional weeks of payments in most cases; 13 in those states where the unemployment rate is above 6 percent.

The action came as the Labor Department announced Friday that payrolls fell by another 159,000 in September. In contrast to similar votes this summer, only 28 Republicans opposed the measure, and the clerk’s tally indicates Boehner didn’t vote.